Only Water Privatization Can Knock Out Allentown’s Pension Mess in One Blow, But Who Cares?

My view on the Allentown water privatization debate is that, on the merits it’s a bad idea. Municipal water privatization was popular for a while in some European cities but now we’re seeing some of those same cities re-municipalizing their water systems. It’s a bad deal. The best outcome would be for the city to sell the water and sewer infrastructure directly to the Lehigh County Authority.

What I really want to take issue with though is the idea that Allentown needs to do One Big Thing to fix the pension mess. It’s not worth selling the city-owned parking garages and surface lots because that won’t knock out the debt in One Shot! Cobbling together a package of lots of little pro-growth tax and regulatory reforms isn’t worth doing because that won’t deliver the Single Death Blow to the pension crisis.

I don’t get this. Why does it have to be one thing? Why not get as far as you can through pro-growth policy reforms and selling other non-essential assets, and then make up the rest by raising the land tax?

Comments

  1. John says:

    It doesn’t knock out the problem, all it does is throw money at it. Your favorite solution to be sure, but yet again it doesn’t work.

    The problem remains and will resurface in 15yrs or so unless there is true pension reform is enacted.

    • Jon Geeting says:

      The problem is coming up with all the money that’s been promised, and in the future, shifting the compensation mix away from benefits toward cash so we don’t have all these unfunded liabilities.

  2. John says:

    Exactly – in other words, pension reform.

    Glad you finally agree!

    • Jon Geeting says:

      I’m always trying to agree with you on this, but you seem to want to think we disagree. We don’t. Cities should pay what they’re contractually obligated to pay for retired workers, switch future workers to defined contribution plans, and shift the compensation mix toward cash. On the asset side, stop overpaying on management and make all municipalities pay in. As someone who values public services, I want to see as much of the tax collections as possible going to pay for current services, not retired people.

  3. GDub says:

    Jon,

    I’d say you are 100% on the money. In fact–I’d take it a step further.

    What, exactly, is the evidence that “one big move” would solve anything? Scarcely any ink has been spilt over describing exactly how this grand plan would work in terms of how to invest this supposed “lump sum” in a way to solve the problem.

    That which has been printed suggests that the city still suffers from absurd assumptions on asset growth rates, which probably means that the problem is even worse. Press coverage also suggests that the expectations of money are hopelessly imprecise, with some describing a huge “lump sum” and others expecting a lump sum and a large “annual payment”.

    This idea has been a muddle of pie-in-the-sky expectations from the start. You are right–a lot more needs to be on the table to really get serious about this.

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