Pittsburgh's City Council directed $736 million in parking-tax revenue to its underfunded pension system, avoiding a state takeover and higher pension payments.
Council members last week voted 9-0 to override Mayor Luke Ravenstahl's veto of the plan to dedicate as much as $27 million a year of its 37.5% parking-lot tax through 2041 to the retirement funds. The pension plans had about $325 million in assets to cover $1 billion in promised benefits before the council action, according to a consultant's report.
Mr. Ravenstahl said the proposal would undermine budgets and likely fail to prevent a takeover. Under Pennsylvania's control, the city's annual pension payments would rise from $46 million now to $127 million in 2017, a state analysis shows.
“A state takeover would take us into raising taxes and really devastating this city,” Council President Darlene Harris said when she introduced the bill Dec. 30. “I believe in my heart I am doing what is right for this city to move forward.”
The state required the plan to have assets to cover at least half its obligations before Jan. 1, or the $1.4 billion Pennsylvania Municipal Retirement System, Harrisburg, would have taken control.
Whether Pittsburgh's strategy is enough to avoid a takeover won't be known until the second half of 2011, after actuaries have determined the fund's asset level as of Dec. 31, said James McAneny, executive director of the state Public Employee Retirement Commission.
The city on Dec. 31 received approval for the budget changes from Pittsburgh's Intergovernmental Cooperation Authority, a state agency set up to monitor the city's finances in 2004.
Officials in Pennsylvania's second-largest city have been trying to devise a plan to shore up its pension for two years.
The parking tax is projected to raise $47 million next year, according to Mr. Ravenstahl's budget.
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.