CHICAGO Macomb County, Mich. said it will pay 3.88% interest on $263 million of taxable 20-year bonds it issued to cover its retiree health care obligation.
The county had planned to sell 25-year bonds at an expected interest rate of 4.3%, according to county Executive Mark Hackel.
But the finance team opted to trim the maturity down to 20 years as it headed into market with the bonds, which priced March 11. The move brought the rate down to 3.88%, saving the county nearly $47 million over the life of the debt, Hackel said in a
“This is the largest and arguably the most important financial transaction the county has ever entered into,” said Hackel. “People will look back on this transaction with favor 20 to 30 years from now because it provides long-term financial stability for the county. It helps ensure that the county will be able to keep the promises it has made to its employees and retirees.”
The county said its advisors believe the borrowing will save $126 million over the next 30 years compared to a pay-as-you-go funding. The county’s other post-employment liability totaled $262 million.
Moody’s Investors Service rated the bonds Aa1, in line with its rating on the rest of the county’s limited-tax general obligation bonds.
The finance team included JPMorgan as senior underwriter, Public Financial Management as financial advisor and Axe & Ecklund PC as bond counsel.
Macomb is one of several Michigan local governments that has decided to borrow to fund its OPEB or pension debts under a new law passed two years ago.
