9 ms·

"At the same time, the city's infrastructure is aging and requires more maintenance than it once did." The thing which is aging is more likely the base of city

"At the same time, the city's infrastructure is aging and requires more maintenance than it once did." The thing which is aging is more likely the base of city employees and retirees who were promised defined benefit pensions which were underreserved for and routinely looted, over a period of decades. Erie, for example, has an unfunded liability of about $90 million against a total annual budget of ~$115 million. (As is typical, the lion's share is police/firefighters.)

freddie_mercury 8y ago
Erie County, Pennsylvania, has an unfunded liability of $9.7 million, according to line 7 of section 2.5 of their 2018 annual report. The annual required contribution is a mere $4.3 million Their pension is 99% funded. I don't know why you'd bring it up, since it is unrelated to the article. Fixing pensions won't change the fact that neglectful landlords get rewarded under the current taxation scheme.
- patio11 8y ago
  The City of Erie, Pennsylvania, is the Erie on the hook for fire and police pensions. https://www.paauditor.gov/media/default/MunPenReporting/RPT_2016_MuniPension_STATUS_REPORT_Dec2016_FINAL.pdf https://www.paauditor.gov/media/default/MunPenReporting/RPT_... Why bring it up? Because cities are special purpose vehicles to fund police/firefighter pensions which have a side hustle in providing civic infrastructure. That's quite relevant to the question of why costs are increasing (because politically powerful people got placated), whether investments in infrastructure will reduce costs (strictly impossible), and whether property developers are to blame for underfunded infrastructure (they do not receive checks from the city every month).
  - freddie_mercury 8y ago
    That seems like just some random place not mentioned in the article? The article mentionedthe county of Erie. And the quote wasn't about any city in particular, just about generic "many older cities". The city of Erie didn't come up in the article.
    - UncleEntity 8y ago
      > The city of Erie didn't come up in the article. "Joshua Vincent’s piece on land taxation in Pennsylvania examines relative tax rates in Erie County, Pennsylvania, finding that property owners in the city of Erie proper pay close to double the taxes that those in many of Erie's suburbs pay."
- theobeers 8y ago
  Unfunded pension liabilities are absolutely related, as they represent part of the "vicious cycle" described in the article. Both Erie County and the city of Erie are mentioned. The comment to which you replied was referring to the latter.
omegaworks 8y ago
Can we close the book on this "unfunded pension liability" nonsense? The government can create the raw dollars needed to fund the pensions. Just listen to Alan Greenspan himself shut down Paul Ryan's perverse anti-social security zealotry: https://www.youtube.com/watch?v=DNCZHAQnfGU https://www.youtube.com/watch?v=DNCZHAQnfGU
- function_seven 8y ago
  Some other government could (federal), but not the municipal or state governments. That’s the rub here. These liabilities are hanging around the necks of governments that can’t pull a monetary supply lever.
  - omegaworks 8y ago
    Bailouts are a tried and true mechanism for addressing this liquidity problem for the private sector. I don't see why it shouldn't apply here.
    - rayiner 8y ago
      In the private sector, bailouts were used to address a liquidity problem—if the companies could survive the crunch, they could be in a position to pay the money back. Municipalities aren’t facing a liquidity problem—they’re insolvent. They owe far more than they can ever hope to pay back, because their tax bases aren’t growing at the rates needed to make their obligations manageable.
    - function_seven 8y ago
      I don’t disagree in the abstract. But Erie can’t tell its municipal bond holders, “Don’t worry, we’ll just wait for the bailout. Your debt is safe” This would make a potential future crisis an actual current one.
    - rmilk 8y ago
      The question then becomes how to acquire the money for the bailout. You can’t just ask for money or acquire funding through buyout. Tax increases or bonds are really the only sources of money, and they require voter approvals. Costs can be reduced by cutting services or through bankruptcy, both of which bring their own side effects by reducing the appeal of the city or county or by making future debt more expensive. See this link for a survey of California issues with pensions. The source is the league of CA cities, so there is some bias but the results are still meaningful and eye opening regarding future mandatory spending commitments. http://www.cacities.org/2018PensionSurvey http://www.cacities.org/2018PensionSurvey
YokoZar 8y ago
Another article from Strong Towns made the point that infrastructure like roads tends to only last about 30 years before needing complete replacement. In many towns this infrastructure is paid for by assessing fees on new development. Once the city stops expanding, you now have no tax base to pay for all the existing roads needing replacement. All those replacement bills come due: the "aging infrastructure" needs more maintenance.
- aperrien 8y ago
  Are there any road structures that will last longer than 30 years? I've heard that there are other materials used overseas that do, but I don't know the subject well enough to ask effective questions about it.
  - josephorjoe 8y ago
    cobblestone
BeetleB 8y ago
>The thing which is aging is more likely the base of city employees and retirees who were promised defined benefit pensions which were underreserved for and routinely looted, over a period of decades. Let me ask: How were those pension banks supposed to be funded? The reason I ask is because my state has a defined pension plan for many public workers. The benefits are defined irrespective to how the market performs. We're also one of the highest income tax states out there. Yet the pension is underfunded. No one's been "looting" it. No one takes money out of it for some other purpose. The tax rate simply isn't enough to fund it. And we have a high tax rate. Whoever designed this for our state did so with the assumption that market returns would be enough to fund it. It never was a plan of simply collecting tax money. They were wrong. The market returns were not enough. Current retirees are getting their pensions. We just won't have enough for the next batch at current funding rates. It's gone to court, and the courts have ruled that there are no loopholes: People will get their pensions, no matter what. So now we're dealing with the "no matter what". We have one of the worst high school graduation rates in the country, and the quality of education overall is rated fairly low. Yet, we can't solve that problem with money. Because for the next decade or two, pretty much all increases in education funding are going to fund the pensions. A number of cities are growing, and the mayors are very clear about the problems: They cannot afford more police officers and other similar employees to keep pace with the growing cities - because all the extra revenue they are collecting in taxes is going to fund the retirement funds. The only solution the courts will allow is to change retirement plans for those just entering the workforce. But we will have to deal with this problem for a few decades where we must increase all kinds of taxes to pay for pensions, and allow the rest of the infrastructure to decay. There's no cap on the defined benefits for high income folks, BTW. University football coaches, and retired presidents, get a lot of money (at least one of them gets over $70K/month). Of course, these are outliers. The median is under $40K/year. Defined benefits is a bad idea. They need to switch to defined contributions from employers, and let the investments dictate their pay (and probably give employees more choices for the investments).
- ohazi 8y ago
  > The only solution the courts will allow is to change retirement plans for those just entering the workforce. The best time to plant a tree was twenty years ago. The second best time is now.
tomjen3 8y ago
What I don't get is how on Earth that was ever legal. A defined benefit retirement service must require you to purchase an annuity, so how is it possible to underfund those retirement founds?
- AnimalMuppet 8y ago
  You purchase an investment, but not an annuity - say, some stocks. You make an over-optimistic assumption about how fast that investment is going to grow, because that lets you put less money in this year to fund it. But when the investment doesn't grow as fast as you forecast, you have an underfunded liability.

