My comments on triple ‘P’s below brought this from reader Mark:
As has been discussed previously on this site, there are some cities out there that are in desperate situations and are grabbing for any life line available; http://www.post-gazette.com/pg/10300/1098253-454.stm “…..Mr. Ardo said the time to act was, in a sense, yesterday. “They needed to address this issue years ago,” he said of the city, “and they didn’t.” As with the case in Harrisburg over the years politicians seem to typically look for the “quick fix” to problems and don’t think a lot beyond their term in office. Those easy fixes only delay the issue, they don’t resolve them. Now there are a lot of cities that are facing a situation where their options are very limited and they have very little time in which to choose before the choice is made for them either by the banks, bondholders, the Courts or the State.
I don’t know of any City in this mix where the problem all of a sudden just snuck up on them, but it seems like most of them are dealing with it like they have only now realized what the situation is. I don’t know the answer to their problems, but what I do know is that a solution involving municipalities defaulting in masse on bonds and pension obligations is not acceptable. I also know that covering debt by taking on more debt doesn’t solve anything long term, it only makes matters worse. We need to get out of the “crisis” mindset and get into an “opportunity” frame of mind. Someone is going to figure out the right formula for these PPP’s, one that is both financially and politically acceptable. From looking at the progression from Chicago to Pittsburgh to LA to Harrisburg to Indianapolis, etc, etc it seems like they are getting closer. I wish I had the “answer” right now, I could be a gazillionaire. I know there’s a way to do it, and I’m putting my powers of concentration (limited as they are) on trying to figure it out. These situations aren’t going to be resolved by either government or the private sector acting alone, it’s going to require a cooperative effort.
Mark has hit the nail – Our city’s problems didn’t “snuck up on them.” When times were flush, and property values were over the top, money was flowing into city coffers and of course they were spending like drunken sailors. The difference is that when sailors are out of money, they go back to the ship and sober up. Cities just keep on spending and set up endless programs that require future funding. Unbelievable salary and pension plans demanded by unions are an example. When the average municipal worker in the country makes over 100K a year (salary and benefits) and the average private sector worker is at what, $60K a year, you know that the future is untenable.
The solution, Mark, is some tough medicine. Cut Cut Cut. It means that promises made will have to be broken. It means that cities have to have a budget that equals income and stick to it. It means that these pensions have to be converted. The private sector does it all the time. One fellow who worked for a major software supplier told me that one day all the employees received a check (for the current value of their pension plan) and were given a number of alternative 401K plans to put it in. The company got out of the pension business.
Maybe the lawns at the park get mowed every three weeks instead of every other week,. Maybe city hall has to get by without so many vice mayors and assistant mayors and committees and the like. Maybe councilpersons will have to limit their staff and reduce the number of neighborhood offices they have. Maybe folks will have to drive their own cars and receive mileage rather than use the city owned fleet. I’ll bet that 25% of the staff at city hall could be cut and the residents of my city at least would never know it.
Then once they get spending in order, it might be time to look at privatization and triple P’s.