City of Faust
One of the core reasons the city is in the predicament it is is that over the years the actuary has consistently understimated how much the city should be putting into the system. Thus the city's funding ratio for the pension liability keeps going down. It is supposed to be marching up toward being fully funded at some ever-pushed-out point in the future. Think about that. Even without the massive pension bonds of the 1990's. Even without the historic investment returns in the stock market of the 1990's, even without the 'extra' payments supposedly being made in the last few months into the pension funds, the funding ratio for the system was supposed to have been marching toward being fully funded. Yet even with all that extra help along the way it has been falling behind more and more, faster and faster. I would love to have the city's actuary and the Act 47 team debate why that is. I honestly think our intrepid reporters should be calling the city's actuary to ask how we got in this predicament. More than anyone else it has been his job to keep us solvent. Yet I only know of one time the poor fellow has ever been called out. So he clearly is willing to talk on the record. For anyone trying to figure out what happened in Pittsburgh, I'd track the man down. He is not entirely to blame, but he is the one with all the answers to how we got into this situation. .
So if the city liquidates its parking assets and puts it toward the pension system, will that solve the problem. Not at all, and certainly not if the actuary reports continue to understimate the minimum municipal obligation in the future. The city is hoping to net $200 million from the leasing of the parking authority assets. Consider a few things first:
Nobody really knows how much the parking assets will get yet. Certainly has not been an RFP put out to actually sell the system. There was a RFP for someone to study the idea not to actually implement it. No bids are out there to actually pay the city anything as yet. Not even close.
Then there is this little issue of whether cash liquidated by the parking authority can be just turned over to the city. Is the parking authority not an independent organization. Granted the governance is controlled by a city appointed board, but I am pretty sure that by law the parking authority is a creation of the commonwealth. Consider that very closely. Would the state need to be sent the money collected via any liquidation of assets. I have no idea, but I bet the lawyers have not thought about that much and the legal issues tied up in this may be complicated. It will certainly be unlike what happened in a lot of other places where this has been tried. As many know so well, Pennsylvania law is not like elsewhere. The situations in Chicago or elsewhere may not apply. At the very least I bet the state would have to at least accede to parking authority cash being turned over to the city. City-Commonwealth relations being what they are these days, I am not sure I would want to assume that would be a quick of painless process.
Consider that in the 1990's the Murphy administration floated two large bonds toward the same goal as the proposed parking asset sale, i.e. to recapitialize the pension fund. In fact the Murphy folks put in not $200 million, but almost $300 million dollars over a decade ago. $300 million in 1998 is worth what? Maybe $400 million in today's dollars. Why anyone thinks putting far less than that into the system now, when the total pension liability is much bigger than it was calculated at back then*, is going to solve the core problem is beyond me. But there is a great irony that the core solution being proposed is essentially what Murphy tried in the 1990's with the sale of the water authority and floating of the pension bonds. That all worked out so well.
Honestly, as esoteric as it is, I really do think the problem with past actuary reports is one of the core motivations behind the state's plan to take over the city's pension system. Trust me, they might want to consolidate a lot of the pension systems in the state, but there is nothing but trouble for them to absorb what may be the least well funded major pension system in the country. That and the fact that the city was so publicly denying that there was any real problem just a few months ago is really what pushed the state into immediate action vice something more deliberative. Supposedly the city was claiming they were "on track to fully fund the pension system". Why does everyone else in the world disagree with that. It didn't give the state any faith much was going to change anytime soon if the city was left to its own devices. Thus they felt forced to do something as soon as possible. The state knows that it's probably too late to keep the system out of insolvency no matter who is running the system, they or the city. Should they have done all of this decades ago? Probably. Now the choices are all Faustian at best.
* in 1995 the total pension liability for the city pension system was calculated to be $622 milion. So the $300 million being put in by the Murphy folks itself amounted to almost half of the total calculated liability at the time. If the city today nets $200 million (after parking authority debt is paid off) to put into the system it represents just 22% of the current $899 million pension liabillity calculation. But as I have said I bet the real current liability is much higher than that, and thus the $200 million comes out to even less as a percentage of the total liability.