freddie_mercury 8y ago

Erie County, Pennsylvania, has an unfunded liability of $9.7 million, according to line 7 of section 2.5 of their 2018 annual report. The annual required contribution is a mere $4.3 million Their pension is 99% funded. I don't know why you'd bring it up, since it is unrelated to the article. Fixing pensions won't change the fact that neglectful landlords get rewarded under the current taxation scheme.

patio11 8y ago
The City of Erie, Pennsylvania, is the Erie on the hook for fire and police pensions. https://www.paauditor.gov/media/default/MunPenReporting/RPT_2016_MuniPension_STATUS_REPORT_Dec2016_FINAL.pdf https://www.paauditor.gov/media/default/MunPenReporting/RPT_... Why bring it up? Because cities are special purpose vehicles to fund police/firefighter pensions which have a side hustle in providing civic infrastructure. That's quite relevant to the question of why costs are increasing (because politically powerful people got placated), whether investments in infrastructure will reduce costs (strictly impossible), and whether property developers are to blame for underfunded infrastructure (they do not receive checks from the city every month).
- freddie_mercury 8y ago
  That seems like just some random place not mentioned in the article? The article mentionedthe county of Erie. And the quote wasn't about any city in particular, just about generic "many older cities". The city of Erie didn't come up in the article.
  - UncleEntity 8y ago
    > The city of Erie didn't come up in the article. "Joshua Vincent’s piece on land taxation in Pennsylvania examines relative tax rates in Erie County, Pennsylvania, finding that property owners in the city of Erie proper pay close to double the taxes that those in many of Erie's suburbs pay."
theobeers 8y ago
Unfunded pension liabilities are absolutely related, as they represent part of the "vicious cycle" described in the article. Both Erie County and the city of Erie are mentioned. The comment to which you replied was referring to the latter.

