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i dont agree with your last point at all. its backwards. its substsntially mote effective.
Well, why do you think that?
The problem with any individual retirement plan is that you face various risks: longevity risk, volatility risk, and so on. These risks can be substantially ameliorated through risk pooling: if a bunch of different retirees pool their funds, they can basically insure each other against these risks (note this works best if they are in different retiree cohorts). If you don't pool risks like this, each individual has to put more funds into their individual retirement accounts, and cumulatively that is inefficient, both on the individual and macroeconomic levels.
Incidentally, you can see this if you look at the literature on what is known as the Safe Withdrawal Rate for retirement funds, and compare that to the implied withdrawal rate available through annuities (some studies have done this very comparison). In a nutshell, the implied rate on annuities is much higher, and that is because even after taking a profit and charging administrative fees, the risk-pooling insurance companies can do allows them to easily beat what individual retirees can do without risk-pooling.
Employers who provide defined benefit plans have effectively done this sort of risk pooling as well. But tying these plans to a specific employer introduces new risks (e.g., the problems associated with employers which unexpectedly start shrinking in size), and the employers were largely bearing those risks thanks to various relevant laws.
So many employers have stopped risk pooling by moving to defined contribution plans. That reintroduces the inefficiencies associated with no risk-pooling, but for a while they were able to push these inefficiencies onto their employees, basically because their employees weren't making realistic assessment with respect to what it would take to provide for their retirements. But employees are gradually figuring this out, and we are reaching the point at which employers are going to start sharing in the burden of the lack of risk-pooling. And in the long run, you just can't avoid someone taking on that avoidable burden when you aren't risk-pooling.
Given all this, the ideal would be a plan that: (A) pooled the relevant risks; but (B) was not tied to specific employers. And you would probably want to add: (C) did not have excessive administrative costs. And it is possible to do all that, but none of the common options today does that (with, I might note, the exception of Social Security).
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i also disagree with your assessment that the original plan is abiut debt reduction.
That's not a matter of opinion. A little over $100 million would go to paying down debt, and a little over $300 million would go into the pension, regardless of what happens with the remaining $120 million or so.
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using the additional money to reduce thkse obligations represents a substantial commitment to debt reduction, using it otherwise is business as usual.
Again, it is not a matter of opinion that the City has been paying down debt in recent years, and it is not a matter of opinion that regardless of what is done with the $120 million, this would retire an additional $100+ million in debt. I am fine with making the case that even more debt reduction would be a good idea, but the plain facts are that under any scenario, the City will have substantially reduced its debt.
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with lower debt levels and lower debt service the city will have more flexibility to tackle things in the future.
Yeah, but spread out a long time over the future. And again, it is entirely possible that there are going to be partnership opportunities in the meantime that will ultimately do more to improve the City's long-term financial health.
The bottomline is that these questions can't be answered in the abstract. Regardless of what is done with the $120 million, the vast majority of the proceeds will go to debt reduction and into the pension. And it might well be the case that 100% should go to that purpose, but I don't think it is possible to simply rule out the idea that maybe some portion could be used to participate in PPPs and state/federal projects without first looking at those options in some detail.
Edit: By the way, in almost every private sector non-liquidation case, the creditors of a distressed borrower will allow at least SOME capital investment, because they understand that capital investments are necessary to maximize the borrower's ability to pay in the future. So what I am suggesting above is really the same logic that is applied in private cases: you simply cannot rule out all capital investment by distressed borrowers without getting into the details.
it reduces the risk to the company of things outside their control. by matchng contributions they are paying market rates for labor at the time of the occurrance of labor. when they guarantee to provide services, they really have no idea how much labor today will cost them because a sizable chunk of the cost is a future expense and involves things they do not control. really, we should move away from 401k's and just make saving more attractive.
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Originally Posted by BrianTH
The problem with any individual retirement plan is that you face various risks: longevity risk, volatility risk, and so on. These risks can be substantially ameliorated through risk pooling: if a bunch of different retirees pool their funds, they can basically insure each other against these risks (note this works best if they are in different retiree cohorts). If you don't pool risks like this, each individual has to put more funds into their individual retirement accounts, and cumulatively that is inefficient, both on the individual and macroeconomic levels.
not really. what you're saying is basically that money earned by jim may be used to support bob..but that money belong to jim. there's nothing inefficient about it. by putting money in large funds risk can be ameliorated. social security, of course, is supposed to be the insurance...there's no need for the company to do so.
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Originally Posted by BrianTH
Employers who provide defined benefit plans have effectively done this sort of risk pooling as well. But tying these plans to a specific employer introduces new risks (e.g., the problems associated with employers which unexpectedly start shrinking in size), and the employers were largely bearing those risks thanks to various relevant laws.
that's just it, you're making commitments in the future which you have no idea if you can deliver on, which is inefficient.
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Originally Posted by BrianTH
Given all this, the ideal would be a plan that: (A) pooled the relevant risks; but (B) was not tied to specific employers. And you would probably want to add: (C) did not have excessive administrative costs. And it is possible to do all that, but none of the common options today does that (with, I might note, the exception of Social Security).
of course, the return on social security is much, much lower than that of a retirement account which is the opposite of what you claimed about annuities. social security is also an excellent exampel of the ineffectiveness of such plans where money is used from current revenues for past obligations...it's essentially a pyramid scheme that works only as long as the labor force is growing (long rumored to be the impetus behind the government's lax immigration enforcement).
