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Old 02-05-2011, 09:03 AM
 
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There's an article in the Wall Street Journal this weekend that basically says that Pittsburgh hasn't come to terms with its huge unfunded pension liabilities to city workers and that, unless the city takes action in the near future, it's either going to go bankrupt or have to raise taxes quite a bit. The article notes that the city's infrastructure needs aren't being addressed because such a high percentge of the taxes collected currently is paid out as pensions, in some cases to workers who retire at age 50.

Is this old news in Da Burgh? Are there sensible plans being discussed to bring these costs under control? The mayor seemed to be acutely aware of the problem, but not sure how to deal with it.

And how will this affect the city's efforts to attract more younger, better-educated workers to the city? Even if home prices are affordable, won't people hesitate if they run the risk of a large tax increase within a few years or they don't think potholes or bridges will be repaired in their lifetimes?

Last edited by JD984; 02-05-2011 at 09:20 AM..
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Old 02-05-2011, 09:41 AM
 
43,011 posts, read 107,605,736 times
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Quote:
Originally Posted by JEB77 View Post
And how will this affect the city's efforts to attract more younger, better-educated workers to the city? Even if home prices are affordable, won't people hesitate if they run the risk of a large tax increase within a few years or they don't think potholes or bridges will be repaired in their lifetimes?
Those issues shouldn't deter people from moving to the greater metro area. There are suburban municipalities within 10 minutes from downtown. People can easily buy houses were taxes remain low and potholes are fixed on occassion.

Your pothole scenario makes me laugh because we've always had potholes throughout my lifetime. I could be wrong, but I believe many of Pittsburgh's key bridges are maintained by PennDot, which is state funded, not city funded. Regardless, it will all work out.
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Old 02-05-2011, 01:30 PM
 
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Quote:
Originally Posted by JEB77 View Post
Is this old news in Da Burgh? Are there sensible plans being discussed to bring these costs under control? The mayor seemed to be acutely aware of the problem, but not sure how to deal with it.
The mayor is acutely aware of the problem and is doing what he can. Unfortunately, city council is behaving like... city council. All but three of them are total ostriches about the situation.
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Old 02-05-2011, 01:54 PM
 
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The real problem is state law. State law prohibits the City from trimming existing benefits. State law provides for mandatory arbitration of contract renewals for the fire and police unions, and they tend to do well in arbitration. State law prohibits the City from entering bankruptcy without the state's permission (and the state could still prohibit the City from doing anything specifically with pensions even if it was allowed into bankruptcy). State law taxes out-of-state insurance to create a pension assistance fund (so the City is contributing to this fund through this tax), but then allocates that funding to cities based on the number of ACTIVE employees. So when the City tries to cut future benefits by cutting the number of employees, it loses assistance for existing pensions. And so on.

So state law has really put the City in a box, and unless and until the state reforms the relevant laws, the City really just has to try to figure out how to make its payments. Which means making some hard choices, which Council in particular doesn't want to make.

Edit: Oh, and while I agree it doesn't mean people shouldn't live in the Pittsburgh area, I do think these issues affect virtually everyone in the Metro, one way or another. It would be nice if the whole area rallied behind state pension law reform, but unfortunately there is a lot of partisan politics involved, and also some municipalities actually benefit from some this (e.g., you make out well on the pension assistance scheme if you don't have high legacy costs and do have a relatively large active force for your size of municipality).
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Old 02-05-2011, 02:12 PM
 
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Originally Posted by BrianTH View Post
The real problem is state law. State law prohibits the City from trimming existing benefits. State law provides for mandatory arbitration of contract renewals for the fire and police unions, and they tend to do well in arbitration. State law prohibits the City from entering bankruptcy without the state's permission (and the state could still prohibit the City from doing anything specifically with pensions even if it was allowed into bankruptcy). State law taxes out-of-state insurance to create a pension assistance fund (so the City is contributing to this fund through this tax), but then allocates that funding to cities based on the number of ACTIVE employees. So when the City tries to cut future benefits by cutting the number of employees, it loses assistance for existing pensions. And so on.

So state law has really put the City in a box, and unless and until the state reforms the relevant laws, the City really just has to try to figure out how to make its payments. Which means making some hard choices, which Council in particular doesn't want to make.

