Pittsburgh will not receive $451.6 million in a 50-year parking-lease agreement with a private operator, as its City Council Tuesday rejected the plan.
The decision makes a state takeover of the city’s pension system more likely, since Mayor Luke Ravenstahl was looking to use the privatization funds to help boost the system’s funded level to 53% from its current 30%.
Pennsylvania will place all municipal pension plans that are under 50% funded on Jan. 1 into the Pennsylvania Municipal Retirement System, which is run by the state.
Pittsburgh’s minimum annual pension contributions would increase by $30 million if the state takes over the system, according to Ravenstahl. The increase would reflect the state’s use of a lower assumed rate of return for pension-fund investments.
The privatization plan failed in a vote of one to seven, with Councilwoman Theresa Kail-Smith abstaining.
Council members today will discuss an alternative plan that involves the Pittsburgh Parking Authority selling $220 million of bonds and using those bond proceeds to buy city-owned parking assets. Pittsburgh could then use those sale proceeds to shore up its pension fund.
Increases in parking fees would pay down the Parking Authority’s bonds. City Controller Michael Lamb is behind the borrowing plan.
He said parking fees under his plan would increase by less than half the amount that the mayor’s privatization proposal would have required.
Ravenstahl has said in local reports that he does not support the bonding initiative.
A spokeswoman for the mayor did not immediately return a request for comment regarding the council’s vote against his plan.
In addition, the Parking Authority’s board would need to weigh in on Lamb’s borrowing plan.
Scott Kunka, Ravenstahl’s finance director, is chairman of the authority’s board. Kunka has been at the center of crafting the 50-year parking-lease deal.
The city-owned parking assets include one parking garage, five surface lots, and all of Pittsburgh’s metered parking. The 50-year lease plan includes both city-owned and authority-owned parking assets.
The Parking Authority has $105 million of outstanding parking revenue bonds.
Also up for discussion Wednesday is a bill that would authorize the city to place its pension system into the PMRS. Councilman Ricky Burgess is sponsor of the measure. Burgess was the sole vote in favor of Ravenstahl’s parking-lease deal.
It is not clear whether the council would hold a preliminary vote Wednesday on the Parking Authority bonding initiative or Burgess’ measure to fold Pittsburgh’s pension system into PMRS.
Council President Darlene Harris was not available to comment on Wednesday’s agenda.
Harris is one of the sponsors of the Parking Authority bonding initiative.
Pittsburgh is operating under Pennsylvania’s distressed municipalities program, called Act 47.
The city has $650 million of outstanding debt, including $180 million of taxable pension bonds that it sold in 1998.
Those bonds are noncallable and carry interest rates of 6.25% to 6.6%, according to the preliminary official statement.
Final maturity for the pension bonds is 2024.
Standard & Poor’s and Fitch Ratings rate Pittsburgh BBB and A, respectively. Moody’s Investors Service rates it A1.