Gov. Jim Doyle last week signed into law legislation that paves the way for Milwaukee County’s proposed bond financing to eliminate its $406 million unfunded pension liability.
“I’m pleased that Gov. Doyle has, from the beginning, strongly supported [pension obligation bonds] to help reduce pension costs in Milwaukee County. His Task Force on Milwaukee County Finances in 2006 also recommended giving Milwaukee County the authority to issue POBs,” board chairman Lee Holloway said in a statement.
County officials have stressed that the financing is still in the planning stages and a final decision as to whether to move forward will depend on its affordability and market conditions. Underwriters interested in competing for a spot on the proposed deal have until April 3 to submit proposals.
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 proposals document. Final approval would be needed by the county executive and board.
The deal is aimed at curtailing the county’s rising payments owed to the pension fund. The 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 billion for a funded ratio of 79%, 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. 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.
