11 ms·

funny thing about Georgia, or metro Atlanta that is. We just completed the new Northwest Corridor Express Lanes, 30 miles of elevated reversible toll lanes for

funny thing about Georgia, or metro Atlanta that is. We just completed the new Northwest Corridor Express Lanes, 30 miles of elevated reversible toll lanes for a whopping eight hundred and thirty four million dollars. however with regards to the story, Atlanta has its issues with old and needing of repair infrastructure but mostly this comes about because politicians love to cut a ribbon and money goes to new and expensive projects while maintenance gets deferred. This is very evident in heavy rail metro transit systems across the country where it is estimated that over a hundred billion dollars has been deferred. however the real bomb coming is the public employee pension funds running out of money, from police to fire to teachers to city employees. Chicago has a time bomb set to go off in just a few years [1] and if we thought infrastructure costs were killer wait till the pensions collapse, here is a hint : worn out sewers and bridges won't sue you. Already more than a few cities and counties have filed bankruptcy because of these costs. rich neighborhoods want more and more services but when the bill finally comes due it is only then that they realize the true cost of that folly. it easy to live on deferred payment plans until it comes due [1] https://chicagocitywire.com/stories/511130434-projection-chicago-s-police-pension-fund-will-be-broke-in-2021 https://chicagocitywire.com/stories/511130434-projection-chi...

