(September 21, 2010) – Pittsburgh’s pension may live to see another day.
On Monday, Pittsburgh Mayor Luke Ravenstahl opened final bids for the city’s parking system. The winner: a group led by investment giant J.P. Morgan and LAZ Parking, which offered to pay the City of Pittsburgh $451.7 million to lease the city’s public parking garages and metered spaces for the next 50 years. If approved by City Council, the funds would be used, among other things, to fend off a state takeover of the city pension system.
According to Ravenstahl, the city needed $330 million to both pay off the parking system’s debts, as well as top-up the city’s pension system, which will be taken over by the state at year-end if $220 million is not injected into it. This figure would bring the city’s current $239 million pension above a 50% funding status.
The Mayor and other officials were clearly happy with the result. There had been a previous round of bidding, but when the offers from two entities came within 10% of each other on September 20, they were asked to return with new bids. According to figures read at a press conference held Monday afternoon, this resulted in a bid more than $40 million higher than originally proposed by the eventual winner.
“The bid exceeded my wildest expectations,” Ravenstahl said in a press conference following the opening of the final two bids. “It clearly solves the immediate problem. The question now is what to do with the extra $110 million.”
The auction winner – a consortium backed by J.P Morgan and Connecticut-based parking operator LAZ Parking – was notified by phone of its victory, as was the losing bidder, EQT Partners. Carlyle Infrastructure Partners was not allowed to bid in this final round, as its original bid of $311 million was nearly $80 million less than the other two in the opening round.
The action now turns to the City Council. By November 1, the nine-person council – rife with Ravenstahl’s political opponents who may wish to deny the young Mayor a victory of this size – must approve the deal for the bid to stand. According to local sources, five members of council and City Controller Michael Lamb have expressed concern about the mayor’s lease deal. “Alternative plans are likely to be floated,” Ravenstahl told ai5000. “However, none do what we’re trying to do here – make a lump-sum payment into the pension to avoid the state taking it over.”
Surprisingly, no bids came from other pension funds or asset owners, which as of late have been very active in the infrastructure space. According to Morgan Stanley’s J. Perry Offutt, who was tapped by the Parking Authority to oversee the deal, pension funds have yet to get into the parking market. “If you came back in a year, you’d likely see the large pension funds bidding on something like this,” he said after the press conference.
<p>To contact the <em>ai5000</em> editors of this story: Kip McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a> and Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a></p>