Even though there was a bit of news yesterday
about the planned parking asset monetization, I think the real thing to note is just how little interest the public has in all of this
. So what the city is about to sell off ~$300 million in parking assets and raise parking rates throughout the city. No big deal I guess. If this does not pique people's interest then it's not a big surprise dozens of other issues don't get on anyone's radar at all.
There are more meetings set
to discuss the proposed parking lease if you want to participate.
On public reaction, I am also surprised there has been no palpable reaction among the public or media to the jump in parking fines that has already been implemented. You would think a doubling of many parking fines would at least spark some notice. I am just surprised that it really has started up without much notice at all. As to what is coming down the road, I am more surprised all the small businesses in town are not reacting to the proposal being floated as part of all this to extend meter hours from 6pm to 10pm.
But for those asking my current thoughts on the plans to monetize parking assets in the city of Pittsburgh, I have nothing new to say really. Here is a compilation of what I have said in the past for the most part:
Parking garages and parking meters are different issues.. have different policy implications and really don't have much to do with each other in an economic sense. Maybe they both should be 'sold', maybe neither, or one and not the other. At the very least they should be debated separately and the decisions on what should happen to them should be made at least somewhat independently. Right now this is all being pitched that they are locked together as a package.
Sell vs. lease. I have to admit I am leaning this way myself, but some very top economists in town have said for the parking garages that they should be sold outright and not leased
. Was that advice even considered I wonder? You can make the argument that leasing gives the city greater control over arguably public assets, but I think it's the other way around actually. Control over the economic development impact of parking assets can be secured through effective and focused zoning laws and enforcement. I suspect that a lease agreement between the city and leasor will wind up having a lot more restrictive covenants on what the city can do development-wise in Downtown and environs. The leasors will want restrictions to prevent their investments, retrictions that probably won't result if you sell some of the large assets outright. Either way, they are not going away and the parking supply will be there from those garages for some time. The question is what other developments may or may not happen under either scenario and I bet a leasor will want promises the city does not develop any other garages near Downtown... possibly including other restrictions that prevent others from building large new parking supply as well. (what is up with the big empty lot across from the city county building anyway.... prime space?)
Speaking of sell vs. lease.. Sell the garages and they will start generating property tax eh? Lease them and presumably they will not. Hmm..... At the end of the day, that is a big part of what is going on here. It's not really privatization as much as a leasing is just monetizing the next couple decades of potential property tax payments into cash. Somehow Henry George is tied up in all of this.. Hold that thought.
At the end of the day there is the elephant in the room and the city's pension miasma
. The city's pension fund is well below the Mendoza line of pension funding and has been for some time. As disclosure I guess I pointed out the inevitability of the parking garage sale
in the past. Like the idea of monetizing the parking assets or not, there are few other things left to alleviate the problem. Will it solve the problem? Of course not. I am surprised the debate is still talking about the pension system needing $200 million just to get it to 50%. That number is already outdated
, and will be further underwater by the time current data on the pension fund is released.. let alone where we will be by late fall.
That's not to say there are not other options per se. Some have been proposed already. The inevitability is on the monetization of the parking assets, but what form that takes is open. From a pure economic standpoint, is any sale or lease that much different from floating a revenue bond of similar value? Not really. Parking is a unique story unlike other proposed 'privatizations' if you want to call it that.. There is very little a private operator will be able to do with the assets that a public manager is not doing already.
50% by the way still counts as one of the worst funding ratios for a pension system anywhere in the nation. Public or private. So our big goal here is still to be the distant outlier when it comes to pension underfunding. I estimate that right now netting $200 million will put the city's funding ratio at about 45% which is where it was at in 2005 which was not long ago. So no reason to think the issue is being solved as much as pushed ahead a few years.
Which leads to one of the funny angles to all of this. The whole effort being described as an effort to pay more into the pension system is really just an effort to pay less into the system. The result of not trying to use parking assets to get to a 50% funding level is the spectre of the state "taking over" the pension system. Legally the state can't lower obligated pension payouts any more than the city can now. The threat is that the state would require the city to make larger annual payments than it is currently. Yet the state has no distinct criteria for funding pensions. If the state will require larger payments it is mostly because their, presumably independent, actuaries are anticipated to calculate a larger minimum payment to get the Pittsburgh pension funds on a path to solvency. The goal here is all to keep that from happening, thus to keep the city in control of the pension system, and thus have the city actuaries' lower calculation of annual pension funding be used for year into the future.
So my only prediction is that given the nature of the assets and the state of financial markets these days the bids will come in relatively high for whatever is put up for sale or lease. Low interest rates these days that the $$ needed for this can be borrowed at very minimal cost so any company with the capacity to borrow at that scale is going to do this with virtually free money in a sense. These are large public assets with future revenues virtually assured by statute and regulation and for the foreseeable future a captive market. It should all end up resulting in being a really good deal for someone and you hope that translates into larger bids. Possibly a naive thought. But if I am right, the big $$ being put on the table will blind all other sensibilities and this will all pass without as much consternation as some may be anticipating. Time will tell.
Getting near the end here All this effort to 'monetize' Pittsburgh Parking Authority assets is curious. No thought of trying to monetize even other public parking assets? I think the Stadium-less Stadium Authority has some parking assets, as does the URA. It will be even more curious if the bids don't quite get the pension funds to 50% and just a little more is needed.
On the "more may be needed angle". What is up with the $$ of city surplus socked away in the pseudo 'lockbox' because nobody wanted to literally defease debt last year? I just bring that up because again, if this all gets us to say 45% funding, I bet that comes into play.
Finally... my 'prediction'. I suspect the lease will happen... the 50% funding won't be achievable from the proceeds and the state of the pension fund as of December. The state still takes over the pension system as it were. The city holds the money with the argument that it needs to hold cash to make the higher annual payments and basically everything is the same except the city now has a big pot of cash to burn through.
Is the ICA still around? That is only a semi-rhetorical question. A more substantive question may be how much longer it will be around in the future.
So with all that... a summer Friday and all.. this and all other related discourse will be lost in the ether. If you have read this far I will send you a merit badge.