citythrow23 8y ago
From the perspective of a buyer, this leads to the opposite conclusion of the article: instead of buying an in older neighborhood that has held on to its property value but racked up pension debt, buy in a brand new neighborhood that may decrease in property value but has no pension debt and new infrastructure. From the perspective of society at large, both are pretty bad. The bet for newer suburban home buyers is that you can buy the home, raise kids for 20-30 years in the good schools that use the new home values as a barrier to entry, sell it without a major loss, and then move somewhere cheaper and older before the home or the home's surroundings deteriorate.
- leetcrew 8y ago
  > then move somewhere cheaper and older before the home or the home's surroundings deteriorate sure, if you know exactly when this will happen. but if you know, other people probably know, and they won't pay as much for your house.
- thebradbain 8y ago
  There’s lots of assumptions here — not that they’re wrong, as for the past few generations they’ve been more or less correct. But what if those assumptions become outdated? E.g. suburbs having a better school system because of the higher home values and home values being high because of the school system? What happens when one side of the circular equation breaks? In Dallas, the city proper is outperforming roughly half of the more expensive suburban school districts. In Dallas, more affluent, young couples who plan to start a family are choosing the city over suburbs that just a decade ago were seen as the Place To Be. There’s also the nationwide trend that many millenials — family or no family — want to live in urban cores, not sprawling suburbs. What happens then? Do “the suburbs” eventually become looked down upon by future generations in the perjorative way the current generation looks at “the inner city” today? And are all those people who made those assumptions when they bought into the suburbs caught holding the bag? https://www.dallasnews.com/news/education/2018/08/15/new-grades-texas-schools-released-today-district https://www.dallasnews.com/news/education/2018/08/15/new-gra...
Gustomaximus 8y ago
It seems the latest plan for the Chicago pensions is to issue $10bn in bonds with the assumption this will earn more in the fund than interest they will pay on the bonds. If the markets keep booming absolutely. Though risky to tackle excessive debt with more debt. Especially while the markets are likely near their cyclical peak. They also talk about increased taxes. But no mention of the pension members taking a haircut or contributing more which would seem a fair and financially stable option, though obviously not politically. https://chicago.suntimes.com/news/rahm-emanuel-10-billion-city-pension-bonds-borrowing-plan/ https://chicago.suntimes.com/news/rahm-emanuel-10-billion-ci... I always felt a good pension system would be to have something like Australia's where 10% of your pay goes into a fund you can't touch til ~65. You can invest it how you want within reasonable parameters to avoid scams etc but the money must be saved. This combined with a government pension that starts at 65 on poverty line payments but increases each year you dont take it. This way people don't have to fund their full retirement lenght and takes away planning for the unknown moment of death, assuming increases are reasonable. People can plan to fund say 15 years of retirement and then know they hit X+15 years increases pension which is more affordable to the govt as many citizens will die during the self-funding period removing that obligation.
- wahern 8y ago
  I always felt a good pension system would be to have something like Australia's where 10% of your pay goes into a fund you can't touch til ~65. Social Security taxes in the U.S. amount to 12.4% of wages, exclusive of income taxes. And that's just to fund poverty line benefits. How are poverty line benefits funded in Australia? From regular income taxes?
  - DreamSpinner 8y ago
    Yes, there is a state issued (means tested, but not that hard to get) Pension that is funded out of general revenue. The 10% that is referred to is a separate but mandatory amount known as "supperannuation" - this is taxed at a reduced rate. I believe that this is similar to a 401K in the US, except that it's mandatory for all workers who earn over a small amount (less than the minimum weekly earning). The long term intent of this is to increase "private" savings to reduce the general-revenue funded pensions (though there is a large industry around structuring assets and savings to allow people to have their savings and still get the pension). https://en.wikipedia.org/wiki/Superannuation_in_Australia https://en.wikipedia.org/wiki/Superannuation_in_Australia
wahern 8y ago
OTOH, how to fund pensions properly is a solved problem. A properly managed pension fund will have fully funded (with a high degree of certainty) a pensioners' expected payout by the time he retires, and indeed have fully funded accrued liabilities at every point in his career. It's just a matter of relying on a conservative rate of return with a proven track record. Something like 4-6% per annum, IIRC. We know this because of the 200+ years of commercial and regulatory experience with insurance, especially life insurance. People trust their life insurance and annuity policies will pay out because politicians from 100 years ago bequeathed to us a reliable regulatory framework (forged by multiple crises) that penalizes insurers from being "innovative" with the bottom line. That same discipline can and is used for pensions, just not for public pensions at the state level because state governments are often exempt from regulations controlling private actors. Do we know how to do the same for infrastructure, especially large infrastructure projects? Infrastructure needs and costs are much more dynamic, which makes it easier to fudge numbers and avoid accountability--now and later.
- jeffbax 8y ago
  Except for when the pension and budget planners plan around 10% returns that don't happen, or the planners make really bad bets for a whole lot of people that will never meet expectations but the money is owed and has to come from somewhere (ultimately the taxpayers)
  - azernik 8y ago
    "It's just a matter of relying on a conservative rate of return with a proven track record."
    - Spooky23 8y ago
      Responsible states have managed to figure out this problem.
      - jeffbax 8y ago
        I think you are over-estimating how many responsible states there are: https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2018/04/the-state-pension-funding-gap-2016 https://www.pewtrusts.org/en/research-and-analysis/issue-bri... > The funding gap for the state pension plans studied reached $1.4 trillion in 2016—an increase of $295 billion from 2015. State contribution policies proved insufficient to deal with the unfunded liabilities already on the books. Even if all assumptions had been met, the funding gap would have grown by $13 billion. Instead, investments fell short of assumptions for the second year in a row, leaving state pension debt at historic highs. > Other measures of fiscal vulnerability also show cause for concern. The gap between returns on safe investments and state pension plan investment assumptions was the highest in decades. Independent analyses suggest that states can assume returns of about 6.5 percent a year for at least the next 10 years; 5 percent or lower returns are a real possibility over the next 20 years.7 While strong investment performance in 2017 would lower reported unfunded liabilities in the short term, measures of plan cash flow show that state pension plans increasingly depend on investment performance to keep assets from declining. All of these measures show that plans are more vulnerable to volatility than in the recent past, which could have an adverse impact on funds in the future. Meanwhile in California, and probably all the other underwater states soon enough: https://reason.com/blog/2017/10/05/pension-costs-are-forcing-cities-to-cut https://reason.com/blog/2017/10/05/pension-costs-are-forcing... > California public pension plans are funded on the basis of policies and assumptions that can delay recognition of their true cost. Even with this delay, local and state governments are facing increasingly higher pension costs—costs that are certain to continue their rise over the next one to two decades, even under assumptions that critics regard as optimistic. As budgets are squeezed, what are state and local governments cutting? Core services, including higher education, social services, public assistance, welfare, recreation and libraries, health, public works, and in some cases, public safety. There's a deep irony in re-electing Jerry Brown to fix the problem he made in the 70s with his giveaways to the public sector, which will be paid for by the private sector who generally is compensated much much less.
jeffbax 8y ago
The amount of people who are wholly oblivious or simply don't care about the pension bombs that are going to rock most states in the USA is utterly insane to me, and its primarily the blue ones. We really need to get rid of these over-promising pensions and get public employees onto private accounts like most workers have with 401ks, and yet the cry from the left is always more "well paying unions and pensions" while they have no idea it is becoming a house of cards. I believe many places in California have already had to deal with shutting down public infrastructure and services due to pensions growing to be more and more of the local budgets.
- i_am_nomad 8y ago
  The problem in many California towns, including mine, is that the public employee unions (particularly the fire and police) give huge amounts of campaign contributions to city politicians, who then turn around and give those unions everything they ask for. We even had a consultant come in and tell us we could easily cut our fire department in half, but nope: they instead got a new emergency center. Median salary for them is about $150K.
  - bunderbunder 8y ago
    That seems to be a ubiquitous problem. I had a bit of a consciousness-raising moment when a friend of mine ran for public office a decade or so back, and shared his experiences with me. The calculus is simple: Nobody really wants to pay out of pocket for the campaign costs, if they can even afford to in the first place, and public donations alone aren't going to cut the mustard, either. So, if you want to play, apparently the very first thing you do is go and talk to the different interest groups in town. Labor unions are an option, but so are philanthropists with significant business interests. They'll happily scratch your back, but only if you promise to scratch theirs. So, that's not even really your first day at work in public office, it's more your first round job interview. The incorruptible need not apply. There have been various attempts at doing something about it over time, but there's a precedent in Constitutional law that money is effectively a form of speech, so serious efforts typically founder on the First Amendment.
bunderbunder 8y ago
> rich neighborhoods want more and more services but when the bill finally comes due it is only then that they realize the true cost of that folly I'm not sure they do; I've known more than a few wealthy acquaintances who just grumble about the taxes suddenly being too high and then move to the next town.
- partiallypro 8y ago
  I think they do, and then a few people who do complain about taxes move away...then suddenly in order to make up that shortfall taxes have to rise again...then a previous group that was closer to wanting low taxes threshold move...Cities take this as they aren't doing enough, so they spend more, and more, and more. They still have shortfalls, so they try to raise taxes, then realize no one wants it. It fails, so the city dips into pensions, or skimps. Then sooner or later it cascades down a hard to reverse path. It can take years or decades to play out...but it almost always does. It can also take decades to fix once it hits the fan.
nopinsight 8y ago
In case anyone could explain this to me/us: What happens after a city/county files for bankruptcy? Do the pensioners get the promised amount in full or there would be a haircut? Is the city/county forced to raise taxes over the objection of current residents?
- madengr 8y ago
  They can be screwed. Detroit for example: https://www.google.com/amp/s/amp.freep.com/amp/759446002 https://www.google.com/amp/s/amp.freep.com/amp/759446002

