There’s one big, scary reason you should get familiar with the phrase “public asset sales” in 2012: pensions.
By 2016, pension fund payments and debt service will eat up 16.5 percent of the city’s budget, according to the Pennsylvania Intergovernmental Cooperation Authority.
In order to clean up the pension mess, the city could sell off assets, such as the airport, Philadelphia Gas Works or parking lots. Philadelphia City Councilman Bill Green said that if the city used a big asset sale to pay down the pension fund, it could reap millions annually.
“If you were to put $100 million in the pension fund, you make available to the city between $8 million and $10 million a year in perpetuity,” he said. “It’s money that’s available either for the provision of additional services or for investment in things that are going to lower the operating costs of government or for tax reductions.”
Though public asset sales aren’t new, there are a few reasons why they are positioned to become the next big thing in 2012. In addition to the pension crisis, the city must wrestle with the fact that revenues are down.
But City Council is loathe to raise property taxes again. In his first speech as council president, Darrell Clarke said the city needs to explore new ways to raise revenues without imposing tax hikes. ”I believe we can use the assets we have in new ways to help create jobs and raise revenues,” he said.
Last year, Clarke floated the idea of selling or leasing the city’s parking meters to raise money.
Mayor Michael Nutter has created a task force to examine selling city assets. Though a report from the task force isn’t due until mid-2013, the city expects to hold public hearings on the idea before then.
Green also is planning to introduce a bill in 2012 that would require that proceeds from public asset sales over a minimum price—say, $1 million—be used to pay down the pension. He expects to hold hearings on the issue this year.
So will there be a “For Sale” sign at the airport this year? Not yet. But the public is likely to weigh in on asset sales at hearings in 2012 — hearings that could become very contentious.
Brett Mandel, a fiscal gadfly and former city controller candidate, supports the idea of selling a city asset to shore up the pension fund. But he said that plenty could wrong during a sale.
“We don’t know what a private company or what a different political entity might do with, say, Fairmount Park or with our gas works or with our airport,” he said. “If corporation X wants to buy our gas works, that might be a great thing.But if corporation X wants to then charge the citizens of Philadelphia five times the amount for gas in the future, that might not be so great.”
If the city decided to sell Philadelphia Gas Works, employees could get laid off. That could lead to a standoff with city unions.
Philly could also go the way of Chicago, which leased its parking meters in 2008. This brought in more than $1 billion for the city, but it also led to higher parking rates and intense backlash from residents.