Existential Fiscal Policy

Since several have asked, my general opinion of the latest news on the PPP front is that the latest plan reminds me of My Dinner With Andre.

Policy and philosophy are not really all that far apart.  Or maybe it’s finance and philosophy that are more akin than we think.  A promise to pay more into the pension fund is not exactly something new in the big picture.  Act 205 pretty much requires the city to pay more into the pension fund in the future.  So much more that the pension fund will get to a fully funded state eventually. That is what the law already says, no need for any less statutory ‘promises’. So if you step back from all the competing minutia of made up numbers all around, I don’t see what will be different on January 1st.  We will have traveled a long winding road to wind up at the status quo. If this promise is made that is, and the state accepts it to forgo the impending takeover by PERC…  we will be exactly where we would have been if none of this ever happened.  There will still be a large and growing unfunded pension liability and no state takeover. Like it was all a bad dream. Did it all really happen?

Something more substantive:  This plan as I understand it it is that somehow the state will accept a somewhat vague promise of future revenue from the parking authority and meters to meet the mythical 50% threshold in pension funding. Remember the 50% number is arbitrary and notional.  Come January 1 the new cycle of actuarial calculation will start and we will eventually learn the current state of the pension fund.  With lease payment or without, with notional promise of future parking revenue or not, the new calculation will show that the pension fund will never really achieved a 50% funding ratio.

But something I have wondered about in the past, but really might impact this plan more than others (though I wonder about the others as well).  Here is what the law actually states is allowable rationale for setting rates in the parking garages owned by the parking authority.

This is an excerpt of section  § 5505. Purposes and powers of the Commonwealth of Pennsylvania Parking Authority Law (Act of June 5, 1947, 53 P.S. § 341 et. seq.) that describes the valid factors such an authorities can use to set rates:

(d) Powers…….An authority has all powers necessary or convenient for the
carrying out of the purposes under this section, including:

……..

9) To fix, alter, charge and collect rates and other charges for its facilities at reasonable rates to be determined exclusively by it, subject to appeal under this paragraph, for the purposes of providing for the payment of the expenses of the authority; for the construction, improvement, repair, maintenance and operation of its facilities and properties; for the payment of the principal of and interest on its obligations; and for fulfilling the terms and provisions of agreements made with the purchasers or holders of such obligations or with the municipality. Any person questioning the reasonableness of rates fixed by the authority may bring suit against the authority in the court of common pleas of the judicial district where the project is located. The court of common pleas shall have exclusive jurisdiction to determine the reasonableness of the rates and other charges. This paragraph supersedes a contrary provision in any home rule charter, ordinance or resolution.

So absent some explicit obligation, as in a bond or loan, then it is permissible for the parking authority to raise rates to just fund the city’s pension obligations?  Begs the question of what rates are proscribed in any circumstances by that paragraph, but that is why we have lawyers I suppose.

Do I think it matters?  Not really.   The law seems to give all legal authority to the local court so who knows how that would turn out if there is not path to appeal.  It does seem to give a very broad definition of who would have standing in challenging the rates, something that is usually what trips up folks trying to litigate against tax issues.   My non-lawyerly reading of “any person” would imply that even just a rate payer could sue; that it need not even be a resident.  Plenty of disgruntled and underemployed suburban-living laywers around who would be more than happy to file something. Someone is going to sue is all I predict.   Something that would not be an issue if the PPA decided to sell all or some of its Downtown garages which they are certainly permitted to do.

So who knows where this will all wind up?   In my ideal world we would be thinking about these things strategically and not just making policy in this uber-reactive way.  There is nothing more reactive than what is going on now with this mad rush to do something, literally anything, to meet an arbitrary deadline based on notional numbers with a deadline now measured in hours.

Strategically to me would be to think through what assets the city should own and what assets it really does not want to own any more.  Then see if monetization of the former helps deal with the pension problem and go from there.   Anyone notice that the stadiumless authority lives this week.   More than a few assets over there on the North Shore nobody wants to talk about.   Assets you would think would soon be appreciating as the T extension comes closer to opening.

Hey, let’s start talking about GASB 45.

*****

Wait… I’ve got it.  This plan is all fundamentally one big huge TIF.  Not really a TIF, more Fee-Increment-Financing.  A FIF!

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