When Success Becomes a Dirty Word

A modified version of the Police Accountability bill covered in this post has passed preliminary approval in the city council. The unanimous vote puts the bill on next Tuesday’s agenda where it is expected to receive passage. 

The City Paper does an excellent job covering the bill here.

The Trib on the other hand takes pains to call the approval ‘tentative’ and implies that the only people applauding the effort are ‘black leaders’. Funny, I could’ve sworn Vic Walczak and Beth Pittinger were concerned to uphold the rights of everyone.

The PG chose not to cover it at all, though they are probably awaiting final passage to print their write-up. 

There is another strange feature of the coverage however. By all accounts, the FOP, public safety and Chief Harper all came to the negotiating table to craft a bill that would address community concerns. This level of cooperation was rather extraordinary considering that just a few months ago FOP President Dan O’Hara was threatening that the bill would have officers so busy filing reports that they would have no ability to fight crime.

The really surprising thing, however, is this. The Trib’s coverage and an article currently running in the City Paper both point out that the Police Bureau is currently suffering from widespread mistrust in the community.  Their cooperation on this bill then would be a great way to start to show good faith efforts to respond to these community concerns. Further, I would expect the mayor’s office to be doing its best to capitalize on the good will brought on by this cooperation.

And yet, the FOP, Chief Harper and the Mayor’s office have been silent. None of them bothered to give a quote to either publication as they were preparing stories. In fact only Huss seems to have addressed the issue at all. While he called the negotiations ‘positive’ and ‘productive’, he certainly didn’t do much to emphasize this unprecedented cooperation.

I think the biggest question is ‘what happened?’. Did public safety or the chief come to realize that this bill was going to pass whether they wanted it to or not and so decided to get some input on it? Was this course of action directed by the mayor’s office? 

While there are plenty of things to praise in this city, cooperation of this sort usually isn’t among them.

Still, all parties that sat down at the table are to be commended. That includes the FOP, the chief and public safety (maybe even the mayor’s office). What is really strange though is that no one seems ready to step forward and take the credit!

The Politics of Parking and Pensions

I think almost everyone has probably grown tired of the parking and pension issue. But I promised to cover the politics of the solution and so cover it I will.

I don’t take the various proposed solutions to the pension crisis to have been undertaken in bad faith by either Ravenstahl’s office or the council. However, I do think that it was, at bottom, a political solution. That is, a solution that had as much to do with keeping a scorecard of winners and losers as it had to do with bailing out the pension.

Let us start with the mayor’s proposed solution. Lease the parking assets for 50 years to LAZ. This would have generated an immediate 452 Million, of which 230 Million was to go to the pension fund. The rest was discretionary, though it was suggested that some of the remainder would also find its way into the pension fund. 

Now on the face of it this doesn’t seem like such a terrible plan. 452 Million, if invested at 6% a year, will compound to almost 8.5 Billion over 50 years. Further the provisions of Act 44 still allow for the city to impose a parking tax. Finally, a great deal of repair, maintenance and employee costs would be reduced under this lease plan. 

But the plan was rejected. Informing this rejection was the idea that a long term of lease of assets should be a last resort for any city. Something that should only be done when there is no other way to make budget. In fact, Chicago’s 75 year lease of parking assets and the steep increases in parking rates was also on everyone’s mind during that time. It was widely reported that LAZ was  aggressively enforcing meter times and paid that city about a quarter of what its parking assets were worth.

Now, fair enough, LAZ may be a company with more to gain from this deal than the city. It certainly would have imposed a more aggressively enforced and expensive parking deal and they would have been largely outside of public control.

So what did we get instead? 

More aggressive enforcement, more expensive parking and a parking authority that is largely outside public control!

However, in order to get that we had to go through a few different plans. Each was rejected in some form or other by the mayor’s office. 

Throughout the argument between city council and the mayor a fairly constant refrain could be heard – “keep public assets public”. Indeed, Dowd did a great deal to forcefully articulate this position at every opportunity, though I often took him to speaking for most everyone else when he did.

"I want to keep public assets public. I want to savethe pension fund" from state takeover, he said. "Improving theservice of the parking authority is the third goal."