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Originally Posted by BrianTH
Yeah, but spread out a long time over the future. And again, it is entirely possible that there are going to be partnership opportunities in the meantime that will ultimately do more to improve the City's long-term financial health.
and they will continue to be available if the city reduces it's long term obligations (and thus it's financial health). let's not forget this is essentially buying revenue today with revenue tomorrow thus plugging the pension gap with revenues from a long period of time.
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Originally Posted by BrianTH
The bottomline is that these questions can't be answered in the abstract. Regardless of what is done with the $120 million, the vast majority of the proceeds will go to debt reduction and into the pension. And it might well be the case that 100% should go to that purpose, but I don't think it is possible to simply rule out the idea that maybe some portion could be used to participate in PPPs and state/federal projects without first looking at those options in some detail.
Basically I'm highly skeptical of the return on such PPP's versus obligations that are a certainty. you are introducing substantial risk as the projected values are all in question. the things we know for a fact are 1) the city has a lot of debt and 2) even after the cash infusion, the pension fund is ridiculously low
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Originally Posted by BrianTH
Edit: By the way, in almost every private sector non-liquidation case, the creditors of a distressed borrower will allow at least SOME capital investment, because they understand that capital investments are necessary to maximize the borrower's ability to pay in the future. So what I am suggesting above is really the same logic that is applied in private cases: you simply cannot rule out all capital investment by distressed borrowers without getting into the details.
but the city does have some capital investments and politics will inevitably be involved in "the details" often making them less reliable. the unfunded obligations are great for the city and making a big dent would be huge for the city. please note that if some wonderful proposal comes forward, I could change my mind, but I see it as unlikely. even the brt proposal seems like it could be scaled back to fit the city's budget. rather than building new, expensive ROW, just consolidate stops and introduce off vehicle fare tech. let's take a look at the state's capital budget. are the projects funded with $700 million in debt in the best interests of the commonwealth? no, they are a reflections of the lobbying abilities of various interest groups and their respective legislators...yet the state clais they have no money for HSR projects or bridge repair
it reduces the risk to the company of things outside their control. . . . that's just it, you're making commitments in the future which you have no idea if you can deliver on, which is inefficient.
True, which is why I agree we should be shifting retirement funds away from employers entirely--it introduces unnecessary risks. There are entities which are designed to deal with these issues, namely annuity-providing insurance companies, and we shouldn't be asking each employer to try to play that role for all but only their own employees.
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not really. what you're saying is basically that money earned by jim may be used to support bob..but that money belong to jim.
"Belong" has nothing to do with it: it is a form of insurance. At the end of the day, some people are going to get more out of insurance than they paid in, and vice-versa for other people, but they are collectively better off because they didn't all have to keep huge reserves for the purpose of self-insuring.
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there's nothing inefficient about it. by putting money in large funds risk can be ameliorated.
What kind of "large funds" do you have in mind? You can't deal with the relevant risks just by diversification of assets (it is assumed you have done that already). But if you are talking about annuities, absolutely--my point is that we need to shift to a broad-based annuity-type system.
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social security, of course, is supposed to be the insurance...there's no need for the company to do so.
Again, forget the company--I don't want them acting as the insurance provider any more than you do. But having no insurance at all isn't a good solution either. Potentially you could expand Social Security--but I'm actually promoting a more flexible system than that, one in which individuals could still determine for themselves how much they want to save for retirement on top of Social Security, but while at the same time not having to overfund their retirement just because they don't have the relevant form of insurance.
And again, this isn't just a problem for the employees: inevitably employers will face artificially high labor costs if their employees don't have this sort of insurance on their retirement funds, and that does no one any good.
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of course, the return on social security is much, much lower than that of a retirement account which is the opposite of what you claimed about annuities.
Actually, Social Security has provided more real-world return than many real-world retirement accounts (and that is particularly true right now). But in any event, you have to divide up the question into two different periods: while the employee is still working, and while the employee is in retirement. And the issue isn't really the rate of return in retirement, it is the safe withdrawal rate. That is what is much lower in retirement for individual accounts than annuities.
Incidentally, this isn't some crazy claim I made up--it has been confirmed over and over again in the relevant research. Here is just one of many such articles:
Again, this should be expected: self-insurance against the relevant risks is bound to be inefficient.
Incidentally, neither Social Security nor current private annuity products are really ideal for these purposes. The former does provide insurance along these lines, but it is also doing a bunch of other things at the same time. Private annuities tend to have excessive overhead, and they still have some default risk. But the fact that private annuities, despite their imperfections, still easily beat typical Safe Withdrawal Rates is indicative of the magnitude of the inefficiencies in question.
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social security is also an excellent exampel of the ineffectiveness of such plans where money is used from current revenues for past obligations...it's essentially a pyramid scheme that works only as long as the labor force is growing (long rumored to be the impetus behind the government's lax immigration enforcement).
That pyramid scheme nonsense is just political rhetoric. A real pyramid scheme involves a fraud on the investors, and Social Security is transparent about what it does. It is true the Trustees currently assume labor force growth, but that is hardly the ONLY reason we need labor force growth--our whole economy is based on the assumption of overall economic growth, and barring unprecedented rates of labor-productivity increases, to hit our assumed economic growth rates we will need a growing labor force.
