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Posted on Thu, Jul 18, 2013 : 5:58 a.m.

A better alternative to Washtenaw County's $345 Million bond issue plan

By Stephen Lange Ranzini

Washtenaw County's Commissioners are seriously considering a plan to borrow up to $345 million to fund the shortfall in the county's retirement plans.

The plan is misguided and likely to cause the county and its taxpayers further material losses. The merit of borrowing now is that long-term interest rates are low, however that money will be invested in stocks and bonds, which are at high levels.

For stocks, the 10 Year Cyclically Adjusted PE Ratio is 50% above the Mean & Median of the past 122 years. The Tobin Q ratio is more than 45% above fair value. So any benefit from borrowing at current record low interest rates is likely to be given up though future substandard investment performance. Bonds are at yields even lower than in the depths of the Great Depression.

The short-term benefit generated by the financial engineering the bond deal promises will turn into future losses. Some of the commissioners want to use these paper profits to close a multi-million dollar annual deficit instead of cutting spending in line with revenues.

I suggest that there is a better alternative. Let me share with you a story from my own past.

Back in 1988 when I was 23 years old, Bank One lent me $3.2 million to buy a tiny bank today known as University Bank in a leveraged buyout because I figured out something the sellers didn't know, that the bank's pension fund was overfunded.

After buying the bank, I terminated and defeased its pension plan by buying an annuity from a AAA rated life insurance firm. The extra funds, some $800,000, I used to fund an Employee Stock Ownership Plan for the bank's employees, which purchased common stock in the bank holding company and paid down Bank One's loan. This greatly reduced the loan, raised the equity in my firm, and gave Bank One the confidence to back my loan.

Similarly, the county could take advantage of over optimism among professional investors and defease it's retirement plans by buying an annuity from a top rated insurance firm.

While this would also require a borrowing to close the large gap between the plans' assets and liabilities, by terminating the plans and buying an insurance annuity, the county would eliminate its future investment risk and lock in today's low interest rates. The cost of this plan is likely to be lower than the plan on the table because insurance companies are hungry for these kinds of long-term annuities.

Because the plans are defeased, the risk of investment underperformance will never haunt the county or it's taxpayers.

The one downside of this plan is that the county loses permanent control of the over half billion in pension fund dollars.

However, if there is no intent to use any of these funds for local economic development, that is no great loss and in fact prevents possible future mischief. The sum that is targeted for economic development can be set aside and an annuity for the rest of the plan liabilities can be purchased. In fact, I recommend this same course of action to all the other units of government in the county to reduce their future risk from the likely under performance of their retirement plans over the next decade.

(Stephen Lange Ranzini is president of University Bank and resident of downtown AnnArbor. He's also an occasional columnist on



Fri, Jul 19, 2013 : 2:51 a.m.

With the filing of bankruptcy by Detroit today, the interest rates for bonds for public entities will rise significantly. The window for cheap money has closed. I suspect the bond rates will be 1 to 2 percentage points higher now that the bankruptcy has happened, even for Washtenaw County. Welcome to the impact of the failure Detroit on our community.

Stephen Lange Ranzini

Fri, Jul 19, 2013 : 11:23 a.m.

@DonBee: Hopefully not, since Washtenaw County's bond rating is AA+. I would expect less impact on higher rates municipal bonds. We'll see What the actual reaction is today in the municipal bond market. A good index fund to watch is the municipal bond fund listed under symbol MUB. If it drops a lot today or in coming weeks, that will be trouble for the borrowing plan overall. I read an excellent legal analysis of the credit risks in Chapter 9 municipal bankruptcies for General Obligation bonds and underfunded pension funds versus municipal bonds secured by dedicated cash flow streams written by the Jaffe law firm in Crain's yesterday. Any buyer of municipal bonds would be wise to ponder the implications of what the lawyers wrote and take that into consideration in their investment strategy. You are correct that unsecured municipal bonds *ought* to price a lot higher due to the much higher risks, but markets, including bond markets, are rarely at fair value and spend most of their time either above or below fair value.


Fri, Jul 19, 2013 : 1:55 a.m.

Stephen, Your plan (purchasing an annuity) seems to be the lesser of two evils. The costs for servicing a $300 million bond issue with a 5% coupon (interest rate to bondholders) and a 4% per year payment to a sinking fund (to ultimately retire the bonds over 25 years by purchasing them from the bondholders at no more than par value) will be a fixed $27 million per year for 25 years. If the general fund is unable to spare $27 million per year than county tax payers must make up the difference either through a special assessment, a millage or an income tax. Even with the above contingency, county tax payers should pay a lot less over 25 years then if half or more of the $300 million bond issue were invested in the stock market. The risk of losing any principle value and missing the target return on investments is eliminated by the annuity with all risks being borne by the sponsoring insurance company or companies (which can afford to absorb deficits).