The problem is that many of the proposals offered by council didn’t really do that. 

It might help to recall the various alternatives that were being floated at this point in the debate.

 One scheme would have given the parking infrastructure directly to the pension fund.

-This would have, perhaps, saved the pension but it would have then been outside the public control and little would have improved in the parking authority.

 Another was to sell the parking infrastructure the city owned to the parking authority and use the proceeds to fund the pension.

-Given that the mayor controls the authority this also would have reduced the public nature of these assets. The money would have flowed into the parking authority not the city.  Again, nothing in this plan improves the service of the parking authority. 

Still another was to lease certain lots and meters to a private contractor for 40 years but with a revenue sharing agreement.

- Again maybe this prevents the takeover, but the other issues are untouched or made worse.

Each of these was rejected by the mayor’s office at various times.In response, Dowd said the mayor’s exhibited a “failure of leadership”. And Peduto accused the mayor of bullying tactics and threats. The perception wasthat this was a game of brinkmanship. By declining to offer alternatives the Mayor was dooming the pension fund to takeover by the State.

Which brings us to the proposal that won out. Transfer the parking tax revenue stream to the pension fund for the next 40years, and deal with the hole created in the budget by demanding a greater cut of the increased revenue brought on by rate increases and aggressive enforcement from the parking authority.

 I suppose this keeps public assets public but only nominally so. The problem is that the lion’s share of the parking infrastructure is still controlled by the parking authority and they have been particularly recalcitrant in coming to a new deal on sharing that revenue stream. While the authority is controlled by the mayor’s office, and so is in some sense under public control, in reality this extra layer of bureaucracy insulates the parking authority from real oversight and scrutiny.

Now city council was facing a deadline here and had little support form the mayor’s office, but it should still be pointed out that while they had criticized the mayor for playing a game of brinkmanship, they did something similar. They essentially put themselves in a position to go broke if the parking authority didn’t renegotiate its revenue sharing agreement with the city. 

In this interplay between council and the mayor, the urge to position oneself to declare victory over the other is particularly palpable. The mayor wants to see his plan succeed and so he ignores alternatives and refuses to allow his parking authority to cooperate with council’s plans. In response the need to show up the mayor as uncooperative leads council to stretch their authority to the absolute limit and essentially make the city’s budget contingent on that cooperation. 

As far as the second desire of Dowd’s goes, this was obviously accomplished. The pension fund was saved. Still, that outcome looked far from certain for a long time and I have heard privately from many who were surprised by that outcome.

Was the parking authority’s service improved? No. But then, I wonder if that was really a realistic goal anyway. If Dowd believed he could pull this off, he is to be admired for his ambition, but I suspect that this functioned as another talking point: another way to needle Ravenstahl.

So here we sit with some tough decisions to make about parking revenue, some tough politicking to get the parking authority to accept a new revenue sharing agreement, and the silver lining – a plan that actually rescued the pension fund. 

But I don’t think we are in any position to say, from this position, whether that solution was the best one. We still have one of the problems that come with the lease plan – more expensive parking and aggressive enforcement. And we don’t enjoy the benefits of outsourcing maintenance, employee costs and repairs. These are largely benefits the parking authority would enjoy, but if we consider that a ‘public entity’ then I guess we can claim those costs and benefits as our own.

We also have the pension fund under our control, in some sense. We can’t really tamper with the revenue stream, though at least we made the decision to use that revenue. And while keeping it seems like a victory, in reality it is a mixed bag. 

The state’s pension fund would have given us lower administration costs, more realistic projections of growth and would have been subject to more professional management. (Our pension fund, in contrast, has made risky investment decisions and recently pulled assets completely out of the stock market – losing millions) But turning the fund over to the state would have come with new taxes. At least by gaining revenue from parking we take some share of the money from the pockets of our suburban neighbors. 

Finally, have we kept public assets public? We haven’t privatized them, certainly, but we don’t have ready access to the revenue generated by them either. If they were public assets in the first place, I guess we have kept them as such. But there are real obstacles to seeing them as ever truly public.  