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and they will continue to be available if the city reduces it's long term obligations (and thus it's financial health).
Yeah, but investments made later and not now are worth less, in part because you are giving up on part of the possible revenue stream. It is not that I am rejecting the importance of transitioning to financial health, just the idea that all capital spending should be halted until that point is reached.
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let's not forget this is essentially buying revenue today with revenue tomorrow thus plugging the pension gap with revenues from a long period of time.
That's inaccurate. It is exchanging a risky set of future revenues for a fixed amount of cash today. In fact, in my view this would have been a good idea without the pension issue looming--I don't see a good reason for the City to have a concentrated, risky investment in parking assets, and so off-loading that risk onto a private partner strikes me as an inherently good idea.
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Basically I'm highly skeptical of the return on such PPP's versus obligations that are a certainty. you are introducing substantial risk as the projected values are all in question.
You can't be so risk-averse that you become completely paralyzed, and anyway the point of PPPs is to actually add to the total capital pool by attracting funds from outside the jurisdiction. It is the same thing with using funds like this as a required local matching portion in state/federal projects--that money is coming from outside.
And again, it is not like I am arguing that all or even a majority of the total proceeds should be invested this way. I'm saying we can't rule out the possibility that using some minor fraction of the total proceeds might be wisely invested in this way, even as the bulk of them go to retiring debt and funding the pension.
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but the city does have some capital investments and politics will inevitably be involved in "the details" often making them less reliable. the unfunded obligations are great for the city and making a big dent would be huge for the city.
Again, this point cuts both ways: there is going to be a big dent made in the liabilities regardless, just as there is going to be capital investment regardless.
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please note that if some wonderful proposal comes forward, I could change my mind, but I see it as unlikely. even the brt proposal seems like it could be scaled back to fit the city's budget.
The City should definitely not be paying for Rapid Bus by itself. At a minimum the County and state should contribute, and I think the feds too. Or they could go the PPP route.
Again, that's what I have in mind considering--not, say, the City blowing all $120 million on Rapid Bus, but maybe putting a $15 million match up for a total investment of something like $75-100 million.
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rather than building new, expensive ROW
That's not part of Rapid Bus.
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just consolidate stops and introduce off vehicle fare tech.
That's part of Rapid Bus, along with a few other similar things that aren't all that expensive. The only reason full implementation will cost a few tens of millions is that you are talking about a pretty extensive service when you total up all the routes.
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let's take a look at the state's capital budget. are the projects funded with $700 million in debt in the best interests of the commonwealth? no, they are a reflections of the lobbying abilities of various interest groups and their respective legislators...yet the state clais they have no money for HSR projects or bridge repair
Yep, the state is a mess. But in the meantime, there are other cities doing a lot more to invest in public infrastructure, including transit infrastructure, than Pittsburgh, and we can't just give up on improving the City because politics both locally and at a state level suck. We need to operate on parallel tracks, fighting for wise investments while at the same time seeking to reform the political structures that have led to systematic misgovernance.
True, which is why I agree we should be shifting retirement funds away from employers entirely--it introduces unnecessary risks. There are entities which are designed to deal with these issues, namely annuity-providing insurance companies, and we shouldn't be asking each employer to try to play that role for all but only their own employees.
but we shoudl be asking each individual to make their own choices. If I give up a spending power now I could have more in the future but I should also be free to reverse that. individual control over their fate is a good thing.
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Originally Posted by BrianTH
"Belong" has nothing to do with it: it is a form of insurance. At the end of the day, some people are going to get more out of insurance than they paid in, and vice-versa for other people, but they are collectively better off because they didn't all have to keep huge reserves for the purpose of self-insuring.
certainly, belong has something to do with it. savings are not a form of insurance.
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Originally Posted by BrianTH
What kind of "large funds" do you have in mind? You can't deal with the relevant risks just by diversification of assets (it is assumed you have done that already). But if you are talking about annuities, absolutely--my point is that we need to shift to a broad-based annuity-type system.
no, I'm talking about funds with diversifcation which certainly can deal with risk. you must be an annuities salesmen.
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Originally Posted by BrianTH
Again, forget the company--I don't want them acting as the insurance provider any more than you do. But having no insurance at all isn't a good solution either. Potentially you could expand Social Security--but I'm actually promoting a more flexible system than that, one in which individuals could still determine for themselves how much they want to save for retirement on top of Social Security, but while at the same time not having to overfund their retirement just because they don't have the relevant form of insurance.
yeah, savings.
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Originally Posted by BrianTH
And again, this isn't just a problem for the employees: inevitably employers will face artificially high labor costs if their employees don't have this sort of insurance on their retirement funds, and that does no one any good.
eh, I don't think so. we're large in that system and labor costs aren't that high. to the extent that they are, it's largely health care costs and regulations driving the cost. lower home prices and health care would go a long way to deflating the cost of living in a good way, meaning we had to earn less to live well.
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Originally Posted by BrianTH
Actually, Social Security has provided more real-world return than many real-world retirement accounts (and that is particularly true right now).
nope. returns are poor relative to retirement accounts, especially those outside the 401k system. it also systematically hurts the poor since they ttend to live harder lives and receive fewer of the benefits.
