CHICAGO — Macomb County, Mich. plans to bring $260 million of bonds to market in March to pay off its retiree health care liability.
The county, which borders Detroit on the north, is one of several Michigan issuers bonding for retirement debts, a move allowed under a 2012 law for certain local governments.
Macomb had hoped to sell its other post-employment benefits liabilities bonds by the end of this year, but the delay has been delayed pending various approvals, including from the state and the board of commissioners.
"We certainly expect the state to approve the bonds, but it's going to take a couple months," said the county's assistant finance director, Steve Smigiel.
The finance team includes Public Financial Management as financial advisor, JP Morgan as underwriter, and Axe & Ecklund PC as bond counsel.
The deal is expected to total $263 million, with proceeds paying off an OPEB liability estimated at just over $262 million.
Macomb is able to do the deal because its retiree health care plan will be closed to new hires starting in January 2016, Smigiel said.
"None of it would be possible if we hadn't closed the plan," he said. "We have a substantial liability but at least you can put your arms around it now that the plan's closed."
With a projected interest rate of 4% on the bonds, the county expects to pay $16.8 million a year for debt service, Smigiel said. The debt service will remain flat for the 25-year life of the debt, and the county estimates debt service will be less than projected annual premium payments within three years.
"We've got a pretty good bond rating and are on solid financial ground and this makes all the sense in the world to us," he said.
The county's pension plan is 97% funded.
Ottawa County sold $29 million of pension bonds last week. Triple-A rated Oakland County privately placed $350 million of refunded OPEB bonds in September 2013 and Saginaw County has also bonded out its debt. Bloomfield Hills and Kalamazoo are expected to bring retirement bonds to market within the next few weeks.
