Basically the city has told the state that the promised future parking revenue that will be sent direct (dare I say 'special delivery') to the pension board for disposal is worth $239 million dollars give or take. The actual revenue stream is $13.4 million a year for the years 2011-2016 and $26.8 million for the years 2017-2041 per the legislation of December.
I won't do the math here now, but many readers here know the financial calculaton behind that and it works out to a discount rate of 8% on that future income stream to work back into a net present value as of January 1, 2011. Here's the funny thing. When in each year is the payment made? If you do the math, it works out that the $239 mil NPV calculation must be assuming the payment is made at the very end of each calendar year. So the assumption is the 2011 payment will get transferred right at the end of 2011. Will be a sad side note if the city can't make the very first payment once the state says ok. I predict there will be many a year where the December debate will be whether the payment (transfer as it were) needs to be made. If anyone gets any other result from reverse engineering that, let us know.
But I was looking back at the actual legislation enabling the whole situation today. It is pretty simple. Other than the schedule of payments, this is the effective text in its entirety:
Ordinance amending and supplementing the Pittsburgh Code of Ordinances, Title 2, Fiscal, amending Article XI: Dedicated Funding for the Comprehensive Municipal Pension Trust Fund, to change the amount of funding to be dedicated to the Comprehensive Municipal Pension Trust Fund with the goal of retaining local oversight immediately and into the futureSo to begin, there does not seem to be all that much guaranteed in any of that. In fact, it all sounds very very conditional when it starts with "for the purposes of Act 44...". Skip that issue for now.
Be it resolved by the Council of the City of Pittsburgh as follows:
Section 1. The Pittsburgh Code of Ordinances, Title 2, Fiscal, is hereby supplemented by amending Article XI: Dedicated Funding for Comprehensive Municipal Pension Trust Fund, as follows:
CHAPTER 272: DEDICATED FUNDING FOR COMPREHENSIVE MUNICIPAL PENSION TRUST FUND
§ 272.01 SOURCES OF FUNDING
The City Council hereby dedicates irrevocably to the Comprehensive Municipal Pension Trust Fund for purposes of Act 44 of 2009 the receipts of revenue from the Parking Tax for the years 2011 through 2041, according to the following schedule of annual payments:
What gets me is the loose connection to parking tax revenue. What happens if parking tax revenues are insufficient? Nothing in that verbiage would inhibit the city with going ahead and selling/leasing the parking assets which would also take away the potential funding stream. Is there any clawback to a general obligation on the city of Pittsburgh's other revenues? Sure seems not to be the case in that it clearly identifies parking tax revenues for the only source of funds here. Is there some other supplemental legal contract that followed this up between the city proper and it's pension fund?
Fodder for a public finance case study if nothing else. No matter for now and by end of day presumably it will be an entirely different debate one way or the other. Wailing and gnashing, or tremendous victory celebrations. All despite the fact that no matter what the state says today, nothing at all has changed impacting the long run financial health of the city of Pittsburgh. This all gives 'accounting fiction' an entirely new meaning.