In a town known for steel and grit, the desperate financial situation is forcing officials to consider selling a valuable municipal asset — its parking garages and lots — to restock a depleted city pension fund.
Over the past 20 years, cash-strapped Pittsburgh has sold its water system and unloaded its outstanding tax liens to a private investor in order to bolster the pension fund, so it was only a matter of time before the city fathers considered placing municipal parking ramps, lots and meters on the auction block.
A state law setting minimal standards for funding municipal pension programs is forcing their hands. But officials can’t agree whether to sell the parking facilities outright or find some way to monetize the parking system without actually losing ownership, as one council member is proposing.
Either way, the controversy highlights the harsh reality of the recession. Large, aging populations and a shrinking tax bases are punishing state and local balance sheets nationwide and forcing municipalities to make draconian cuts. “The city has sold off everything else,” said Chris Briem, a professor at the University of Pittsburgh who researches state and municipal pension issues. “There is nothing left.”
The city was known historically as a major steel town, and at the close of World War II the population was well over 600,000. But like other “rust belt” cities, Pittsburgh was forced to reinvent itself economically as the auto industry and the demand for domestic steel plummeted. Today, its economy is largely centered on health care, technology, education and financial services. The city government in recent years improved its balance sheet by cutting the city workforce, closing firehouses and charging admission to city pools.
But like other states and cities, the pension fund has been a financial albatross, a problem that has eclipsed many of Pittsburgh’s budgetary successes. With a population now of just over 300,000, Pittsburgh has 2.3 percent of Pennsylvania’s overall population but a staggering 20 percent of the total statewide unfunded municipal pension liability of $5 billion.
Pittsburgh’s plight epitomizes a national problem whose full dimensions came to light in a recent study published by the Pew Center on the States. That report concluded there is a $1 trillion gap between the promises states and localities have made to current and future retirees and the cash they have actually set aside.
States and localities either failed to invest the money recommended by their own actuaries or miscalculated what they would need. In many cases, such as that of Pittsburgh, clever schemes that involved selling “pension bonds” and reinvesting them fell flat when markets tanked.
“Every dollar spent to reduce the unfunded retirement liability cannot be used for education, public safety and other needs,” the Pew study states. “Ultimately, taxpayers could face higher taxes or cuts in essential public services.”
Here in Pittsburgh, at the confluence of the Allegheny and Monongahela rivers, parking is an essential city service, one that makes many Pittsburghers skittish with talk of selling off garages or even parking meters. After Chicago privatized its parking garages and meters in 2008, rates spiked as the new owner sought to recoup the $1.16 billion, 75-year lease. The sell-off plan includes 10 garages and possibly 37 surface lots, plus 8,000 parking meters. Mayor Luke Ravenstahl is pushing the plan to sell the garages only because the state legislature passed a law last fall requiring the city to fund at least half of its roughly $1 billion in pension liabilities or face a state takeover. The city’s fund needs about $200 million by the end of the year to reach that level.
Pittsburgh is a town where marking your parking spot with a chair — a ritual that came to other cities only after massive snowstorms forced residents to dig out their cars and then protect the space — is an established practice all around the city. Rachel Kartch, an IT consultant who parks around the city for work, said The Pittsburgh Chair, as it is known, suggests how seriously parking is taken. “I think you’d get shot if you tried to move somebody’s chair,” she said.
Regardless, the city’s longstanding strong ties with organized labor win in a battle between parking and pensions.