Thursday, May 10, 2012

Nobody's on nobody's side

Long story... but I'm back.

So I learn from Early Returns that the City of Pittsburgh's euphemism as oversight board, otherwise known as the Intergovernmental Cooperation Authority (ICA),  is still around.   Who knew?

They seem to be looking at the city's debt.  I need to update my graphic below which is my calculation of the long term trend in the city's debt when calculated per household. But then I realized it really is a philosophical question these days what the city's debt is. 

So remember the whole debate over the notional 'asset' the city's pension fund now counts.  A promise of future parking tax revenue is actuarially monetized to be counted as an asset.   I still want to know ..... if it is really an 'asset' could the pension board sell it to a third party?  Is that almost the definition of 'asset'. OK,  skip that, but it has a big corollary that goes like this:

So if the pension board is counting the diverted parking revenues as an 'asset'.. is it not the case that the same promised revenue stream is an equally valued debt to the city of Pittsburgh's accounting? 

Why ask why?

But if you look at my un-updated graphic below (from this old post) you see the long term trend in city debt when caluclated per resident household in the city of Pittsburgh.  What you see is a big jump in the mid/late 1990's when the city of Pittsburgh floated a big Pension Bond to put $$ into the pension fund.  So was not this big new and notional asset in the form of parking revenue meant to do the same exact thing?  Yes? No?   Think about it?  The difference between the two capitalizations is that one was at least a bit more honest than the other.  Sure seems to me that one side of a ledger got some money that is mostly being ignored on the other. It all might work out if there was a City of Pittsburgh central bank, but otherwise a bit problematic. 


Anonymous BrianTH said...

Assets don't have to be alienable, but it is true this asset has to be SOMEBODY's liability.

But isn't that what "independent" authorities in Pennsylvania are for, to hold liabilities off the books of the general governments? So I'd guess if it shows up, it is as a Parking Authority liability.

Thursday, May 10, 2012 1:24:00 PM  
Anonymous MH said...

The city just needs to find 1,820,000 chainsaws.

Thursday, May 10, 2012 9:18:00 PM  
Blogger Bram Reichbaum said...

Parse please:

Friday, May 11, 2012 7:26:00 PM  
Anonymous MH said...

1,819,060 chainsaws.

Friday, May 11, 2012 11:35:00 PM  
Blogger C. Briem said...

It's too pathological to parse since those numbers add up the cash and other investments that normally make up an the assets of a pension fund, and this big notional asset which is whatever it is.

But if you insist. Lets see. This is reporting on the pension funds appreciation over the first quarter. So between January 1 and April 1. Between those dates the S&P went up just under 13%. Yet the pension fund went up in value by under 5%. Hmmm...

and so far this quarter... April 1 to present the S&P is DOWN about 5%. Double hmmmmmm.....

Of course it is all screwier than that. The notional asset can't go up or down in value based on the market since.. you know.. it isn't an invesment in any market. It is and I am speculating a bit going to increment down in value just a bit based on the shortening of the period of future benefits which isn't much since the NPV of payments 10+ years out is pretty small.

Then there is the question of how you evaluate the performance of the notional asset. Did did it perform as expected? A truly convoluted question in context.

Saturday, May 12, 2012 2:49:00 AM  
Blogger BrianTH said...

I believe there are various standard strategies for valuing inalienable or otherwise illiquid assets--whether they are being used in this case I don't know.

Saturday, May 12, 2012 7:27:00 AM  
Blogger Bram Reichbaum said...

Lol. Thanks.

Tuesday, May 15, 2012 4:33:00 PM  

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