Stephen Lange Ranzini

Fri, Jul 19, 2013 : 11:13 a.m.

@Veracity: I agree with your assessment. My alternative plan is an effort to make the best of a bad situation. I am trying to make lemonade out of lemons. It is a shame that our county leaders screwed up so badly and caused us this huge loss!

Stephen Lange Ranzini

Fri, Jul 19, 2013 : 12:38 a.m.

Thanks everyone for your input and the vigorous discussion!

Kai Petainen

Thu, Jul 18, 2013 : 9:52 p.m.

" however that money will be invested in stocks and bonds, which are at high levels" I would agree with the idea that stocks are at high levels... the market makes me -- nervous. I'd expect a fall at some point this year. When earnings start slowing down, then we'll have a correction. Shiller's PE is a goofy way to look at the market, as it uses the average PE of stocks in the S&P 500 and that average gets skewed by the outliers. For example, NFLX has a PE of 650, X is at 125, TYC is at 288 and those will skew the results. Not to mention, 40 or so stocks don't have a PE so that would skew the results as well. It would be better to use a median PE, but even then... that number is rather high right now, so the market seems to be overvalued from that perspective.

Stephen Lange Ranzini

Fri, Jul 19, 2013 : 12:33 a.m.

Excellent point, @Kai! The median would be a better metric to use. Thanks for the information.

Nicholas Urfe

Thu, Jul 18, 2013 : 6:48 p.m.

Most executives and many lawmakers still enjoy their pensions. 401K's are for little people.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 7:34 p.m.

@Nicholas Urfe: Most executives no longer have pensions. Few companies have them, because they have become so expensive and so risky. For example, in my case, in addition to the Employee Stock Ownership Plan, I have a 401k and no pension. Also I have no lifetime healthcare retirement benefits. The Michigan state legislature no longer gets a pension and have something like a 403b, which is an equivalent to a 401k but in the non-profit world. The former legislature pension fund was closed and in run off mode.


Thu, Jul 18, 2013 : 6:07 p.m.

The entire county, township, city and state needs to do away with pensions and have 401ks etc employee match benefits. They need to join the real world the rest of the taxpayers live in. I am extremely tired of funding over generous pensions for all of them, especially management and elected officials and their cronies. I for one am not interested in funding big pensions. This hair brained scheme is doomed to fail with taxpayers picking up the tab so they can continue the status quo until we become Detroit.


Fri, Jul 19, 2013 : 11:56 a.m.

"The pensions are designed under the assumption that there will be new contributors. If you stop the flow of new contributors, the pensions have insufficient capital." I believe what you have described is known as a Ponzi Scheme.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 7:36 p.m.

@Nicholas Urfe wrote: "The pensions are designed under the assumption that there will be new contributors. If you stop the flow of new contributors, the pensions have insufficient capital." That is exactly why it is a best practice that a pension fund that is closed should be a candidate for defeasance and annuitization.

Nicholas Urfe

Thu, Jul 18, 2013 : 6:55 p.m.

The pensions often are just fine until they get "robbed", or until they get intentionally put in a position to fail. That often happens right after they stop having people pay into them, by forcing them to 401K's. The pensions are designed under the assumption that there will be new contributors. If you stop the flow of new contributors, the pensions have insufficient capital. It usually happens after some people shout about how attractive 401K's are. Sometimes the people doing the shouting make a lot of money from the 401K's, or from consulting fees. They often omit the important part about the obligations to the pension. Well funded pensions are targets of companies like Bain Capital. They get rich by taking those hard earned assets and then replacing them with debt. If they bankrupt the company in the end, it does not matter to them, doesn't matter. Got rich. And if they convince some people that pensions are evil, and they should be pillaged in favor of 401K's, so much the better.

Nicholas Urfe

Thu, Jul 18, 2013 : 6:01 p.m.

If only there was a pension we could ranzack to cover this liability.


Thu, Jul 18, 2013 : 5:23 p.m.

I would love to see Mr Ranzini and DonBee run for AAPS School Board.


Thu, Jul 18, 2013 : 5:01 p.m.

Mr. Ranzini - thank you for a creative and risk-free alternative for Washtenaw County. Also thanks for your thoughtful explanation of a difficult to understand subject (for me).

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 4:22 p.m.

