With Eight Hours to Go, Pittsburgh Finds Pension Solution – and Now Waits

(January 3, 2011) – After months of back-and-forth between Pittsburgh Mayor Luke Ravenstahl and City Councilors, both sides believe a pension funding solution has been reached. Whether the state accepts the deal – which promises to inject future parking proceeds into the severely underfunded pension plan – is another question.

The deal came with little time to spare. On December 31, with eight hours to go before the city’s 29%-funded scheme would have been taken over by Pennsylvania’s Municipal Retirement System, City Council overrode a Mayoral veto and in doing so promised to devote future parking tax proceeds to the pension system. Earlier last week, five council members, plus City Controller Michael Lamb, announced their support for the new plan, which would inject the fund with dedicated revenue from parking-rate increases over coming decades instead of cash. However, Mayor Ravenstahl – who has championed the idea of selling city parking garages and spaces to raise the required $220 million – rejected the proposal, citing problems dedicating 30-odd years of revenue with one vote. In a rare sign of political agreement, however, Mayor Ravenstahl agreed to expedite his veto so that Council could override it before the New Years deadline. Both sides admit, however, that dedicating revenue will not solve the underfunding problem, but only delay the day of reckoning for a few years.

The solution does not guarantee that the city will avoid a state takeover of its pension assets and management, however. According to various local news sources, the state’s Public Employment Retirement Commission will take until September to decide whether the deal actually brings the pension fund above 50% funding levels, which is required if Pittsburgh hopes to avoid a takeover. If the Commission decides that the deal fails to do so, a takeover would occur. Such action, Mayor Ravenstahl has repeatedly warned, would bring crushing pension contributions upon the city.

The Pittsburgh scheme is one of the most underfunded in America. One proposal to fix it, championed by Mayor Ravenstahl but rejected by Council, would have sold many of the city’s parking garages and spaces to Connecticut-based LAZ Parking for $452 million, a figure well in excess of the minimum required pension payment.