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Originally Posted by BrianTH
Incidentally, this isn't some crazy claim I made up--it has been confirmed over and over again in the relevant research. Here is just one of many such articles:
I'll take a look but I think you've taken the idea too far.
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Originally Posted by BrianTH
That pyramid scheme nonsense is just political rhetoric. A real pyramid scheme involves a fraud on the investors, and Social Security is transparent about what it does.
I know it's hard to admit from the left but it's far from nonsense. ponzi (that's what I meant)schemes involve getting an ever increasing number of investors to pay out to current investors. that's EXACTLY how SS works. the only real difference is SS is compulsory.
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Originally Posted by BrianTH
Yeah, but investments made later and not now are worth less, in part because you are giving up on part of the possible revenue stream. It is not that I am rejecting the importance of transitioning to financial health, just the idea that all capital spending should be halted until that point is reached.
this is a nonsensical claim as I've made no such claim. I merely stated that this particular amount should be used for a reduction of obligations.
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Originally Posted by BrianTH
That's inaccurate. It is exchanging a risky set of future revenues for a fixed amount of cash today. In fact, in my view this would have been a good idea without the pension issue looming--I don't see a good reason for the City to have a concentrated, risky investment in parking assets, and so off-loading that risk onto a private partner strikes me as an inherently good idea.
I completely disagree with your claim of inaccurracy, it's entirely accurate. I agree with your second opinion.
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Originally Posted by BrianTH
You can't be so risk-averse that you become completely paralyzed, and anyway the point of PPPs is to actually add to the total capital pool by attracting funds from outside the jurisdiction. It is the same thing with using funds like this as a required local matching portion in state/federal projects--that money is coming from outside.
I'm not paralyzed, just advocating a more prudent approach.
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Originally Posted by BrianTH
And again, it is not like I am arguing that all or even a majority of the total proceeds should be invested this way. I'm saying we can't rule out the possibility that using some minor fraction of the total proceeds might be wisely invested in this way, even as the bulk of them go to retiring debt and funding the pension.
it seems unlike that's the best use of money considering the mountains of obligations and possibility of political manipulation.
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Originally Posted by BrianTH
Again, this point cuts both ways: there is going to be a big dent made in the liabilities regardless, just as there is going to be capital investment regardless.
right, but 50% is extremely low. it would be very beneficial to have a properly funded pension.
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Originally Posted by BrianTH
The City should definitely not be paying for Rapid Bus by itself. At a minimum the County and state should contribute, and I think the feds too. Or they could go the PPP route.
it's not clear rapid bus is even the right way to go, IMO, at least on the downtown-oakland corridor. as noted, some moderate investment could yield some increase. I'm not convinced the dedicated lane is a good idea on this route. certainly they should apply for funding matches but I do think the city could chip away at it over time, especially if debt service/pension payments are dramatically decreased.
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Originally Posted by BrianTH
Again, that's what I have in mind considering--not, say, the City blowing all $120 million on Rapid Bus, but maybe putting a $15 million match up for a total investment of something like $75-100 million.
of course, if they put $452 million into the pension/debt, they'll easily free up that amount annually.
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Originally Posted by BrianTH
That's not part of Rapid Bus.
ah, it was part of what was talked about the other day (and posted in another thread). If Rapid bus is a name for what I'm talking about, so be it.
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Originally Posted by BrianTH
Yep, the state is a mess. But in the meantime, there are other cities doing a lot more to invest in public infrastructure, including transit infrastructure, than Pittsburgh, and we can't just give up on improving the City because politics both locally and at a state level suck. We need to operate on parallel tracks, fighting for wise investments while at the same time seeking to reform the political structures that have led to systematic misgovernance.
right, but addressing long term financial health is just as important.
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Mr. Ravenstahl's budget lists $453.4 million in revenue and $447.4 million in expenditures, including about $133 million in pension payments and $88 million in debt service.
as you can see, debt service and pensions make up nearly half the city's budget. a dramatic reduction in these costs would free up a lot of money for things like property tax cuts (important, property taxes in the city are high) and capital investments, not to mention operating money for parks, streets, etc.
but we shoudl be asking each individual to make their own choices. If I give up a spending power now I could have more in the future but I should also be free to reverse that. individual control over their fate is a good thing.
Agreed. That is why I didn't propose just expanding Social Security, which would decide the question of exactly how much consumption to defer for everyone in one way.
But that doesn't address the issue of insurable risks.
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certainly, belong has something to do with it. savings are not a form of insurance.
Savings can be for many purpose. We're talking here specifically about funding retirements, and that is something that should in fact be done in large part through an insurance mechanism (at least as long as the relevant risks remain).
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no, I'm talking about funds with diversifcation which certainly can deal with risk. you must be an annuities salesmen.
Diversification absolutely cannot deal with the relevant risks. The two relevant risks are market risks and longevity risk. Market risk, by definition, cannot be eliminated through diversification. And diversification can't do anything about longevity risk either.
I don't mean to be insulting, but are you sure you really grasp the relevant risks? I'm not actually an annuity salesman, of course, and I already identified some problems with the current annuity industry. But the things I am noting here are absolutely basic and well-confirmed in the relevant literature.
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yeah, savings.