An Asset You Have To Believe In

Now that all of the City’s documentation on pension funding has been sent off to Harrisburg, it seems an excellent time to examine that funding in more detail. Of course, the whole story of this funding scheme is a long one and has as much to do with political enmity as it does with crafting a reasonable solution to the problem. I’d like to address this all, but I tend to be wordy and so it is prudent to divide this labor.

Today then, let us look at the asset which was offered to cover the hole in the pension accounts.

Future posts will deal with the debt itself and the politics of the solution.

On the face of it, the scheme used to bring the underfunded pension up to a reasonable level of funding couldn’t be any less exotic. Our City Council simply dedicated a revenue stream, in this case parking revenue, to the pension account thereby closing a gap.

Dig a little deeper though and this scheme looks less and less like an asset.

Let us start with the initial impetus to fund the pension. It didn’t appear to come from any of our local leaders. The state required that our pension fund be at least 50% funded by the end of the year. While some of the pension fund’s problems can be traced back to the economic downturn and stock market losses, much of it is squarely the fault of local leadership. They chose to kick the can down the road by failing to contribute enough each year to keep the plan funded.

So, to be clear, this drastic response to the underfunded pension system doesn’t look like a spontaneous effort to set things right once and for all, it looks like a response to a potential loss of their own power. If Harrisburg found itself in the position of having to step in and shore up the pension fund, it would have levied additional taxes on the residents of Pittsburgh.

As recently as Aug 23rd Bill Peduto, in his Facebook feed, was asking for patience by pointing out that ‘[the City] did not ask to be required to pay $250 million by the end of the year’.

If I were a recipient of a City pension I might beg to differ.

So what did they do to plug the hole?

They did this. City Council dedicated parking tax revenue to the pension fund for the next 31 years. But this would leave a hole in the operating budget. However, they realized that by increasing the parking rate on City meters, lengthening enforcement hours and increasing the fines for illegal parking they could generate revenue to close that hole without admitting to raising taxes.*

But, strictly speaking, that revenue wasn’t yet theirs to promise. The funds that parking meter revenue and fines get paid into is controlled by the Pittsburgh Parking Authority. True, the Parking Authority shares revenue with the City according to the terms of a joint agreement. But, since the Parking Authority is effectively controlled by the Mayor’s office and the Mayor’s office favored another plan for bailing out the pensions, no new revenue sharing agreement was put in place to send the rewards of the fine and rate increases into the operating budget.

The fact that this scheme turned on securing a future agreement from the Parking Authority didn’t seem to slow this effort at all. Indeed I suspect that this was done as a political calculation. If the agreement from the Parking Authority wasn’t forthcoming, Council could point to the Authority and claim it was holding the City’s pension fund hostage and endangering its ability to continue under the City’s control.

Now this part is the real kicker. The state required an infusion of about 250 Million into the pension fund to ensure that it was at least 50% funded, and so in compliance with the law, to remain under the City’s control. But there was no way of getting 250 Million from parking fines and rate increases. At best those might have added up to 10 Million this year. So the City made a promise that has to be understood as binding any future City Council. The promise says that the City will use parking revenues to pay 1.3 Million into the fund this year, 2.6 Million next year and about 9.3 Million a year for each year after that. When all of that revenue is added up, it totals 735 Million, 31 years from now.

So how do you make 735 Million in 31 years add up to about 250 Million today?

By arguing that since 735 Million in revenue in 2042 will represent a funding level of 62% at that time, then the promise to do this today represents an asset that funds the pensions to a level of 62%.

I wish I could pay my mortgage this way.

Say I go into my bank and give them the following offer.

“Look I know I still owe about 80% of the debt I have with you and I know I haven’t been paying. And if things continue like this you are going to foreclose. But, hey, I have a plan to pay it. Over the next 25 years I will give you 50% of each paycheck I earn. If you do the math you will find that 50% of each check for 25 years adds up to exactly the amount of debt still outstanding. So with this promise of a plan, please call my debt paid and stop the foreclosure.”

Essentially I make good on my promise to pay, by offering another promise to pay.

But if that wasn’t bad enough, it gets worse.

The rate increases and lengthened enforcement pissed a lot of people off.

And that is no surprise: it was poorly considered and rushed through.

