Kick the Can

When you see the words "fresh" and "collar" together you probably think of laundry detergent, not pensions. But the state House has just passed their idea of pension reform for the two statewide systems SERS (state employees) and PSERS (teachers) that involve a fresh start for unfunded liabilities and collars-or maximum percentage amounts that the state or school districts have to contribute will grow year over year.

What does that mean? It means that there would be annual caps on how high employers would have to put in to the pension system in coming years. For PSERS the employer contribution rate (both the state and school districts pay in) would rise from 5.64% in FY11 to 21.20% in FY15 instead of the current trajectory of 8.22% to 33.60% over that same time frame. For SERS (only the state pays in) the employer rate would increase from 5% in FY11 to 20.50% in FY15 as opposed to the current planned increase of 5.64% to 27.72% over the same time period. The year over year incremental growth rates beginning in FY11 would be 1%, 3%, 3.5%, and then 4.5% from FY14 on. Savings on the state’s share from the changes range from $211 million in FY11 to $1.2 billion in FY15.

In other words, get immediate, short term relief for nagging pension pain by spreading it over a longer time frame.

Pop Goes the Soda Tax

What is the goal of the Mayor of Pittsburgh’s piggybacking on Philadelphia’s idea to tax sugary drinks? Is it to combat obesity, raise money for the City’s pension fund, or both? From all published reports to date it would be fair to argue that the revenue goal is the overarching end game. Much like Allegheny County’s poured alcohol tax which never carried the temperance banner.

But could a sugary drink tax in Pittsburgh actually work to make a dent in the so called obesity epidemic? According to researchers at RAND, who recently conducted a study on sugary drink taxes, "small taxes will not prevent obesity". They found that the tax would have to be high enough to do more than, say, keep a person who drinks ten cans of pop a week to just cut back to nine.

At 2 cents per ounce tax, which would add 24 cents to the price of a can of pop or $2 to a two liter bottle, the Pittsburgh-Philadelphia sugary tax idea might be the level at which consumption might fall.

That would of course work against the goal of the Mayor-the more money garnered from the tax for pensions the better, at least from his view. He would not want too much of a decline in consumption because of the tax.

Parking, Pensions and Prices in Pittsburgh

Will parking rates skyrocket if the City successfully leases its publicly owned garages and lots over to a private operator? Several members of the Pittsburgh intelligentsia seem to be convinced this is the case. Officials of the Downtown Partnership feel that there will be an "impact on the affordability of parking Downtown" and this will make "the City even less attractive to developers, shoppers, businesses, etc." The Mayor even played prognosticator back last January when he first announced his idea to lease the garages in order to fund pensions: he noted that "I’ve got to protect pensioners. I’ve got to protect City taxpayers. And of course I’d like to protect parkers too, but not at the expense of City taxpayers and pensioners". And therein lies a clear indicator of the City’s real problem, i.e., shift blame and cost to someone who cannot vote you out of office.

The implication seems to be that putting parking in private hands with the market determining rates that operators are simply going to gouge people who park.

But the big problem in Pittsburgh is that there is a mismatch between the supply of parking and the demand for it. This mismatch existed as far back as 2002 when we studied Downtown parking. And what has been happening to parking demand and supply in recent years? The building of three new sports venues, convention center, residential, retail, cultural and new office buildings over the last decade or so has increased parking demand in Downtown and near-Downtown with relatively few new parking spaces being provided. This desire to have people come into the City has forced existing firms to ration the spaces to an increasing number of users by employing the basic market tool-pricing.

The other big problem is the parking tax, a tax that further jacks up the price of parking in the City. The true irony here is that the civic leaders who are now expressing concern about the price of parking in Downtown Pittsburgh did nothing to push City officials to lower the tax dramatically over the last few years, especially since the state legislation in 2004 that mandated a lowering of the parking tax from 50% to 37.5% merely spelled out the maximum rate the tax could be set.

The same City officials who realized the inelastic nature of parking demand and boosted the tax to 50 % in order to increase City revenues substantially now rail against operators who dare to be motivated by profits and a reasonable return on investment. How hypocritical. How typically Pittsburgh.