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Teachers’ pension fund has a secret plan for urban renewal in Harrisburg. They won’t talk about it.

PSERS says it's 'transparent' but trustees spend hours behind closed doors and have a secret plan to redevelop a swatch of Harrisburg.

Demolition work along Market Street east of PSERS headquarters in Harrisburg, Pa., in October 2019. The pension system is using pension funds to buy and clear properties stretching from its offices to the rundown residential neighborhoods on the city's east side, but says it's not ready to discuss its plans in detail.
Demolition work along Market Street east of PSERS headquarters in Harrisburg, Pa., in October 2019. The pension system is using pension funds to buy and clear properties stretching from its offices to the rundown residential neighborhoods on the city's east side, but says it's not ready to discuss its plans in detail.Read moreJoseph N. DiStefano

Last summer, the Pennsylvania Public School Employees’ Retirement System, which has $57 billion invested around the world and needs a $4.8 billion “employer contribution” from public school and state taxpayers this year, bragged that it won a “transparency award” from a government finance officers’ group pleased with the charts and graphs of its annual report.

Transparent, for whom? PSERS trustees met for hours behind closed doors and agreed to spend $5 million more in the third year of their $13.5 million-so-far campaign to buy up and demolish city blocks along Market Street east of the agency’s headquarters.

The millions are “for use in the site preparation and development of real property located in Harrisburg, Pennsylvania, as more fully set forth in the confidential recommendation memorandum of Glen R. Grell, executive director,” according to the agenda.

What’s in the memo? Can’t tell you: That’s confidential, said Steve Esack, a PSERS spokesman.

“You can tell these people used to be school board members. They are always trying to do things in ‘executive session,’” with members of the public barred, just like at a small-town school board meeting, said Russ Diesinger. He’s a retired teacher and school board member from Berks County, one of a handful of private citizens who showed up to watch the trustees deliberate and wait when they shut him out.

How long were the members hidden away, over the two-day meeting, not counting their trips to the in-house lunch buffet table? “Five and a half hours,” says spokesman Esack.

“I counted six and a half,” Diesinger told me.

In its open meeting session, the board approved other investments — $25 million in repairs to a shopping mall it owns in Florida ; and $100 million for a Conshohocken-based warehouse investment fund.

Citizen Diesinger is a member of the Pennsylvania Association of School Retirees and a candidate for a PSERS retirees’ board seat in this fall’s mail-ballot election. He told me he’s running against incumbent PSERS trustees’ chairman Melva Vogler, a retired teacher from the Wallenpaupack Area School District who has sat on the board for 25 years.

The $5 million investment in Harrisburg is becoming a fall ritual, like Halloween.

In 2017, according to PSERS nonconfidential documents, trustees approved $5 million to buy the former Harrisburg Patriot-News facilities in the 800 and 900 blocks of Market Street and the first blocks of Ninth and 10th Streets. Contractors have been busy, reducing the blocks to dusty slabs.

In 2018, it was $2 million more “to support the acquisition and demolition costs, and master planning and site development” at the vacant former Department of General Services Publication Building at 909 Market St. Plus $450,000 to buy three 10th Street parcels, now parking. And $1 million to prepare property for development. Then $200,000 to buy 1000 Market St.

This fall, it was $5 million for the confidential purposes noted above.

It’s not a typical investment for the fund. PSERS has mostly invested in professionally managed stocks, bonds, venture capital, private equity, real estate, hedge, junk-bond, commodity, and other investment funds.

Investments matter. Back under Gov. Tom Ridge 20 years ago, the plan was funded mostly by investment profits — which some years beat and sometimes, as in this last year, fall below long-term targets — and teacher payroll deductions.

But today, the biggest payments are the “employer contributions” split by state and local taxpayers, who currently pay an extra $1 to PSERS for every $3 they pay teacher and staff salaries. That’s up from $0 in 2001. The contribution has gone up every year since. It’s projected to rise again next year.

Reforms signed by Gov. Tom Wolf should eventually cap guaranteed pensions. Retirees will rely more on private-sector-type market-risk pensions. That will ease the public cost — when today’s hires start retiring, decades from now. PSERS says the expense would be less today if we had paid more under Gov. Ridge.

Diesinger has more waiting stamina than I do and hung around to hear scuttlebutt after the secret sessions. He heard that State Rep. Frank Ryan (R., Lebanon), a new board member, urged members not to buck a General Assembly’s pension-cost-cutting proposal, backed also by Gov. Wolf and State Treasurer Joe Torsella (a PSERS trustee), which would combine PSERS’s investment office with the separate State Employees’ Retirement System (SERS) investment office.

The theory is that because SERS and PSERS buy some of the same investments, maybe they could get a volume discount by doing it together. (Ryan didn’t return a call.)

I asked Diesinger whether he’d heard what I heard — that the properties PSERS knocks down with public money have been nicknamed “the Grell Campus,” and that PSERS is trying to interest colleges and other institutions in moving there, leaving a monument to the executive director once he retires on his state pensions.

Diesinger hadn’t heard that. And PSERS’s Esack declined to comment “as plans remain in the development stage.”

Diesinger and other rare visitors might be able to skip the trip to Harrisburg and its Market Street demolition zone if PSERS found an efficient way to join the 21st century and make the video feed of the meetings it already transmits to employees in their headquarters building also available — transparent — to the taxpaying and pension-collecting public.

At least they could broadcast the “public session” hours of its meetings when they aren’t mulling plans for spending the people’s money in secret.