So now City Council announced in a letter that it is about to rescind the lengthened enforcement hours and the rate increases. The very source of the revenue needed to plug the gap is now being temporarily removed because it is politically unpopular.

Not only does the promise to pay fail to bind when it is made to our City employees – as evidenced by the fact that the fund has been chronically underfunded. But City Council’s new promise to pay doesn’t even seem to bind the current Council, much less future Councils.

And it isn’t as though these policies will get more popular any time soon. There will be, for the foreseeable future, a need to raise this revenue from the City’s parking infrastructure. This amounts to a tax on driving in the City. As such, there will continue to be pressure to roll back these increases.

Only one person on City Council seems to recognize that when you are selling someone a promise you never let the buyer see how nervous you are – Patrick Dowd.

He remarked, in response to these efforts to roll back the increases –

"We need to be committing ourselves to showing the utmost confidence" in the bailout plan… but the letter "unfortunately casts doubt."

He is right.

What is unfortunate is that the doubt his confidence aims to overcome is not personal to him. To generate confidence he has to be understood as speaking for any future Council. While I might have confidence in Dowd’s sincerity, his promise just doesn’t have the ability to bind future councilors. The doubt that most of us have stems from how the pension fund has been treated in the past. So the basis for confidence in this plan doesn’t turn on the sincerity of anyone today, but on the ability of different people to keep these commitments over the next 31 years.

When you are in the process of breaking your promise to fund the pensions of those who worked for the city, you don’t buy yourself anything by making another promise.

If retired employees can’t take the city at their word, why would Harrisburg?


Bonus question: What happens if, in five years time, council removes this revenue stream? Are we under constant threat of takeover if we tamper with the parking fund over the next 31 years?


*Correction: This paragraph has been altered to reflect the fact that parking tax revenue was being pledged to the pension fund and that the hole which was created was expected to be filled by a new revenue sharing agreement with the Parking Authority. This new agreement is expected to tap the increased fines and enforcement hours revenue to permit the Parking Authority to make a greater contribution to the City. It previously and incorrectly described the increased revenue from rates and enforcement as going directly into the pension fund.  - Thanks Bram for pointing this out.

A 'Concise' Guide to the Woes of the PWSA

I had been wanting to compile a list of the scandals and shady dealings surrounding the Pittsburgh Water and Sewer Authority for some time now. However, really detailing all of what has gone on there in just the last few years would require far too much space. And, in any case, there are others out there who have already done the research and are doing a better job spelling it all out than I ever could. So, below, I give you all the newsworthy events I can recall and links to the required reading for each.

First, there is the shady variable-rate bond deal they got into. Raising this issue was part of Dowd's campaign for Mayor. Then, infrastructure improvement was delayed to pay off that bond. Nullspace attacks the way it is all being spun now.

Then, we have the debacle with Iron City where PWSA debts were forgiven with the promise of retaining jobs in the city. (But, those jobs moved to Latrobe) First, Ravenstahl negotiated a package to reduce Iron City's debt with PWSA, in addition to other incentives, in exchange for production staying in the city. But then Iron City moved production to Latrobe and PWSA sealed all the documents relating to the deal with them.

Finally, there is the line insurance program.This program offered insurance to customers at a rate of 5$ a month in case repairs were needed to the customer's water lines. This one is like a octopus!

There was the initial controversy about it being an opt-out program.

Then, later, the lawsuit that ended it.

On top of that, the director of PWSA's board, Michael Kenney, had been an owner of the company that provided the line insurance. So, after Dowd called for it, he resigned.

But then PWSA took steps to ensure that he wouldn't be investigated or prosecuted. Dowd's previous calls for transparency grew faint as his fellow councilors Shields and Peduto called for an investigation into Kenney's dealings at PWSA.

And now it turns out that the line insurance money is gone and claims aren't being paid. PWSA's promise that all claims would be paid seems to have been forgotten.

Finally, we learn that the insurance scheme probably wouldn't have been able to cover all the claims even if it had survived. Nullspace has even more coverage of the issue here.

Ughhh, when you lay it all out like that it looks pretty disgusting.

Ravenstahl was right and Shields worries me.