citythrow23 8y ago

From the perspective of a buyer, this leads to the opposite conclusion of the article: instead of buying an in older neighborhood that has held on to its property value but racked up pension debt, buy in a brand new neighborhood that may decrease in property value but has no pension debt and new infrastructure. From the perspective of society at large, both are pretty bad. The bet for newer suburban home buyers is that you can buy the home, raise kids for 20-30 years in the good schools that use the new home values as a barrier to entry, sell it without a major loss, and then move somewhere cheaper and older before the home or the home's surroundings deteriorate.

leetcrew 8y ago
> then move somewhere cheaper and older before the home or the home's surroundings deteriorate sure, if you know exactly when this will happen. but if you know, other people probably know, and they won't pay as much for your house.
thebradbain 8y ago
There’s lots of assumptions here — not that they’re wrong, as for the past few generations they’ve been more or less correct. But what if those assumptions become outdated? E.g. suburbs having a better school system because of the higher home values and home values being high because of the school system? What happens when one side of the circular equation breaks? In Dallas, the city proper is outperforming roughly half of the more expensive suburban school districts. In Dallas, more affluent, young couples who plan to start a family are choosing the city over suburbs that just a decade ago were seen as the Place To Be. There’s also the nationwide trend that many millenials — family or no family — want to live in urban cores, not sprawling suburbs. What happens then? Do “the suburbs” eventually become looked down upon by future generations in the perjorative way the current generation looks at “the inner city” today? And are all those people who made those assumptions when they bought into the suburbs caught holding the bag? https://www.dallasnews.com/news/education/2018/08/15/new-grades-texas-schools-released-today-district https://www.dallasnews.com/news/education/2018/08/15/new-gra...

