Pittsburgh councilors advanced a plan to dedicate $13 million a year from a local services tax to its pension fund to avoid a state takeover that might have doubled the city's payments into the system by 2015.
Mayor Luke Ravenstahl said he opposes the council plan because he believes it won't head off the takeover and will open a $13 million hole in future budgets.
Mr. Ravenstahl told the council's finance committee he would veto the plan Wednesday, to give the elected body time to override him before a Friday state deadline for raising at least $200 million of assets needed to get the fund at least 50% funded and avoid a takeover.
“I think we're creating a bigger problem in the future,” he said. “I will not be an active supporter to participate in something I think doesn't work and doesn't solve the problem.”
Officials in Pennsylvania's second-largest city have been struggling for two years to devise a plan to shore up a pension fund that has about $325 million in assets to cover $1 billion in promised benefits, according to a consultant's report. Under Pennsylvania law, the state must begin taking control if the city's obligations are less than 50% funded by year's end.
Pittsburgh joins cities such as Chicago and states such as Illinois and New Jersey that may cut services or raise taxes to meet ballooning retirement costs. Those states and 18 others skipped payments or underfunded their pension systems from 2007 to 2009, according to an October report from Loop Capital Markets.
If assets haven't been added to Pittsburgh's pension fund by Friday, the $1.4 billion Pennsylvania Municipal Retirement System, Harrisburg, will take it over, and may order the city to double its $46 million contribution by 2015 and to make payments of as much as $160 million by 2030, according to a report prepared for the state.
Pittsburgh's pension system includes three retirement plans for about 7,000 active and retired firefighters and government workers. The accounts have only enough funds to pay benefits for three to four years, Mr. Ravenstahl said.
“I don't think anyone knows what the impact of this will be,” Mr. Ravenstahl said. “All we know is it's going to be bad.”
Pittsburgh's council two months ago rejected Mr. Ravenstahl's plan to raise $452 million through a long-term lease of parking facilities to a group led by J.P. Morgan Chase.