Edit: Oh, and while I agree it doesn't mean people shouldn't live in the Pittsburgh area, I do think these issues affect virtually everyone in the Metro, one way or another. It would be nice if the whole area rallied behind state pension law reform, but unfortunately there is a lot of partisan politics involved, and also some municipalities actually benefit from some this (e.g., you make out well on the pension assistance scheme if you don't have high legacy costs and do have a relatively large active force for your size of municipality).
Thanks for the thoughtful reply. Here's the WSJ article (not sure how long this is a free link):

Pittsburgh's Pension Woes Call for a Hail Mary - WSJ.com

One other thing the article mentions is that the city can't collect taxes from hospitals and educational institutions that own a good chunk of the city's real estate - it's reminiscent of DC, where the local government can't tax federal employers (and also isn't authorized to impose any commuter taxes on Maryland or Virginia residents who work in DC).

Currently, how much could one expect to pay in annual taxes on a $300K house in the City of Pittsburgh and what are the prospects that the taxes would increase substantially in the next 5-10 years?
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Old 02-05-2011, 02:46 PM
 
20,273 posts, read 32,861,408 times
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Originally Posted by JEB77 View Post
Thanks for the thoughtful reply. Here's the WSJ article . . .
Oh yeah, I forgot to include the state laws that allow spiking and early retirement.

Quote:
One other thing the article mentions is that the city can't collect taxes from hospitals and educational institutions that own a good chunk of the city's real estate
Yep. The "non-profits" have lots of revenues, but don't pay property taxes. They do make some other payments, but this is one of the chief reasons the City has a higher wage tax than the surrounding municipalities.

Quote:
Currently, how much could one expect to pay in annual taxes on a $300K house in the City of Pittsburgh and what are the prospects that the taxes would increase substantially in the next 5-10 years?
That's a complex topic. Right now that house should be assessed at its 2002 value (which could be significantly different from $300K, likely lower given such a price point) and then taxed at a total rate of 29.41 mills.

In 2012, every property in Allegheny County will get a new assessment, based on 2010 values, as a result of a court order. But that will trigger a recalculation of the various millage rates due to the state's anti-windfall laws (and the County is also talking about taking other measures). So the actual tax paid could go up or down--it will likely go up a bit for a $300K house, but I'd guess the millage will in fact be lower.

As for the future--who knows? Pittsburgh is perhaps the worst off city in Pennsylvania when it comes to pensions, but many other places are on a similar track, and maybe the state will take action at some point. But in any event, raising property taxes significantly will be one of the last things the City is likely to do, so I suspect it will be a while yet before that is even possibly on the table.
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Old 02-05-2011, 09:19 PM
 
480 posts, read 608,186 times
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Originally Posted by caroline2 View Post
The mayor is acutely aware of the problem and is doing what he can. Unfortunately, city council is behaving like... city council. All but three of them are total ostriches about the situation.
Disagree with you on this one. The Mayor's plan did NOT solve the pension crisis. Everything proposed and everything that was passed is nothing more than a short term fix.

Selling off the garages and meters would have had horrible impacts on the city budget down the road.
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Old 02-05-2011, 09:43 PM
 
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Even as someone who has been paying pretty close attention to the pension debacle, the numbers in that article are pretty stunning.

"Pittsburgh already devotes half of taxpayer dollars to debt, pensions and health-care costs for city workers."

and

"The city's ability to generate tax revenues has been limited by the growth of nonprofit hospitals and universities, which own roughly 40% of city land."

Quote:
Disagree with you on this one. The Mayor's plan did NOT solve the pension crisis.
I said that the mayor was doing what he can, not that he could solve thirty years' worth of mismanagement in one fell swoop. But it was city council that turned down $250 million extra purely out of spite.
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Old 02-07-2011, 12:20 PM
 
Location: O'Hara Twp.
4,359 posts, read 7,479,241 times
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Quote:
Originally Posted by caroline2 View Post
Even as someone who has been paying pretty close attention to the pension debacle, the numbers in that article are pretty stunning.

"Pittsburgh already devotes half of taxpayer dollars to debt, pensions and health-care costs for city workers."

and

"The city's ability to generate tax revenues has been limited by the growth of nonprofit hospitals and universities, which own roughly 40% of city land."



I said that the mayor was doing what he can, not that he could solve thirty years' worth of mismanagement in one fell swoop. But it was city council that turned down $250 million extra purely out of spite.
I agree that half of your budget seem like a lot to basically pay for benefits and debt servicing. Any idea what other cities are spending for the same costs?
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Old 02-07-2011, 12:37 PM
 
Location: Mt. Lebanon
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I just don't know how people can retire at 50 when the retirement age is 67. Isn't this a law or something?

I mean, come on, even in France, a country that values leisure by allowing people to take 6 weeks of vacation per year and countless holidyas, they pushed the retirement age up, sparking protests.
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