Gustomaximus 8y ago

It seems the latest plan for the Chicago pensions is to issue $10bn in bonds with the assumption this will earn more in the fund than interest they will pay on the bonds. If the markets keep booming absolutely. Though risky to tackle excessive debt with more debt. Especially while the markets are likely near their cyclical peak. They also talk about increased taxes. But no mention of the pension members taking a haircut or contributing more which would seem a fair and financially stable option, though obviously not politically. https://chicago.suntimes.com/news/rahm-emanuel-10-billion-city-pension-bonds-borrowing-plan/ https://chicago.suntimes.com/news/rahm-emanuel-10-billion-ci... I always felt a good pension system would be to have something like Australia's where 10% of your pay goes into a fund you can't touch til ~65. You can invest it how you want within reasonable parameters to avoid scams etc but the money must be saved. This combined with a government pension that starts at 65 on poverty line payments but increases each year you dont take it. This way people don't have to fund their full retirement lenght and takes away planning for the unknown moment of death, assuming increases are reasonable. People can plan to fund say 15 years of retirement and then know they hit X+15 years increases pension which is more affordable to the govt as many citizens will die during the self-funding period removing that obligation.

wahern 8y ago
I always felt a good pension system would be to have something like Australia's where 10% of your pay goes into a fund you can't touch til ~65. Social Security taxes in the U.S. amount to 12.4% of wages, exclusive of income taxes. And that's just to fund poverty line benefits. How are poverty line benefits funded in Australia? From regular income taxes?
- DreamSpinner 8y ago
  Yes, there is a state issued (means tested, but not that hard to get) Pension that is funded out of general revenue. The 10% that is referred to is a separate but mandatory amount known as "supperannuation" - this is taxed at a reduced rate. I believe that this is similar to a 401K in the US, except that it's mandatory for all workers who earn over a small amount (less than the minimum weekly earning). The long term intent of this is to increase "private" savings to reduce the general-revenue funded pensions (though there is a large industry around structuring assets and savings to allow people to have their savings and still get the pension). https://en.wikipedia.org/wiki/Superannuation_in_Australia https://en.wikipedia.org/wiki/Superannuation_in_Australia

wahern 8y ago

OTOH, how to fund pensions properly is a solved problem. A properly managed pension fund will have fully funded (with a high degree of certainty) a pensioners' expected payout by the time he retires, and indeed have fully funded accrued liabilities at every point in his career. It's just a matter of relying on a conservative rate of return with a proven track record. Something like 4-6% per annum, IIRC. We know this because of the 200+ years of commercial and regulatory experience with insurance, especially life insurance. People trust their life insurance and annuity policies will pay out because politicians from 100 years ago bequeathed to us a reliable regulatory framework (forged by multiple crises) that penalizes insurers from being "innovative" with the bottom line. That same discipline can and is used for pensions, just not for public pensions at the state level because state governments are often exempt from regulations controlling private actors. Do we know how to do the same for infrastructure, especially large infrastructure projects? Infrastructure needs and costs are much more dynamic, which makes it easier to fudge numbers and avoid accountability--now and later.