Again, not to be insulting, but it is things like this that make me question if you understand the relevant risks. I mean, are you familiar with the literature on Safe Withdrawal Rates? Are you aware of why they are so low? And some people have argued that even the conventional estimates are too high, an argument that is looking very good right about now.
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eh, I don't think so. we're large in that system and labor costs aren't that high.
But that is only because in the last couple decades people have woefully underfunded their defined contribution plans. And all the evidence is that they haven't done this deliberately: they just don't understand the situation, either because they have unrealistic assumptions or just haven't tried to figure it out.
Employers can't expect their employees to be fooled forever. In a few more years, people are going to start noticing how many people are experiencing a huge dropoff in standard of living during retirement, and they are going to demand their employers do something about that. In other words, this is a trick you can play only once, and that once is running out.
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to the extent that they are, it's largely health care costs and regulations driving the cost.
I agree about health care costs, and the only proven solutions are ones I suspect you won't like.
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lower home prices and health care would go a long way to deflating the cost of living in a good way, meaning we had to earn less to live well.
That is definitely true, but that is not mutually-exclusive with addressing the current crisis in retirement funding as well.
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nope. returns are poor relative to retirement accounts, especially those outside the 401k system.
This is a tangent, since pre-retirement returns on Social Security contributions have nothing to do with the point I have been making. Nonetheless, have you seen some of the real-world returns people have gotten in their retirement accounts? There is no way you can make this blanket statement.
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it also systematically hurts the poor since they ttend to live harder lives and receive fewer of the benefits.
That's true--Social Security has a redistributive element that somewhat offsets this effect, but by adopting a standard schedule it thereby is biased against the poor. I'd be happy to discuss how to deal with this issue in a voluntary retirement system of the kind I have been describing.
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I'll take a look but I think you've taken the idea too far.
In what sense? If you look at the literature, they will typically recommend annuitizing a large chunk of your retirement funds, perhaps up to all of them (this requires segregating any funds you might want to leave as an inheritance). I didn't invent that idea, and these people are just reporting what the numbers say.
What I am doing is just trying to come up with a way to make that possible for everyone. We haven't discussed specifics yet, but we have already noted how the existing annuity industry isn't a model of efficiency, and it also couldn't handle the scale involved if everyone suddenly followed these recommendations. So it will take some doing to make all that possible.
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I know it's hard to admit from the left but it's far from nonsense. ponzi (that's what I meant)schemes involve getting an ever increasing number of investors to pay out to current investors.
No, Ponzi schemes involve telling investors that their money is being invested in real assets, when in fact they are not.
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this is a nonsensical claim as I've made no such claim. I merely stated that this particular amount should be used for a reduction of obligations.
But how do you know that? If we agree that the City should be simultaneously making both capital investments and reducing its liabilities, then don't you need to do the actual work of evaluating the City's current options? That's all I'm saying, that you can't make a decision like this in the abstract.
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I completely disagree with your claim of inaccurracy, it's entirely accurate.
I don't think much depends on this, but it isn't accurate to imply this deal is merely time-shifting fixed quantities of revenue. It is also divesting risk, because the future revenues are in fact uncertain.
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I'm not paralyzed, just advocating a more prudent approach.
Doesn't prudence require actually taking some time to evaluate your options? Again, that's all I am suggesting.
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it seems unlike that's the best use of money considering the mountains of obligations and possibility of political manipulation.
You already agreed the City shouldn't be zeroing out capital spending. So while you might be right, I don't see how you can know that in advance of at least looking at the options.
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right, but 50% is extremely low. it would be very beneficial to have a properly funded pension.
What do you mean by "beneficial"? I mean I agree it is good in the sense that then the City wouldn't have to keep doing makeup contributions. But since to get there the City would have to do a lumpsum makeup contribution, what you are really talking about is two different schedules for ending up in the same place. I'm not saying there is no possible benefit to accelerating the schedule, but it isn't an obvious point.
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it's not clear rapid bus is even the right way to go, IMO, at least on the downtown-oakland corridor.
Most of Rapid Bus is pretty much a no-brainer, even if you do something else for Downtown-Oakland eventually. That is because barring a truly mind-boggling investment in new infrastructure, the Rapid Bus routes will still be needed to feed people as far as Oakland, and so it will likely make sense to continue them the short additional distance to Downtown too, even with a parallel dedicated Downtown-Oakland service.
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as noted, some moderate investment could yield some increase. I'm not convinced the dedicated lane is a good idea on this route. certainly they should apply for funding matches but I do think the city could chip away at it over time, especially if debt service/pension payments are dramatically decreased.
There are already dedicated lanes available for part of it, including between Downtown and Oakland, and in other parts they are likely to do just bypass lanes, or even just signal prioritization. They definitely have pitched this as a phased program, so some of that can be deferred. But I would be very opposed to the City simply going it alone--this is likely to be very beneficial for PAT as a whole, and PAT is a County and state creature.
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of course, if they put $452 million into the pension/debt, they'll easily free up that amount annually.
We're taking about just the remaining $120 million or so, though. If it were true putting that $120 million into paying down liabilities would free up $15 million a year annually, then that sounds like a great deal. I'd want confirmation on that first, of course.
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ah, it was part of what was talked about the other day (and posted in another thread). If Rapid bus is a name for what I'm talking about, so be it.
There are no new ROW planned as part of Rapid Bus. They are talking about maybe dedicating some existing lanes, but that is basically a matter of paint.
