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Bill seeks to limit pension burdens

Republicans in the Pennsylvania General Assembly, backed by Democratic mayors in cash-strapped towns, are battling to limit public financing of local police, firefighter, and municipal-worker retirements.

The new Comcast tower under construction. Some worry about its impact on other city office space. MATT ROURKE / AP
The new Comcast tower under construction. Some worry about its impact on other city office space. MATT ROURKE / APRead more

Republicans in the Pennsylvania General Assembly, backed by Democratic mayors in cash-strapped towns, are battling to limit public financing of local police, firefighter, and municipal-worker retirements.

Senate Bill 755, which would let cities, boroughs, and townships in the state (except Philadelphia) stop adding new police and fire hires to municipally funded guaranteed pension plans, passed the Senate Finance Committee, 7-3, last week. State Sen. Arthur Haywood (D., Montgomery and Phila.) joined Republicans, with "reservations."

A similar measure, House Bill 316, passed in committee earlier this year after endorsement by Democratic mayors in Allentown, West Chester, and eight other towns.

Local police pension rules typically allow officers to collect up to half their base pay after they retire - or more, counting overtime and unused leave.

But more than 500 of the 1,300 Pennsylvania towns with their own worker pension plans are "distressed" because they have set aside less money than they will need for pensions. Many towns are paying more each year to keep plans solvent, says state Auditor General Eugene DePasquale. Credit agencies cut pension-deficit towns' ratings, boosting borrowing costs.

The Senate bill would let towns put new officers into retirement savings accounts similar to private-sector 401(k) plans, whose values rise and fall with the stock market and interest rates. The proposal exempts pensions from binding arbitration, which normally governs police labor disputes.

State Fraternal Order of Police president Les Neri, a former Tredyffrin Township detective, says his union opposes the measures. He prefers House Bill 32, which would join Pennsylvania's incredible 970 police pension plans in a unified system. State Public Employee Retirement Commission data suggest combination could save hundreds of dollars in costs per officer per year. Gov. Wolf has backed consolidation.

Neri says only a few plans, such as Scranton's, are really in "bad shape." Letting police retire relatively young protects the public from having to rely on officers too old to chase bad guys, he says.

No sale

John Guinee, real estate analyst at Stifel, Nicolaus & Co., last week dropped his "Buy" recommendation on Brandywine Realty Trust, the dominant office landlord in Center City. Guinee cited "investor ambivalence" toward Brandywine strongholds around Philadelphia and Washington, amid the threat of higher interest rates.

Center City landlords still ask office rents averaging in the $20s per square foot, close to the levels of 20 years ago. By contrast, asking rents in University City (home to Brandywine's prosperous Cira complex) and the Navy Yard district are approaching $40 per square foot, though Center City rents are gaining a bit, says Lauren Gilchrist, vice president, director of research, at broker Jones Lang LaSalle's Philadelphia office.

JLL expects National Real Estate Development will test Center City office demand next year, asking $32 per square foot for renovated space at 34 S. 11th St. above the planned Mom's Organic Grocery.

Analysts worry Comcast Corp. will exit more downtown space when its new tower opens in 2017. And they wonder about Cigna's long-term Center City plans, amid health-insurer merger talks.

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