(December 2, 2010) — With Pittsburgh’s pension still only 27.5% funded and up against a state takeover, City Council President Darlene Harris has proposed another strategy to help ameliorate the city’s pension crisis.
The proposal — taking out life insurance policies on those vested in the fund while using the proceeds to pay off the $700 million in unfunded liabilities — is yet another option for city officials to weigh before its year-end deadline. According to the Pittsburgh Post Gazette, Harris, who has not yet introduced legislation for the plan, said the plan would be similar to “dead peasant” insurance (also known as “janitors” policies), which occurs when a company buys a life insurance policy on a rank-and-file, low-level employee, often without saying so, claiming the company as the beneficiary should the employee die.
Harris’ idea is the the latest attempt to provide a solution to shore up the city pension fund, which is anticipating a state takeover if it fails to be 50% funded by December 31.
Previously, the City Council voted down a proposal by Mayor Luke Ravenstahl to lease garages and metered spaces for 50 years for $451.7 million to a private investment group formed by J.P. Morgan and Connecticut-based LAZ Parking. The mayor had hoped to use some of the money created by his plan to pay off the parking authority’s debt and pump more than $200 million into the city’s pension fund to avoid a state takeover by January 1. Rejecting the mayor’s plan, the City Council instead proposed it would sell a garage, five parking lots and nearly 7,000 metered spaces to the Parking Authority to raise the $220 million the pension funds need. Ravenstahl has said a takeover would result in mounting pension payments requiring tax hikes and service cuts.
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