@trespass @Veracity: Excellent questions! Commissioner Yusef Rabhi committed to me yesterday that the county would do a formal legal analysis of the question whether or not there were any impediments to the county's retirement plans buying annuities. They have not done that analysis yet, but are now committed to doing it. If current state law does not allow this for any reason, I have the interest of at least one state legislator to work to fix that. It should be a relatively easy bi-partisan issue, because it is good public policy. Imagine the benefit at the state level, for example, where they have over $40 billion in pension fund deficits, but could use this technique to eliminate those deficits and lower the annual cost to the state of honoring those existing retirement plans. This could be a big piece of the puzzle to fixing the underfunding of public schools. Currently, because the closed retirement plans are severely underfunded, 30 cents in benefits must be paid to the statewide school retirement plans for school employees for every dollar of payroll. If this expense could be eliminated, it could provide not just more funding for classroom education, but perhaps some of the $1.2 billion a year in additional road funding required to adequately fund the maintenance of the existing road network in the state that the state MDOT is responsible for maintaining, but cannot with current funding levels! The county would use the bond proceeds & existing pension fund assets to buy one or more annuities. The annuities would be selected & purchased after a highly transparent RFP (request for proposal process where the lowest qualified bidder wins the bid. The strongest insurance firm that requires the least amount of money to take on the county's retirement fund liabilities would win the bidding process. We must test the market to find the cost. I have written the commissions to offer to help in any way I can.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 8:28 p.m.

@Veracity: The cost of the annuity is paid for from the current funds on hand and the proceeds of the new bond. The total cost of the bond (principal and interest) is less than the current cost being paid out of the annual budget from current taxes for the required retirement funds annual contribution. By buying the annuity and eliminating the risk of being dragged into a new deficit, that would never change. There would be a permanent savings from current annual ongoing costs under my alternative plan. The fact that $345 million or $300 million or whatever the final number is, was lost (under my alternative plan I believe the total cost will be less than the plan on the table), is water under the bridge at this point. My plan only addresses what we should do going forward. That the county and the city have run up such huge deficits in their retirement plans over the past 10 years is truly a disaster for the county and city. But let's not make the same mistake and hope by kicking the can down the road it will get better. As I pointed out in the column, it is likely over the next 10 years to get much worse under the current course, or the plan on the table. Only with my alternative plan do I see an end to the deficits and hope they don't get worse again.


Thu, Jul 18, 2013 : 7:21 p.m.

"The County would use the bond proceeds & existing pension fund assets to buy one or more annuities." This plan does NOT eliminate the bond issue which will still require interest rate payments and a sinking fund which will double the final cost of a $300 million to $600 million. I thought that buying an annuity was INSTEAD of issuing bonds. I did pose the question to Mr. Ranzini regarding the cost of buying an annuity and the source of the purchasing funds. I imagine that county tax payers must pay additional taxes in one form or another in order to meet the purchasing price of the annuity. I am not sure if Mr. Ranzini answered the last question and, if he did, I certainly do not understand the arrangement and require further explanation.


Thu, Jul 18, 2013 : 2:55 p.m.

"However, if there is no intent to use any of these funds for local economic development, that is no great loss and in fact prevents possible future mischief". Does this mean the WCBC have been using pension fund (if the fund was ever overfunded) on something else with in the county?


Tue, Jul 30, 2013 : 8:45 p.m.

Steven - I disagree with you. The County has skimmed "good" years' surpluses by failing to regularly pay into the funds. As your analyses illustrate, good years are ineventably followed by bad years. You have to constantly pay in.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 4:03 p.m.

@Judy: WCBC have not been using any of the pension fund money to benefit local economic development. As witnessed in Detroit and Wayne County, this is trickier to do than it sounds on the surface. We know from them the wrong way to do it. The right way is for the pension fund to co-invest on the same terms and conditions (the technical term is "parri passu") only when at least half of the money comes in on the same terms and conditions from savvy private sector investors. For example, if McKinley wanted to do a real estate deal locally, or the Simon firm that owns Briarwood Mall wanted to invest a substantial sum to intensify development at the mall, and the pension fund wanted to co-invest on exactly the same terms and conditions as these large and savvy real estate investors wanted to invest, I'd have no problem with that. The problem comes where the gains are privatized and the losses socialized, because the pension funds is a lender or equity investor holding the sharp end of the stick on the deal as has occurred in Wayne County and Detroit with their pension funds. Pension funds should make local economic investments on the same terms and conditions and provide less than half the funds, or they shouldn't make such investments.


Thu, Jul 18, 2013 : 2:12 p.m.

Read the article carefully. What Mr. Ranzini did was to lock in the future of the pension, and in doing that took the risk out for his company and the pension holders. No pension holder was harmed, no pension value was decreased. With the extra money that was in the fund at the time (which would have disappeared in the recent downturn and probably ended up hurting the pension holders) he purchased shares for the employees, putting that money to work for the current employees. I don't see any "pocketing of money" by Mr. Ranzini. What I see is prudent decisions to lock in the future benefits of the current and retired employees. I think his ideas would work for the County as well.


Thu, Jul 18, 2013 : 1:50 p.m.