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right, but addressing long term financial health is just as important.
Absolutely. As I have often noted, I am fine with most of this money going to that purpose, and I may well be fine with all of it. I'm just willing to consider other options for a fraction of it before making that determination, in part because long term financial health is also, in part, a function of capital investment.
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as you can see, debt service and pensions make up nearly half the city's budget. a dramatic reduction in these costs would free up a lot of money for things like property tax cuts (important, property taxes in the city are high) and capital investments, not to mention operating money for parks, streets, etc.
Again, I think it is clear at this point that we need to see actual numbers. How much of a reduction in mandatory payments would the City get from putting the $120 million in the pension? How much from paying down debt? What are their capital investment options (a question that might take a little time to explore)? That's my point: these are not abstract questions, they need real, specific answers.
No, Ponzi schemes involve telling investors that their money is being invested in real assets, when in fact they are not.
if you want to repost that under it's own thread fine, I'm not going to argue you about it more here. this last claim is BS of course. it effectively works the same, even if the mechanism (promise investment vs force people to pay in) is different. if you don't think people should be allowed to save their own money well, that's your bag, and we're never going to agree and having a tiring quote war isn't going to help us talk about municipal debt. obviously all your healthcare solutions will be government knows best solutions and how all the data proves you have the one and only right pov so it's pointless to go there.
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Originally Posted by BrianTH
But how do you know that? If we agree that the City should be simultaneously making both capital investments and reducing its liabilities, then don't you need to do the actual work of evaluating the City's current options? That's all I'm saying, that you can't make a decision like this in the abstract.
as said it's possible but highly unlikely. with those two expenses eating up half the budget, it seems a stretch to think that reducing them dramatically isn't in order. the city will continue to make capital investments and even increase them even if ALL of this money reduces liabilities.
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Originally Posted by BrianTH
I don't think much depends on this, but it isn't accurate to imply this deal is merely time-shifting fixed quantities of revenue. It is also divesting risk, because the future revenues are in fact uncertain.
Doesn't prudence require actually taking some time to evaluate your options? Again, that's all I am suggesting.
I've stated many times the risk part so obviously I recognize that. it shifts revenue and risk which you disagree with when I say it but agree with it when you say it. prudence dictates that the city take the safer route give its enormous level of liabilities.
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Originally Posted by BrianTH
You already agreed the City shouldn't be zeroing out capital spending. So while you might be right, I don't see how you can know that in advance of at least looking at the options.
Most of Rapid Bus is pretty much a no-brainer, even if you do something else for Downtown-Oakland eventually. That is because barring a truly mind-boggling investment in new infrastructure, the Rapid Bus routes will still be needed to feed people as far as Oakland, and so it will likely make sense to continue them the short additional distance to Downtown too, even with a parallel dedicated Downtown-Oakland service.
it seems like it could easily be achieved in bit size chunks as well.
Quote:
Originally Posted by BrianTH
We're taking about just the remaining $120 million or so, though. If it were true putting that $120 million into paying down liabilities would free up $15 million a year annually, then that sounds like a great deal. I'd want confirmation on that first, of course.Again, I think it is clear at this point that we need to see actual numbers. How much of a reduction in mandatory payments would the City get from putting the $120 million in the pension? How much from paying down debt? What are their capital investment options (a question that might take a little time to explore)? That's my point: these are not abstract questions, they need real, specific answers.
wasn't it $152 million in additional funds? I'd want to know numbers as well, but I'd be willing to bet the impact will be noticable and immediate. it's not like this came in at $310 million.
you are concerned with mandatory payments but that's just what has to be put in, not what should be put in. first you cover mandatory, then advisable. I'm just much more sure they shouldn't be playing with projects that involve more risk rather than taking the opportunity to make a huge dent in their obligations. at half the budget, it's important.
as said it's possible but highly unlikely. with those two expenses eating up half the budget, it seems a stretch to think that reducing them dramatically isn't in order.
Reducing the total outstanding liabilities would reduce the annual payments somewhat, but I'm saying we should take the time to figure out how much. Why is that unreasonable or imprudent?
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it shifts revenue and risk which you disagree with when I say it but agree with it when you say it.
I've only noted the inaccuracy when you omitted the part about risk. I think it is important to be consistent about noting that.
I meant exactly what do you think the benefit would be in this case, not your generic definition of beneficial. Obviously.
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it seems like it could easily be achieved in bit size chunks as well.
Yep. Still, sooner would be better than later, from pretty much every perspective including revenues.
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wasn't it $152 million in additional funds?
There has been a lot of rounding going on. Apparently the parking authority debt is actuallly a bit more than $100 million, and the planned contribution to the pension fund is a bit more than $300 million, and when you add it up and subtract from the $452 million you only get around $120 million.
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I'd want to know numbers as well, but I'd be willing to bet the impact will be noticable and immediate. it's not like this came in at $310 million.
Obviously you would expect some cash flow impact from a $120 million reduction in liabilities. But $15 million annually would be pretty big (not impossible, mind you, depending on how they calculate the pension makeup contributions--that is one of the questions I would like answered).
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you are concerned with mandatory payments but that's just what has to be put in, not what should be put in. first you cover mandatory, then advisable.
OK, but "advisable" is the part that takes some work to figure out.
