What Will a State Pension Takeover Mean for Pittsburgh?

“A City of the Second Class that is determined to be in Level III distress based upon the required actuarial valuation reports for a plan year beginning on January 1, 2011, shall transfer all existing benefit plans established by the City to the Pennsylvania Municipal Retirement Board solely for administration…Pension benefits and eligibility requirements shall continue to be subject to collective bargaining”-Act 44 of 2009, Section 902C

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What Will Council’s $250,000 Parking Study Accomplish?

City Council wants to leave no stone unturned and wants to make sure that when it decides to approve or disapprove of any agreement the Mayor reaches with a potential lessee of parking facilities that will provide funds to bolster the City’s ailing pension funds it will base its decision on a thorough examination of facts and options. That’s why, with the blessing of the City’s oversight board, Council will spend $250,000 to engage a consulting group to study the lease-for-pensions deal. 

 

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Parking Still a Key Component in Pension Deal

Municipal pension reform is still hurtling forward in Harrisburg as the SenateFinance Committee has signed off on a bill that would classify pensions according to level of distress (the key measure being funded ratio) and outlines discretionary and mandatory remedies for municipalities according to health. The City of Pittsburgh, with an aggregate funded ratio reported at 28%, would fall into Category III.

There are special provisions in the bill that apply to Cities of the Second Class (Pittsburgh is the only one). For instance, the parking tax-now at 37.5% after being reduced incrementally from its 2004 high of 50% by the state reform package-would stay at 37.5%. In addition, the bill notes that if the City nets at least $200 million from a sale or lease of parking facilities then the City would be allowed to raise the parking tax to 40%. The bill then stipulates that 6.75% of the original 37.5% rate (around $2.8 million based on recent financials) and 100% of the additional 2.5% rate (another $2.8 million or so) be put toward the minimum municipal obligation that the City puts into the pension funds.

Should this plan go forward it would change the trajectory the City has been on as far as tax reform goes. Recall that the parking tax would be a maximum of 35% next year based on the ratcheting down of the tax under Act 222. The Act 47 team recommended keeping the tax at 37.5% for this coming year but wanted to use the proceeds for capital projects. And the Mayor stated that part of the parking lease or sale would be used to wipe out the debt for the Parking Authority ($108 million) and the remainder for pensions. It is not clear if the lease or sale would bring in enough to satisfy the Authority debt and reach the $200 million to enable the City to meet the minimum amount the state would want to see to trigger the additional parking tax.