Tuesday, March 2, 2010
You know what my retirement plan is? The luncheon meat known as Spam. Lots and lots of canned Spam. Keeps forever, and it's more substantial than a 401(k) has proven to be. Plus, you can build housing from the tins.
A Spam-based investment strategy means I miss out on a lot of great investment opportunities, true. But I also don't get caught up in shady investment deals like credit-default swaps.
I say this to explain why I'm a bit wary of a new proposal for bailing out the city's pension fund announced this morning.
Mayor Luke Ravenstahl's plan is well known: Lease parking facilities owned by the city's Parking Authority, for a period of up to 50 years. The money from that lease would be paid up front, and used to shore up a pension fund that has less than a third of the money it needs to pay future obligations.
Still, there are misgivings about the lease idea. And this morning, city councilor Patrick Dowd and city controller Michael Lamb held a presser to annoucne their potential solution.
It's called the "Dowd-Lamb Public Plan" -- emphasis on "public," to contrast it with the mayor's privatization scheme. It largely consists of taking some (or all) of the parking garages owned by the city Parking Authority, and transferring them to the board that oversees the city's pension fund. (Parking meters and surface lots would still belong to the Parking Authority.)
Transferring ownership would have a couple of benefits, Dowd and Lamb say. First, the market value of the parking garages could be added to the value of the pension fund's assets. The garages, Lamb said, would be more than the $100-200 milion needed to get the pension fund to its critical 50-percent-funded threshhold.
Second, once the pension fund gained control of the garages, it would have a steady stream of parking revenue to continue paying pensions in the future.
Dowd pointed out that this plan has some advantages when compared to the city's last effort to shore up the pension fund. Mayor Tom Murphy sold off water/sewer assets, and plowed that money into investments. Seemed like a good idea during the 1990s, before the dotcom bust and all that, but it hasn't panned out. Spam probably holds its value better than the city's pension fund over the past decade.
There are other advantages to the Dowd/Lamb plan. One little-noted provision of Ravenstahl's plan is that, as a condition of leasing its garages, the Parking Authority may have to forfeit the ability to build new garages.
You can see why someone leasing garages would insist on that: Any new garages built by the Parking Authority would compete with the garages it just leased. But as Lamb pointed out, "We wouldn't have places like Whole Foods ... without the leadership of the Parking Authority." If you owned a chain-retail store, would you move into a neighborhood without plentiful parking close by?
But even if the Parking Authority transferred garages to the pension fund, it would still be free to build new ones.
Those are the advantages: a steady stream of revenue, local control of garages (and the rates they will charge), and a Parking Authority that, while diminished in size, would be able to expand in the future.
What's the downside? Well, by Dowd's own admission, "This is not a normal plan ... It's new and different." Which means that, as a Pittsburgher, I fear it.
For starters, is it realistic to think that a pension fund -- which hasn't had much luck keeping on top of pensions -- will be able to operate parking garages? These guys don't really deal with infrastructure.
I'll admit that on the surface, the Dowd-Lamb plan is tremendously appealing. And clearly there needs to be a lot more discussion about the mayor's proposal But for reasons I can't explain, it feels like a gimmick to me. By shifting an asset from one set of books to another, the argument goes, we'll have suddenly solved a problem without doing anything. Maybe so. But if life was that easy, we could solve the pension fund's problems just by investing the whole thing in shares of Enron.
In any case, Dowd says he's had informal conversations with the mayor, other councilors, and other interested parties. (Lamb himself sits on the pension fund.) The response from all corners, he says, has mostly been, "Let's kick the tires and give it a look."
Indeed, shortly after the presser, city councilor Natalia Rudiak -- who serves as council's representative on the Parking Authority, issued the following statement.
"This plan has a lot of merit. I am glad that we have an alternative on the table. I want to make sure that whatever plan we ultimately choose, it helps keep our promise to the public employees of this City, many of whom live in my district, and that it helps improve the City's financial outlook."
If this plan fails, maybe we lease parking chairs instead?
Tags: Slag Heap