CHICAGO — The board of Oakland County, Mich. next week is expected to vote on a measure that would allow the county to refund $438 million of certificates of participation issued in 2007 to cover the county's other post-employment benefit liability.
The triple-A rated county wants to issue general obligation bonds to refund the outstanding COPs. The state Legislature earlier this year passed a law allowing local governments to issue GO debt to cover their OPEB liabilities, and the county wants to tap the new authority.
Officials said the refinancing would save $100 million over the life of the debt, or $8.1 million a year on debt service, most of which would go to the general fund. Oakland currently pays $48.5 million a year in debt service on the COPs
"Given the new legislation, favorable bond interest rates, and current market value of the investments in the two retiree health care trusts, responsible fiscal management dictates that the county should refinance the outstanding balance of the COPs," deputy county executive Robert Daddow said in a statement.
The county finance committee approved the refunding last week. The full board is set to vote on the measure Nov. 28, according to a local report.
In 2007, Oakland County was the first local government in Michigan to fund retiree health care costs when it issued $570 million of taxable certificates of participation. The deal saw a true interest cost of 6.23%. Officials estimated they would pay 2.9% in the current market. Growth in the two investment funds would also allow the county to pay off $75 million of principal, officials said.
If approved, the county would issue the bonds in two series in August 2013 and December 2013.
"Oakland County consistently retains its AAA bond rating because of our prudent fiscal management," said executive L. Brooks Patterson in a statement. "My Budget Task Force says now is the time to take advantage of a new state law and low interest rates to save taxpayers tens of millions of dollars."