omegaworks 8y ago

Can we close the book on this "unfunded pension liability" nonsense? The government can create the raw dollars needed to fund the pensions. Just listen to Alan Greenspan himself shut down Paul Ryan's perverse anti-social security zealotry: https://www.youtube.com/watch?v=DNCZHAQnfGU https://www.youtube.com/watch?v=DNCZHAQnfGU

function_seven 8y ago
Some other government could (federal), but not the municipal or state governments. That’s the rub here. These liabilities are hanging around the necks of governments that can’t pull a monetary supply lever.
- omegaworks 8y ago
  Bailouts are a tried and true mechanism for addressing this liquidity problem for the private sector. I don't see why it shouldn't apply here.
  - rayiner 8y ago
    In the private sector, bailouts were used to address a liquidity problem—if the companies could survive the crunch, they could be in a position to pay the money back. Municipalities aren’t facing a liquidity problem—they’re insolvent. They owe far more than they can ever hope to pay back, because their tax bases aren’t growing at the rates needed to make their obligations manageable.
  - function_seven 8y ago
    I don’t disagree in the abstract. But Erie can’t tell its municipal bond holders, “Don’t worry, we’ll just wait for the bailout. Your debt is safe” This would make a potential future crisis an actual current one.
  - rmilk 8y ago
    The question then becomes how to acquire the money for the bailout. You can’t just ask for money or acquire funding through buyout. Tax increases or bonds are really the only sources of money, and they require voter approvals. Costs can be reduced by cutting services or through bankruptcy, both of which bring their own side effects by reducing the appeal of the city or county or by making future debt more expensive. See this link for a survey of California issues with pensions. The source is the league of CA cities, so there is some bias but the results are still meaningful and eye opening regarding future mandatory spending commitments. http://www.cacities.org/2018PensionSurvey http://www.cacities.org/2018PensionSurvey

YokoZar 8y ago

Another article from Strong Towns made the point that infrastructure like roads tends to only last about 30 years before needing complete replacement. In many towns this infrastructure is paid for by assessing fees on new development. Once the city stops expanding, you now have no tax base to pay for all the existing roads needing replacement. All those replacement bills come due: the "aging infrastructure" needs more maintenance.

aperrien 8y ago
Are there any road structures that will last longer than 30 years? I've heard that there are other materials used overseas that do, but I don't know the subject well enough to ask effective questions about it.
- josephorjoe 8y ago
  cobblestone

BeetleB 8y ago

>The thing which is aging is more likely the base of city employees and retirees who were promised defined benefit pensions which were underreserved for and routinely looted, over a period of decades. Let me ask: How were those pension banks supposed to be funded? The reason I ask is because my state has a defined pension plan for many public workers. The benefits are defined irrespective to how the market performs. We're also one of the highest income tax states out there. Yet the pension is underfunded. No one's been "looting" it. No one takes money out of it for some other purpose. The tax rate simply isn't enough to fund it. And we have a high tax rate. Whoever designed this for our state did so with the assumption that market returns would be enough to fund it. It never was a plan of simply collecting tax money. They were wrong. The market returns were not enough. Current retirees are getting their pensions. We just won't have enough for the next batch at current funding rates. It's gone to court, and the courts have ruled that there are no loopholes: People will get their pensions, no matter what. So now we're dealing with the "no matter what". We have one of the worst high school graduation rates in the country, and the quality of education overall is rated fairly low. Yet, we can't solve that problem with money. Because for the next decade or two, pretty much all increases in education funding are going to fund the pensions. A number of cities are growing, and the mayors are very clear about the problems: They cannot afford more police officers and other similar employees to keep pace with the growing cities - because all the extra revenue they are collecting in taxes is going to fund the retirement funds. The only solution the courts will allow is to change retirement plans for those just entering the workforce. But we will have to deal with this problem for a few decades where we must increase all kinds of taxes to pay for pensions, and allow the rest of the infrastructure to decay. There's no cap on the defined benefits for high income folks, BTW. University football coaches, and retired presidents, get a lot of money (at least one of them gets over $70K/month). Of course, these are outliers. The median is under $40K/year. Defined benefits is a bad idea. They need to switch to defined contributions from employers, and let the investments dictate their pay (and probably give employees more choices for the investments).

ohazi 8y ago
> The only solution the courts will allow is to change retirement plans for those just entering the workforce. The best time to plant a tree was twenty years ago. The second best time is now.

tomjen3 8y ago

What I don't get is how on Earth that was ever legal. A defined benefit retirement service must require you to purchase an annuity, so how is it possible to underfund those retirement founds?

AnimalMuppet 8y ago
You purchase an investment, but not an annuity - say, some stocks. You make an over-optimistic assumption about how fast that investment is going to grow, because that lets you put less money in this year to fund it. But when the investment doesn't grow as fast as you forecast, you have an underfunded liability.