Yesterday the city’s actuaries found a mathematical problem in the City Council’s pension bailout plan – forcing officials to redo the legislation with little more than a day left to head off a state takeover of the plan, according to the Philadelphia Enquirer.
Under state law, the pension fund, now just 29.3% funded, must be 50% funded by 12:01 a.m. Saturday to avoid a state takeover by the Pennsylvania Municipal Retirement System.
The council had approved the plan Wednesday to dedicate about $414.7 million in parking tax revenues over 31 years to the pension fund, which officials believed would be enough to avert state takeover (see Pittsburgh Inches Closer to Pension Funding Crisis Resolution). But the actuaries, brought in Thursday morning, thought otherwise, according to the Enquirer report, citing firefighters union president Joe King, a city pension board member. Rather than voting to override Mayor Luke Ravenstahl’s veto of the plan, King said, the council must redo the plan, submit it to Ravenstahl again, and then override the new expected veto.
In passing the plan, King said, the council miscalculated the “net present value” of the future stream of parking tax revenues, according to the Enquirer. According to the report, the council will revise the bailout plan to take about $735.7 million in parking revenues over 31 years instead of the $414.7 million.
Bloomberg notes that, under Pennsylvania’s hand, Pittsburgh’s annual payment to the plan may double by 2015 from $46 million this year and rise to $160 million in 2030, according to a state analysis. Mayor Ravenstahl opposed the parking-tax plan because he said it won’t head off a takeover and will open a hole in future budgets, according to the report. That said, his veto on December 29 gave the council enough time to act before today’s deadline. Ravenstahl had backed raising $452 million with a long-term lease of parking facilities to a group led by JPMorgan Chase & Co., but the council rejected that plan in October.
Pittsburgh’s pension system includes three retirement plans for about 7,000 active and retired firefighters and government workers. The accounts have only enough funds to pay benefits for three to four years, Ravenstahl said, according to Bloomberg.
Moody’s Investors Service changed its outlook for the city’s A1 rated general-obligation bonds to negative on November 23, citing a potential rise in pension costs under state control.