jeffbax 8y ago
Except for when the pension and budget planners plan around 10% returns that don't happen, or the planners make really bad bets for a whole lot of people that will never meet expectations but the money is owed and has to come from somewhere (ultimately the taxpayers)
- azernik 8y ago
  "It's just a matter of relying on a conservative rate of return with a proven track record."
  - Spooky23 8y ago
    Responsible states have managed to figure out this problem.
    - jeffbax 8y ago
      I think you are over-estimating how many responsible states there are: https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2018/04/the-state-pension-funding-gap-2016 https://www.pewtrusts.org/en/research-and-analysis/issue-bri... > The funding gap for the state pension plans studied reached $1.4 trillion in 2016—an increase of $295 billion from 2015. State contribution policies proved insufficient to deal with the unfunded liabilities already on the books. Even if all assumptions had been met, the funding gap would have grown by $13 billion. Instead, investments fell short of assumptions for the second year in a row, leaving state pension debt at historic highs. > Other measures of fiscal vulnerability also show cause for concern. The gap between returns on safe investments and state pension plan investment assumptions was the highest in decades. Independent analyses suggest that states can assume returns of about 6.5 percent a year for at least the next 10 years; 5 percent or lower returns are a real possibility over the next 20 years.7 While strong investment performance in 2017 would lower reported unfunded liabilities in the short term, measures of plan cash flow show that state pension plans increasingly depend on investment performance to keep assets from declining. All of these measures show that plans are more vulnerable to volatility than in the recent past, which could have an adverse impact on funds in the future. Meanwhile in California, and probably all the other underwater states soon enough: https://reason.com/blog/2017/10/05/pension-costs-are-forcing-cities-to-cut https://reason.com/blog/2017/10/05/pension-costs-are-forcing... > California public pension plans are funded on the basis of policies and assumptions that can delay recognition of their true cost. Even with this delay, local and state governments are facing increasingly higher pension costs—costs that are certain to continue their rise over the next one to two decades, even under assumptions that critics regard as optimistic. As budgets are squeezed, what are state and local governments cutting? Core services, including higher education, social services, public assistance, welfare, recreation and libraries, health, public works, and in some cases, public safety. There's a deep irony in re-electing Jerry Brown to fix the problem he made in the 70s with his giveaways to the public sector, which will be paid for by the private sector who generally is compensated much much less.

jeffbax 8y ago

The amount of people who are wholly oblivious or simply don't care about the pension bombs that are going to rock most states in the USA is utterly insane to me, and its primarily the blue ones. We really need to get rid of these over-promising pensions and get public employees onto private accounts like most workers have with 401ks, and yet the cry from the left is always more "well paying unions and pensions" while they have no idea it is becoming a house of cards. I believe many places in California have already had to deal with shutting down public infrastructure and services due to pensions growing to be more and more of the local budgets.

i_am_nomad 8y ago
The problem in many California towns, including mine, is that the public employee unions (particularly the fire and police) give huge amounts of campaign contributions to city politicians, who then turn around and give those unions everything they ask for. We even had a consultant come in and tell us we could easily cut our fire department in half, but nope: they instead got a new emergency center. Median salary for them is about $150K.
- bunderbunder 8y ago
  That seems to be a ubiquitous problem. I had a bit of a consciousness-raising moment when a friend of mine ran for public office a decade or so back, and shared his experiences with me. The calculus is simple: Nobody really wants to pay out of pocket for the campaign costs, if they can even afford to in the first place, and public donations alone aren't going to cut the mustard, either. So, if you want to play, apparently the very first thing you do is go and talk to the different interest groups in town. Labor unions are an option, but so are philanthropists with significant business interests. They'll happily scratch your back, but only if you promise to scratch theirs. So, that's not even really your first day at work in public office, it's more your first round job interview. The incorruptible need not apply. There have been various attempts at doing something about it over time, but there's a precedent in Constitutional law that money is effectively a form of speech, so serious efforts typically founder on the First Amendment.

bunderbunder 8y ago

> rich neighborhoods want more and more services but when the bill finally comes due it is only then that they realize the true cost of that folly I'm not sure they do; I've known more than a few wealthy acquaintances who just grumble about the taxes suddenly being too high and then move to the next town.

partiallypro 8y ago
I think they do, and then a few people who do complain about taxes move away...then suddenly in order to make up that shortfall taxes have to rise again...then a previous group that was closer to wanting low taxes threshold move...Cities take this as they aren't doing enough, so they spend more, and more, and more. They still have shortfalls, so they try to raise taxes, then realize no one wants it. It fails, so the city dips into pensions, or skimps. Then sooner or later it cascades down a hard to reverse path. It can take years or decades to play out...but it almost always does. It can also take decades to fix once it hits the fan.

nopinsight 8y ago

In case anyone could explain this to me/us: What happens after a city/county files for bankruptcy? Do the pensioners get the promised amount in full or there would be a haircut? Is the city/county forced to raise taxes over the objection of current residents?

madengr 8y ago
They can be screwed. Detroit for example: https://www.google.com/amp/s/amp.freep.com/amp/759446002 https://www.google.com/amp/s/amp.freep.com/amp/759446002