City Council passes pension solution

The state is not likely to take over the city’s struggling pension fund after City Council… The state is not likely to take over the city’s struggling pension fund after City Council passed a funding plan the day before the state’s deadline.

Council passed the plan and overrode a mayoral veto on Thursday, Dec. 30 of last week, pledging revenue from the next 30 years of parking taxes as the main source of funding for the plan. The $735 million infusion is expected to bring the pension fund past the state-mandated 50 percent threshold needed to avoid a takeover.

Currently the city’s pension obligations are just less than 30 percent funded.

Each year, at least $13 million from the parking tax will go into the fund as part of the annual budget. After 2018, the annual contributions will increase to more than $26 million, about 6 percent of the city’s current $435 million budget.

The increase in 2018 comes from a reduction in the city’s debt payments planned for that year, freeing up some $48 million in the budget.

A state takeover of the city’s pension fund would have meant increased, mandatory contributions from the city that could likely only come from service cuts and tax increases for city residents. A report from the Pennsylvania Municipal Retirement System, which manages municipal pensions, estimated that contributions to the pension fund might have reached a quarter of the city’s budget under a state takeover.

Pittsburgh is one of a few municipalities in the state which funds and manages its own pension fund. Most of the municipal pension funds are run by the state’s retirement system.

Mayor Luke Ravenstahl had supported a series of plans to lease the city’s parking assets to JPMorgan Chase and other private investors for 50 years. Some funds from the lease would have gone to boost the pension plan past the 50 percent level.

Council voted the plans down over the course of last few months, citing concerns about increasing parking rates and the length of the lease. The mayor’s office could not be immediately reached for comment.

Another plan would have involved a sale of the city’s parking assets to the Pittsburgh Parking Authority. Ravenstahl vetoed the plan and Council could not muster enough votes to override it.

The city’s pension plan has been under threat of a state takeover since 2009. The state legislature passed Act 44 that year, which said that the city needed to make certain the pension would be funded to at least 50 percent of its obligations by Jan. 1, 2011, or risk takeover by the state.

The system would have managed the funds and mandated contributions from the city.

The Intergovernmental Cooperation Authority, a state-appointed board that oversees Pittsburgh’s pension funding and budget, approved the Council’s solution in a letter. Another state agency, the Public Employee Retirement Commission, will have to approve Council’s plan to finally avoid a takeover.

Despite the seven-vote majority for the latest plan  — only Councilman Rev. Ricky Burgess voted against it  — feelings among the Council members were mixed.

Councilman Doug Shields said he supported the plan, because it avoided giving over the city’s assets, borrowing money or raising taxes.

“It’s the best solution I’d heard of,” he said. “We have set the city up for success. This is a solution for the pension issue. No one has done that before.”

Councilwoman Theresa Kail-Smith had a less-rosy view of the situation. Smith said that Council’s solution was far from ideal, however she voted for it to address the pension funding problem without raising taxes.

“I voted for it because it was the last option on the table,” she said. “It wasn’t an ideal situation.”

She said that Council should have laid out all of the pros and cons of each of the various options, rather than leaving only one option for the last minute.

“A lot of conversation that we need to have hasn’t happened yet,” she said. “Hopefully in time we’ll come up with better solutions.”

One of her major concerns with the ordinance was the $13 million in revenue taken out of the budget, which will need to be addressed to avoid future tax increases or service cuts.

Shields said that Council should be able to nip and tuck different parts of the budget in order to fill the hole. Shields said that the options included salary freezes and leaving vacated positions temporarily unfilled.

Kail-Smith said that cuts like that might impede the city’s ability to function. She said some departments, like Public Safety and Public Works, were already understaffed.

“We’re overtaxing our current staffs,” Smith said. “Even now it takes a while for things to get done.”