County administrator holding public briefing on $345M bond issue
Washtenaw County Administrator Verna McDaniel will host a public meeting at 4:30 p.m. Thursday to answer questions regarding a $345 million bond the county will consider issuing to cover long-term pension and health care costs for its retirees.
The meeting will be at the Learning Resource Center at 4135 Washtenaw Ave., in Pittsfield Township.
County administration has also developed a new website full of links with information on the bond issue.
Verna McDaniel
McDaniel planned the meeting to engage the public prior to the Washtenaw County Board of Commissioner’s back-to-back July 10 meetings, during which commissioners will take their first vote on initiating the bonding process.
The July 10 meeting also will include a public hearing on the potential $345 million bond issue at the beginning of the board’s regular meeting — which begins after 6:45 p.m.
A June 6 hearing specifically arranged on the bonding issue was sparsely attended by the public.
McDaniel first introduced the $345 million bond issue to commissioners during labor contract negotiations earlier this year.
Motivated by the impending implementation of Michigan’s new right-to-work law, the majority of the county’s unions negotiated long-term contracts. In exchange, the unions agreed to close retiree health care and pension plans that were costly for the county.
The closing of the plans meant the county could pursue issuing a massive bond to pay off the debt the county already was carrying for its retiree benefits, and to pay off the future estimated debt the county would incur.
Based on a 2011 actuary report of its employees, the county’s bond counsel estimated that figure would be about $340 million.
The county Board of Commissioners is now considering issuing a limited tax bond to pay off those unfunded liabilities. The bond does not require a vote of the people, and would not raise taxes.
The bond investment would pay-off the long-term debt — and the county would be responsible for paying off the bond throughout the next 25 years.
The payment schedule for the bond is something the county is able to manipulate — versus the increasingly large payments the county owes to its pension and health care funds year after year.
However, the success of the bond issue depends on the investment returns being at least the same as or higher than what the county pays for the bonds themselves.
Several commissioners have spoken in favor of issuing the bonds, as the payment schedule would give the county a way to manage its cash-flow issues as it faces nearly $7 million in cuts this budget cycle.
Amy Biolchini covers Washtenaw County, health and environmental issues for AnnArbor.com. Reach her at (734) 623-2552, amybiolchini@annarbor.com or on Twitter.
Comments
unionproud
Fri, Jun 28, 2013 : 2:34 p.m.
Stop busting on the UNIONS, the people who get the big bucks in Washtenaw County are NON - UNION employees, 4 of which received between $10,000 - $20,000 raise last year for doing a 1/4 of a job.while the unions once again, received no pay increase, non in the last several years. I haved worked over 26 years for the county and I have never received a raise for taking extra duties, sometimes a full position after it was cut. After 26 years the highest I will make retired will be between $1500 - $1700 before taxes are taken out. Non- UNION (cheapest $100,000) employee will average after 26 years will be getting approximately $4000, for the most high about $6000. I choosed to work for the public, way should I not get a pension like my friends in the private sector. If I had know 26 years how people act to public employees, I would have worked in the private sector, I would have gotten paid a lot more with less grieve. Just remember, in the future, when the county hire new, low schooled employees because that will be all that will work for them, and it takes a 3 times longer for anything related to county, roads, schools, pre-school, permits, public and mental health, and your favorite place to eat does not get inspected, your the person responsible. You can get a job working for the public anytime you want, if you qualify for the position, of course, prehaps you are not quailifed, so you don't have a clue what is involved working for the county. I have more to say but I would most likely be locked out if I said it.
SalineTeacher
Fri, Jun 28, 2013 : 6:53 p.m.
In Washtnaw County, roads are not (yet?) part of the county; and nowhere in Michigan are counties managing schools.
DJBudSonic
Fri, Jun 28, 2013 : 2:27 a.m.
A bad idea, that should not be done without voter approval; I have no desire to put my 'full faith and credit' in the turnings of the markets.
Chris Baty
Thu, Jun 27, 2013 : 11:04 p.m.
In the old days bonds were only sold to build infrastructure, and now pensions. What's next: salaries? Why should government pensioner live large when I worked hard but didn't have the luxury of a government job and barely get by? This just smells like AFSME cronyism.
trespass
Thu, Jun 27, 2013 : 10:22 p.m.
The consultants who are pushing this bond issue are using figures of 4% interest on the bonds and 6% yield on the stock market investments. These are both unreasonably optomistic predictions. If you look at the current investment funds managed by the County, the net yield on their investments since 2000 are 3.2% on WCERS (retirement) and 2.4% on VEBA (healthcare benefits). That is much less than the 6% being predicted. The bond interest rates are now 4% but they are rising in the last month, particularly after the Fed said that they were going to reduce the availability of "free money" in the future. The Board motion would approve the sale of bonds at up to 5.5% interest rate.
trespass
Thu, Jun 27, 2013 : 10:13 p.m.
I am in the process of building a website that will give important information about this proposal. I will be adding information over the next several days. www.wastenawwatchdogs.com
Ralph Pasola
Thu, Jun 27, 2013 : 10:11 p.m.
