CHICAGO - Underwriters interested in competing for a spot on Milwaukee County's proposed pension obligation sale to wipe out a portion or all of its $406 million unfunded liability have until April 3 to submit proposals.
The county has won the state legislative changes needed to advance the deal and a county POB working group is formalizing a plan to bring before the county board. If the group recommends a pension sale and it is approved by the board, the county expects to pick an underwriting team from the proposals submitted. Any deal is also dependent on market conditions.
Officials anticipate that the largest piece of the deal would sell with a fixed-rate structure with annual serial maturities based on a preliminary market analysis by financial adviser Public Financial Management Inc. The county may also include floating-rate securities and capital appreciation bonds.
Two copies of a firm's proposals are to be submitted to PFM's David Anderson in its Milwaukee office. The county expects to interview firms in late April and recommend a team to the county board's Finance Committee in May, according to the request for proposal document.
The deal is aimed at curtailing the rising payments owed to the pension fund by the county. The pension fund had an unfunded liability of $406 million based on a new actuarial report as of Jan. 1, 2007, with liabilities of $1.93 billion and assets of $1.52 for a funded ratio of 79%. That figure is up from $330 million a year earlier.
Under preliminary proposals, the county could save $90 million based on the assumption that it could borrow at an interest rate of about 6% and garner investment returns of 8%. Its annual debt service payment would be $21 million in future years.
Milwaukee County's $1.3 billion 2008 budget anticipates about $10 million in savings from the deal to reduce its annual payment to about $39 million. The county's payments have been on the rise in recent years, due partially to controversial benefit enhancements approved in 2001 and 2002 that have prompted a wave of early retirements.
