The Pittsburgh City Council has voted on a five-year recovery plan that includes the possible lease of its parking garages as one “preferred” option for raising an additional $10 million to $14 million per year for the city’s underfunded public pension.
The plan authorizes the city to pursue the lease as one of three “alternative” options to increasing funding for the pension, including additional cost cuts and fee increases. If the city cannot guarantee the additional funding for the pension from any of these sources by November, next year’s budget will revert to the “failsafe” option of increasing taxes to fund the required additional pension contribution for the budget year, according to the plan.
A feasibility study for the long-term lease of the city’s 11 parking garages is already underway and Pittsburgh Mayor Luke Ravenstahl has come out in strong favor of strengthening the city’s public pension fund, which was only 29 percent funded as of December last year. That level of funding made it the worst-funded pension fund of ten major US cities in a January report published by the Pew Charitable Trusts.
Other cities that have pursued long-term leases of their infrastructure assets have taken similar approaches of budgeting for the proceeds of a potential deal prior to pursuing it. In Chicago, the city council enacted a 2009 budget in November 2008 that included the proceeds from a potential long-term lease of its on-street parking as a way to address a $150 million budget shortfall.
However, the plan also reserves the city the right to raise revenue from the parking garages without leasing them.
“As an alternative to the Mayor’s proposed lease of the parking garages, the City may consider and review an increase in parking authority rates and a dedication of incremental parking revenues to its pension or debt obligations,” the plan reads.
That alternative mirrors similar steps recently taken by Milwaukee’s city council. The city was considering a long-term lease of its water utility but decided to put those plans on hold to see how much money it could generate by raising rates and retaining the Milwaukee Water Works under its management.
In Pittsburgh, as in Chicago and Milwaukee, budget pressures have prompted the city to look into public-private partnerships for its existing assets as a revenue-raising measure.
In 2004, Pittsburgh passed its first five-year recovery plan under the state’s Act 47 – a statute that allows the state to declare certain municipalities “financially distressed” as a way to help them chart their way to recovery – and eliminated the problem of persistent annual operating deficits.
However, the problem of legacy costs tied to the city’s underfunded pension, medical and retiree benefits has remained, prompting it to pass the second recovery plan under Act 47, which includes the parking lease as a potential alternative for rescuing the city’s retiree benefits.