aiCIO’s Year in Review: It's Raining in Pittsburgh

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Pittsburgh Mayor Luke Ravenstahl sits in his beige-hued office, one hour forty-three minutes before he will open the final bids for the privatization of the city’s parking system. This controversial plan has been a centerpiece of his recent work to save a dying pension system; The proceeds from the proposed 50-year lease will be used to top up the city’s retirement plan—and just in time, for, if the deal isn’t executed by January 1, 2011, Pittsburgh’s $239 million in pension capital will be transferred into state control.

“We need $220 million by the end of the year,” he says, sinking into a green leather chair. “If we fail, the state takes the assets. They would manage the fund, and they will send a bill every year, saying our minimal municipal obligation (MMO) is X. We calculate that at being $30 million more than the $45 million we pay right now. That comes from the taxpayers.” If he succeeds, however, and the nine-member City Council approves the bid to be unveiled in less than two hours, the plan will not be consumed by the state of Pennsylvania. “Essentially, we could keep our MMO at $45 million,” he says. “However, we need an additional $15 million—still less than what the state would charge us—if we want to do more than tread water and instead fund the plan within 20 years or so. “

At 30 years of age, Ravenstahl’s narrative is comically perfect. Mayor at age 26 of a prominent, if faltering, town, he is attempting to do what many before have tried and failed—or, more likely, simply ignored. Pensions are by definition an old man’s game, but the last half-century of American history has shown most old men unwilling to pay for their own retirement. When you’re a Mayor who won’t retire for upward of 35 years, however, the problem is almost by definition your problem.

The problem is exacerbated in a place such as this. Once the thriving steel town depicted in classic Americana, Pittsburgh’s population has shrunk from a once robust 680,000 to a more moderate 300,000. Likely due to the tendency of bureaucracies to perpetuate themselves past their point of necessity, this exodus has created a large public pension liability without an equal growth in the citizenry needed to support it via tax revenues. Yet, with the state breathing down Pittsburgh’s neck, this demographic reality, combined with a youthful Mayor, may have created the perfect confluence of need and boldness.

Maybe it is because of his boldness—or, more likely, his youth and electoral politics—that Ravenstahl has encountered opposition. Becoming Mayor in your mid-20’s through tragedy (the previous Mayor died of a brain tumor while in office, leaving City Council President Ravenstahl with the top job) is a recipe for jealousy and resentment, and it is suggested by those around the Mayor that such animosity is the root of opposition to the parking sale plan. While other proposals have been floated, including streamlining the parking system to increase revenue and pension bonds, Ravenstahl has answers to all of them.

“Pension bonds: That provides the up-front capital, but it increases our debt servicing by large amounts, and passes it on to the next generation,” he says, well aware that the next generation is, indeed, his generation. The streamlining approach, he also notes, may rely a little too heavily on a faith in government’s ability to run like a for-profit corporation. Regardless of merit, however, Council members are holding the cards close to their chest, knowing full well that they have more power than Ravenstahl would like. The about-to-be-revealed bid will have to win five of nine votes by November 1. Even the confident Mayor refuses to make a prediction about how the vote will go.

One hour and forty-three minutes later, Ravenstahl, flanked by various members of City Council, City attorneys and administrators, three news cameras, one radio reporter, and a splattering of print journalists, reads out the winning bid. It is a good one. Due to the first round of bidding being so close, the City asked two groups to resubmit their proposals; in doing so, the winning bid—$451,680,000, by a JP Morgan-led consortium— was increased by upward of $40 million from the first round of offers. There are smiles everywhere.

“The number blew away my wildest expectations, ” Ravenstahl says to the cameras as his young and charming press secretary buzzes around the room, attempting to keep the one openly dissident Council member in attendance—a political opponent who is rumored to want Ravenstahl ‘s job—away from impressionable reporters. “Clearly, it will solve this year’s pension problem “—the total estimate for the pension top-up plus paying off the parking system’s debt is $320 million— “plus provide additional revenue to put into the pension or something else,” the Mayor adds.

It is a victory, to be sure, but one that may obscure the larger issue. This process—the idea, taken from “other places that have done this, like Chicago,” Ravenstahl says; the bids; the hopefully successful Council vote; the topping-up of pension funding— is all simply a beginning to a difficult journey. If everything goes as planned, the pension will be only 50% funded, still one of the worst funded plans in America. Ravenstahl, by noting that treading water is not an ideal situation, clearly understands the challenge that awaits his potentially long reign as the Mayor of Steeltown. Whether he can convince others—the City Councilors, the reporters, the people who will see the press conference on the 7:00 p.m. news—is anything but clear.

– Kip McDaniel