A $220 million Pittsburgh Parking Authority borrowing plan hit a snag Thursday as the agency’s board voted against hiring bond professionals to help structure the debt sale.
The borrowing initiative would help Pittsburgh avoid a state takeover of its pension system. Without it, Pennsylvania’s second-largest city faces the prospect of having to contribute 67% more to its pension plan.
The five-member board rejected a plan to issue requests for qualifications for bond counsel, financial adviser and investment banker, parking consultant, and independent appraiser to peg the value of city-owned parking facilities, in order to piece together a borrowing strategy.
The decision essentially ends the $220 million bond plan, unless Councilwoman Natalia Rudiak, who sits on the Parking Authority’s five-member board, and other proponents can persuade City Council to pick up the cost of hiring bond professionals. She said the council may weigh in on that issue Tuesday.
“There was some discussion at the table of asking City Council to undertake that study and have board members be a part of that process,” Rudiak said in a phone interview. “The way I look at it, the board didn’t completely say no today. They said they basically didn’t want to pay for the independent analysis. So we’re going to regroup here internally and see how we may be able to work with other board members to try and make that happen.”
The proposed bond transaction involves the Parking Authority issuing $220 million of bonds to buy city-owned parking assets, with parking-fee increases paying down the debts. The city could then use the asset-sale proceeds to strengthen its retirement system, which is nearly 30% funded.
The state will place any municipal retirement program that is not at least 50% funded on Jan. 1 in the state-run Pennsylvania Municipal Retirement System. That would increase Pittsburgh’s minimum annual pension contribution as the state uses a lower assumed rate of return on retirement-fund investments.
Mayor Luke Ravenstahl estimates that the city’s minimum annual pension contribution will increase by $30 million to $75 million if the state takes over Pittsburgh’s retirement system.
The council expects to receive state estimates Thursday for the amount Pittsburgh would face for its yearly pension contributions under state oversight.
Controller Michael Lamb crafted the $220 million bonding plan and the City Council passed it on Tuesday.
Even if the council offers to pay for the professional services, it is uncertain if the borrowing would pass the Parking Authority’s board. City finance director Scott Kunka, is chairman of the board. He helped craft Ravenstahl’s plan to lease all city-owned and authority-owned parking assets to a private operator for 50 years for an upfront payment of $451.6 million. Bids on that privatization plan expire on Nov. 1.
The mayoral administration would have used a portion of that initial payment to boost the pension system to 53% funded. The council voted down that long-term lease agreement on Oct. 19.
While there is little hope that the council would reconsider the privatization plan, Ravenstahl spokeswoman Joanna Doven said the administration is ready to work with the City Council on a plan that does not include “irresponsible borrowing.”
“What does that look like, what does that mean, we simply don’t know,” Doven said. “But we do imagine that now that this plan is dead, so to speak, that we can begin to work on a solution that makes sense.”