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I'm just much more sure they shouldn't be playing with projects that involve more risk rather than taking the opportunity to make a huge dent in their obligations. at half the budget, it's important.
I'm not saying its not important, but whether they put in $100 million or $120 million isn't going to make an annual difference on the same magnitude as half the budget. Again, it seems obvious to me we have reached the point where actual numbers on the different options are needed.
but we shoudl be asking each individual to make their own choices. If I give up a spending power now I could have more in the future but I should also be free to reverse that. individual control over their fate is a good thing.
certainly, belong has something to do with it. savings are not a form of insurance.
no, I'm talking about funds with diversifcation which certainly can deal with risk. you must be an annuities salesmen.
yeah, savings.
eh, I don't think so. we're large in that system and labor costs aren't that high. to the extent that they are, it's largely health care costs and regulations driving the cost. lower home prices and health care would go a long way to deflating the cost of living in a good way, meaning we had to earn less to live well.
nope. returns are poor relative to retirement accounts, especially those outside the 401k system. it also systematically hurts the poor since they ttend to live harder lives and receive fewer of the benefits.
I'll take a look but I think you've taken the idea too far.
I know it's hard to admit from the left but it's far from nonsense. ponzi (that's what I meant)schemes involve getting an ever increasing number of investors to pay out to current investors. that's EXACTLY how SS works. the only real difference is SS is compulsory.
this is a nonsensical claim as I've made no such claim. I merely stated that this particular amount should be used for a reduction of obligations.
I completely disagree with your claim of inaccurracy, it's entirely accurate. I agree with your second opinion.
I'm not paralyzed, just advocating a more prudent approach.
it seems unlike that's the best use of money considering the mountains of obligations and possibility of political manipulation.
right, but 50% is extremely low. it would be very beneficial to have a properly funded pension.
it's not clear rapid bus is even the right way to go, IMO, at least on the downtown-oakland corridor. as noted, some moderate investment could yield some increase. I'm not convinced the dedicated lane is a good idea on this route. certainly they should apply for funding matches but I do think the city could chip away at it over time, especially if debt service/pension payments are dramatically decreased.
of course, if they put $452 million into the pension/debt, they'll easily free up that amount annually.
ah, it was part of what was talked about the other day (and posted in another thread). If Rapid bus is a name for what I'm talking about, so be it.
right, but addressing long term financial health is just as important.
as you can see, debt service and pensions make up nearly half the city's budget. a dramatic reduction in these costs would free up a lot of money for things like property tax cuts (important, property taxes in the city are high) and capital investments, not to mention operating money for parks, streets, etc.
Quote:
Originally Posted by pman
but we shoudl be asking each individual to make their own choices. If I give up a spending power now I could have more in the future but I should also be free to reverse that. individual control over their fate is a good thing.
certainly, belong has something to do with it. savings are not a form of insurance.
no, I'm talking about funds with diversifcation which certainly can deal with risk. you must be an annuities salesmen.
yeah, savings.
eh, I don't think so. we're large in that system and labor costs aren't that high. to the extent that they are, it's largely health care costs and regulations driving the cost. lower home prices and health care would go a long way to deflating the cost of living in a good way, meaning we had to earn less to live well.
nope. returns are poor relative to retirement accounts, especially those outside the 401k system. it also systematically hurts the poor since they ttend to live harder lives and receive fewer of the benefits.
I'll take a look but I think you've taken the idea too far.
I know it's hard to admit from the left but it's far from nonsense. ponzi (that's what I meant)schemes involve getting an ever increasing number of investors to pay out to current investors. that's EXACTLY how SS works. the only real difference is SS is compulsory.
this is a nonsensical claim as I've made no such claim. I merely stated that this particular amount should be used for a reduction of obligations.
I completely disagree with your claim of inaccurracy, it's entirely accurate. I agree with your second opinion.
I'm not paralyzed, just advocating a more prudent approach.
it seems unlike that's the best use of money considering the mountains of obligations and possibility of political manipulation.
right, but 50% is extremely low. it would be very beneficial to have a properly funded pension.
it's not clear rapid bus is even the right way to go, IMO, at least on the downtown-oakland corridor. as noted, some moderate investment could yield some increase. I'm not convinced the dedicated lane is a good idea on this route. certainly they should apply for funding matches but I do think the city could chip away at it over time, especially if debt service/pension payments are dramatically decreased.
of course, if they put $452 million into the pension/debt, they'll easily free up that amount annually.
ah, it was part of what was talked about the other day (and posted in another thread). If Rapid bus is a name for what I'm talking about, so be it.
right, but addressing long term financial health is just as important.
as you can see, debt service and pensions make up nearly half the city's budget. a dramatic reduction in these costs would free up a lot of money for things like property tax cuts (important, property taxes in the city are high) and capital investments, not to mention operating money for parks, streets, etc.
Quote:
Originally Posted by BrianTH
Agreed. That is why I didn't propose just expanding Social Security, which would decide the question of exactly how much consumption to defer for everyone in one way.
But that doesn't address the issue of insurable risks.
Savings can be for many purpose. We're talking here specifically about funding retirements, and that is something that should in fact be done in large part through an insurance mechanism (at least as long as the relevant risks remain).
Diversification absolutely cannot deal with the relevant risks. The two relevant risks are market risks and longevity risk. Market risk, by definition, cannot be eliminated through diversification. And diversification can't do anything about longevity risk either.
