Pension costs are a problem for many cities, but few policy-makers have been able to come up with tangible solutions to meet current obligations. That's why we're intrigued by an idea out of Pittsburgh, where Mayor Luke Ravenstahl is seeking to lease the city's parking infrastructure to generate a big chunk of cash for the pension fund.
The plan is pretty simple: Instead of having local government operate garages, parking lots, and meters, Pittsburgh will lease those assets over to a private company in exchange for a big payment. Yesterday, Pittsburgh announced that a group of investment firms was willing to pay $452 million for the rights to operate the system. That's significantly more than the $300 million originally projected by Mayor Ravenstahl.
So, what are the arguments against doing this? Pittsburgh City Controller Michael Lamb, has questioned if the deal will really generate enough money in the long-term.
"We would realize well over $1 billion if we continued to operate the garages on our own," he said, particularly if the city followed the parking rate increases that Mr. Ravenstahl has proposed as part of the lease plan.
Ravenstahl has said that he believes alternative plans won't generate enough money to solve the city's pension problems. But there are other factors that might generate opposition to the lease. There are two unions that represent workers at the various parking facilities, and both have expressed concerns about the plan. Given the political power of organized labor in Western Pennsylvania, that could turn into a real problem.
It's worth noting, though, that the plan offered by Ravenstahl would be a big boost to the pension fund of city employees, who are also union members. In fact, this almost seems like it could be a grand bargain of sorts -- the unions get a healthy pension fund, but agree to some privatization of government services to make it happen.