Not only is the bond market collapsing, with municipal and junk bonds being hit real hard, the M1 money supply (coin and paper) is very low along with the velocity of money. Several states have recently put off municipal bond sales to avoid the higher interest. Washtenaw County should do the same. Take a look at this. http://theautomaticearth.com/Finance/deflation-by-any-other-name-would-smell-as-foul.html
Goober
Fri, Jun 28, 2013 : 8:53 a.m.
Collapsing? I don't think so! Interest rates are in a state of flux and look like they are going up. So, it's time to sell old holdings for those that might have higher rates.
Vivienne Armentrout
Thu, Jun 27, 2013 : 6:52 p.m.
Here is another article on municipal bonds, this time on the ones like the proposal that are specifically designed to provide a short-time fix on pensions with a long-time impact. http://articles.latimes.com/2012/mar/26/business/la-fi-pension-bonds-20120327 Here is a quote from that article: "Although local governments risk big losses from pension bonds, they carry profits with almost no risks for the law firms and banks that help arrange them. They aggressively market deals in which they get their fees up front, no matter what happens in the long term, according to several public officials."
Angry Moderate
Thu, Jun 27, 2013 : 6:51 p.m.
Let's use debt financing to provide healthcare for old people so that the repayment obligation doesn't kick in until after they're dead and removed from the tax base. What could possibly go wrong?
DonBee
Thu, Jun 27, 2013 : 6:30 p.m.
Very poor timing - the stock market is coming down and bond costs are going up. A year ago, I might have been interested, now I am not. I suspect this will cost way more than anyone wants to bet and it will lead to more problems. The fact that the person pushing it is financially interested, and the board does not seem to want to back up and take an honest look at the risk, scares me even more. The real issue is re-opening the pension system a few years back, if they had not, none of this would have been required. I am worried that with the bond in place, in a couple of years, they will decide to do it again. In the mean time the county seems bent in hiring as many people as possible before the 1 January end of the pension system enrollment. And of course most of the costs are now locked in a 10 year contract that we the citizens of the county will be responsible for long after this set of board members have moved on to other things.
nickcarraweigh
Thu, Jun 27, 2013 : 6:20 p.m.
Many people dislike unions generally, and they dislike public employees as a group. They don't really know why, it's just assumed. It's a trend. You could look it up.
Mr. Ed
Thu, Jun 27, 2013 : 6:19 p.m.
Sound like a solid plan. A public hearing is being held so the above concerned voters can voice any concerns at that time. Washtenaw County is a well run County with great leadership.
Basic Bob
Fri, Jun 28, 2013 : 4:07 a.m.
Solid plan? Great leadership? Care to elaborate?
Goober
Thu, Jun 27, 2013 : 5:59 p.m.
And if the investments fall short, who gets stiffed?
Veracity
Fri, Jun 28, 2013 : 4:27 a.m.
You and I and every other tax payer in the county. And what is with the "if"?
Barzoom
Thu, Jun 27, 2013 : 5:52 p.m.
Something this large should be put to a vote by the tax-payers, not decided in some back room negotiations by a few people.
Vivienne Armentrout
Thu, Jun 27, 2013 : 4:57 p.m.
Today's New York Times has a front-page article about the travails of the municipal bond market. http://dealbook.nytimes.com/2013/06/26/bill-for-public-projects-is-rising-and-pain-will-be-felt-for-years/?ref=business&_r=1& Briefly, interest rates paid by municipalities are going up, which means the spread between interest paid and any possible investment gain from the proposed investment trust will be harder to achieve. In addition, because rates are going up, bond prices are going down (the classic formula). This means that there is less interest in the market to buy these bonds, since the trend is unfavorable. So the less of a market for the bonds, the more the interest rates will continue to go up. According to the article, this phenomenon is nationwide but they specifically mention that Detroit's travails may be influencing the trend (Detroit may ask bond-holders to "take a haircut".) Since we are in Detroit's general metropolitan influence zone, it seems plausible that we may be affected even more than counties in other parts of the country. The administrator's brief has only two alternatives: one very speculative scheme to sell bonds and invest the proceeds, and draconian cuts to county programs. We need to hear more alternatives.
SalineTeacher
Fri, Jun 28, 2013 : 6:56 p.m.
@Lake Trout: Ms. Armentrout served on the County Board and has also ran for City Council; I think she's shown she's able to provide alternatives.
Lake Trout
Fri, Jun 28, 2013 : 4:02 p.m.
More alternatives? Really? So what would you suggest Ms Armentrout? You are quick to comment, but not to be a part of the solution as usual. This problem has been over 30 years in the making and previous administrations did nothing but keep sweeping it under the rug and now it has come home to roost. If extreme measures like the bond are not taken, services to the Counties residents are going to come to an abrupt and unwelcomed halt as staff and funding are eliminated to balance the budget.
Alan Goldsmith
Thu, Jun 27, 2013 : 4:34 p.m.
"However, the success of the bond issue depends on the investment returns being at least the same as or higher than what the county pays for the bonds themselves." So basically we're playing Russian Roullette with hundreds of millions of dollars, trying to outguess the financial markets? You trust Conan Smith and other Commissioners to be around in ten years when this all begins to fall apart?
Basic Bob
Fri, Jun 28, 2013 : 4:05 a.m.
Conan figures to be in the Governor's mansion by then.