I don't mean to be insulting, but are you sure you really grasp the relevant risks? I'm not actually an annuity salesman, of course, and I already identified some problems with the current annuity industry. But the things I am noting here are absolutely basic and well-confirmed in the relevant literature.
Again, not to be insulting, but it is things like this that make me question if you understand the relevant risks. I mean, are you familiar with the literature on Safe Withdrawal Rates? Are you aware of why they are so low? And some people have argued that even the conventional estimates are too high, an argument that is looking very good right about now.
But that is only because in the last couple decades people have woefully underfunded their defined contribution plans. And all the evidence is that they haven't done this deliberately: they just don't understand the situation, either because they have unrealistic assumptions or just haven't tried to figure it out.
Employers can't expect their employees to be fooled forever. In a few more years, people are going to start noticing how many people are experiencing a huge dropoff in standard of living during retirement, and they are going to demand their employers do something about that. In other words, this is a trick you can play only once, and that once is running out.
I agree about health care costs, and the only proven solutions are ones I suspect you won't like.
That is definitely true, but that is not mutually-exclusive with addressing the current crisis in retirement funding as well.
This is a tangent, since pre-retirement returns on Social Security contributions have nothing to do with the point I have been making. Nonetheless, have you seen some of the real-world returns people have gotten in their retirement accounts? There is no way you can make this blanket statement.
That's true--Social Security has a redistributive element that somewhat offsets this effect, but by adopting a standard schedule it thereby is biased against the poor. I'd be happy to discuss how to deal with this issue in a voluntary retirement system of the kind I have been describing.
In what sense? If you look at the literature, they will typically recommend annuitizing a large chunk of your retirement funds, perhaps up to all of them (this requires segregating any funds you might want to leave as an inheritance). I didn't invent that idea, and these people are just reporting what the numbers say.
What I am doing is just trying to come up with a way to make that possible for everyone. We haven't discussed specifics yet, but we have already noted how the existing annuity industry isn't a model of efficiency, and it also couldn't handle the scale involved if everyone suddenly followed these recommendations. So it will take some doing to make all that possible.
No, Ponzi schemes involve telling investors that their money is being invested in real assets, when in fact they are not.
But how do you know that? If we agree that the City should be simultaneously making both capital investments and reducing its liabilities, then don't you need to do the actual work of evaluating the City's current options? That's all I'm saying, that you can't make a decision like this in the abstract.
I don't think much depends on this, but it isn't accurate to imply this deal is merely time-shifting fixed quantities of revenue. It is also divesting risk, because the future revenues are in fact uncertain.
Doesn't prudence require actually taking some time to evaluate your options? Again, that's all I am suggesting.
You already agreed the City shouldn't be zeroing out capital spending. So while you might be right, I don't see how you can know that in advance of at least looking at the options.
What do you mean by "beneficial"? I mean I agree it is good in the sense that then the City wouldn't have to keep doing makeup contributions. But since to get there the City would have to do a lumpsum makeup contribution, what you are really talking about is two different schedules for ending up in the same place. I'm not saying there is no possible benefit to accelerating the schedule, but it isn't an obvious point.
Most of Rapid Bus is pretty much a no-brainer, even if you do something else for Downtown-Oakland eventually. That is because barring a truly mind-boggling investment in new infrastructure, the Rapid Bus routes will still be needed to feed people as far as Oakland, and so it will likely make sense to continue them the short additional distance to Downtown too, even with a parallel dedicated Downtown-Oakland service.
There are already dedicated lanes available for part of it, including between Downtown and Oakland, and in other parts they are likely to do just bypass lanes, or even just signal prioritization. They definitely have pitched this as a phased program, so some of that can be deferred. But I would be very opposed to the City simply going it alone--this is likely to be very beneficial for PAT as a whole, and PAT is a County and state creature.
We're taking about just the remaining $120 million or so, though. If it were true putting that $120 million into paying down liabilities would free up $15 million a year annually, then that sounds like a great deal. I'd want confirmation on that first, of course.
There are no new ROW planned as part of Rapid Bus. They are talking about maybe dedicating some existing lanes, but that is basically a matter of paint.
Absolutely. As I have often noted, I am fine with most of this money going to that purpose, and I may well be fine with all of it. I'm just willing to consider other options for a fraction of it before making that determination, in part because long term financial health is also, in part, a function of capital investment.
Again, I think it is clear at this point that we need to see actual numbers. How much of a reduction in mandatory payments would the City get from putting the $120 million in the pension? How much from paying down debt? What are their capital investment options (a question that might take a little time to explore)? That's my point: these are not abstract questions, they need real, specific answers.
numbers on capital projects are of the abstract nature. It is my opinion that the best use of the money will be either debt reduction or pension payments. it's the least risky and the only one guaranteed to reduce annual expenses leaving money for capital projects, property tax cuts, or actually catching up on pension payments. I don't think even exploring capital investment options is advisable. the way these things work, if you don't simply use the money to reduce obligations at first, it's going to get spent whether it should be or not. in the abstract I can agree with your sentiment but in reality, I do not think it's the best course of action. and with debt service and pension payments making up half the annual budget, reductions there will translate immediately into reductions in annual payments or reduction in future payments.
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