It isn't often that I have cause to praise the Mayor of our fair city, but you should give credit where it is due. Ravenstahl was right to prevent the gas drilling amendment to our City's Charter from appearing on the November ballot.

Still the reason the Mayor is right on this issue has very little to do with the major reason he cites in his letter. Ravenstahl argues that amending the City Charter in this way will effectively prevent the industry from investing in our city. This argument, however, is a red herring because there is currently no plans to drill for shale gas within the city limits and it is unlikely that there will ever be. Now it is true that there have been some purchases by the industry of gas rights within the city limits -notably Lawrencville- but I have heard many claim that these sales were more about showing company shareholders that rights were obtained, rather than reflecting any real desire to drill in the city.

On top of this, as Ravenstahl's letter makes clear, there is already an identical ordinance on the books. In other words, the city is already hostile to gas drilling so Ravenstahl's claim that this will prevent industry from investing couldn't be further from the truth. The industry is already prevented from 'investing' in the city - they can't drill here!

So what does the mayor get right? Its this...

"This bill was rushed through with little time for public discussion, legal analysis and consideration of its impacts"

He is right! This bill was rushed through at the behest of Doug Shields. Now I like Doug Shields. From the very limited encounters I have had with him, he seems very bright and very sincere in his concerns and his dedication to the city of Pittsburgh. However, Shields also seems to have a real penchant for the dramatic. He could be accused, at times, of grandstanding and of using the legislative process as a tool for sending a message rather than crafting good law.

The fact is that Shields just lost an election for Magisterial District Judge that he seemed certain that he would win. Indeed he didn't run for reelection on council precisely because he was aiming for the position of judge. His council seat was won by Corey O'Conner in the same election.  So it will be goodbye to Shields come January. Now Shields seems to be angling for a job with an environmental group and burnishing his reputation as champion of environmental causes by putting this issue on the ballot in November.

Further, after Council's August recess they will be dealing with budget issues until the new year. There will be little opportunity during that time for anything else and so this might have been Shields' last chance to showcase his causes before he loses his seat.

So, Ravenstahl is right to point out that this looks like a rushed piece of legislation that hasn't undergone the kind of scrutiny needed for the serious changes it aims to bring about. Indeed I wonder why the language is identical at all. This makes it look especially hasty.

But there is another aspect to this issue that seems to have gone largely unnoticed. Lets looks more carefully at the text of the law itself.

2.      Corporations in violation of the prohibition against natural gas extraction, or seeking to engage in natural gas extraction shall not have the rights of "persons" afforded by the United States and Pennsylvania Constitutions, nor shall those corporations be afforded the protections of the commerce or contracts clauses within the United States Constitution or corresponding sections of the Pennsylvania Constitution.  

3.       Corporations engaged in the extraction of natural gas shall not possess the authority or power to enforce State or federal preemptive law against the people of the City of Pittsburgh, or to challenge or overturn municipal ordinances or Charter provisions adopted by the City Council of Pittsburgh.  

Obviously, the law Shields has written and which council passed contains some very disturbing language. I am no legal scholar but, it appears blatantly illegal for council to try and strip away the rights afforded to corporations by the constitutions of the United States and Pennsylvania. Pittsburgh is a part of the US and the State of Pennsylvania it cannot pick and choose which of the legal protections afforded by those documents it is going to allow to people. There is a word for this sort of thing! I do find it especially disturbing that that this bill passed unanimously!

OK so a city council crafts some overly broad legislation that probably won't hold up in a court challenge, what so bad about that? Doesn't this happen all the time?

The problem is that this language was written by a man who wanted to be a Judge. This is truly frightening! The language of this law shows contempt for the legal protections given by the constitution. Indeed, Shields ran on a platform which denied that legal expertise was needed for the position of Judge. But this shows just how essential that kind of training, and the respect for the law it aims to instill, actually is.

This matters because it seems that Shields is far too willing to put the law aside and do what he thinks is right. While this can be an admirable trait, its not something we should want in a Judge. If Shields is willing to play fast and loose with the law because of his strong dislike for the shale drilling industry, there is no reason to think that his passions over other issues won't result in a similar willingness to discard what is legal in preference for what he thinks is right. The result would be anything but dispassionate justice.