I find it absolutely horrifying that the WCBC can make such a huge financial decision that will burden the tax payers far, far into the future. I would hope there is a legal way to overturn this insanity once a new WCBC can be elected. The real problem is that the WCBC is elected by union funds and so their union masters demand crazy wages & pension benefits. It's what happens when you allow unions in government. The WCBC is NOT responssble to the tax payers but only to its "union masters".

Larry Baird

Thu, Jul 18, 2013 : 1:47 p.m.

I agree that the county must be looking for ways to mitigate future investment risk. Given the size of the county's structural budget deficit, the current pension plans should have been frozen (cap pension benefits at existing levels and switch future year contributions to a defined contribution plan) or possibly defeased as Mr. Ranzini suggests. Instead, the current county pension plan is still accruing years of service for current covered workers (those hired prior to 2014) going forward into the foreseeable future..10 years.....20 years.....30 years..... Therefore, history could very well repeat itself and the pension benefits being promised may continue to grow faster than the county's ability to fund and manage the plan. Essentially, all the same dynamics that created the shortfall still exist today. All efforts so far have focused on the short-term and have ignored the longer term root of the problem: If the required/assumed investment rates of return are not realized going forward (they haven't in the past), the county's annual employer contribution level of $26 million (this year) will continue to grow in size to make up the difference for underperforming investment results (less than 7.5% and 7.25%). The county would then have to continue borrowing and/or cutting to make these required payments.

Dr. Rockso

Thu, Jul 18, 2013 : 1:41 p.m.

So the writer stole $800,000 from the pension fund and put it in his own pocket.

Stephen Lange Ranzini

Fri, Jul 19, 2013 : 1:48 a.m.

@michael Limmer: If the bank had failed, the pensioners of the bank would have been screwed had I not terminated the pension plan and bought the annuity. They would have ended up with far lower pension checks from the PBGC (the Pension Benefit Guarantee Corporation - just ask some former Delphi workers how that worked out for them)! If the bank had failed after I terminated the pension plan and bought them the annuity, the AAA rated insurance company would have continued to send them monthly checks. As it is they do get their monthly checks from the insurance company regardless of whether or not our bank prospers or not.

michael Limmer

Fri, Jul 19, 2013 : 12:51 a.m.

And Stephen, if the bank hadn't been successful? You asked a lot of eggs be put into one basket.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 3:55 p.m.

@Dr. Rockso: No, the money was put in the employees pockets! They received not only their full pension and full retirement healthcare benefits guaranteed by a AAA life insurance company much stronger financially than the tiny bank whose pension they had, but also a major ownership position in that bank via valuable stock listed on NASDAQ. That bank has gone on to great success over the past 25 years. Please also see my comments to @belboz and @kmgeb2000 above for more info on this topic.


Thu, Jul 18, 2013 : 1:34 p.m.

So Stephen raided the "overfunded pension" and gave employees the opportunity of have stock options. How generous. Take what was theirs to begin with and give potentially give it back to them. Assumes it will be worth something 20 or 30 years from now. Banks have long left the position of being the granite pillar of the community. When have you seen a bank keep the same sign out front for more than a few years. Would the pension have been "overfunded" after 2008 or only at the time of the leveraged buyout? What is at one moment overfunded can at another be underfunded. How and why did pensions become CEO and bank president fodder? Stock options are wonderful if the company is solvent and growing, but less so after say a bankruptcy or leveraged buyout from one not so caring. I do appreciate the presentation of an alternative plan to a problem (pension funding) when only one path has been presented. Having family member who were casuaties of a leveraged buyout and pension raiding from a not so caring entity, your example does not warm my heart.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 8:50 p.m.

@kmgeb2000: Actually, if an insurance company fails, there is a strong back stop. The capital shortfall required to resolve the insurance company is calculated and then all the insurance firms operating in that state are sent a bill for their share of the cost based on their market share of that insurance product. So, if a life insurance company fails in Michigan, all life insurance companies that write policies in Michigan pay into the pot based on their market share. If the loss is $1 billion and you have 1% market share, your life insurance company writes a check on the spot for $10 million to the insurance regulator for Michigan. In essence the entire insurance industry stands behind the the policies written and the role of the insurance commissioner is critical to ensuring that no insurance company is taking on too much risk or has too great a market share, so that the system can work as designed. Now having said that, there could be a delay in the process so you really do want to do business with strong insurance companies. In our own insurance agency we do business as an independent agent with 53 insurance companies in Michigan, but we limit it to those rated B+ or better, which is pretty strong. For annuity issuing insurance firms, I would recommend much higher ratings than that since the policies go for decades and not a year or two like most insurance does.


Thu, Jul 18, 2013 : 8:20 p.m.

@Stephen: "AAA rated insurance company would have continued to send them monthly checks" Like AIG? Before their "criminal" dealings one could have held them as a example of being the highest standard. We simple seem to be playing a shell game with risks. Not not long ago a pension would have been veiwed as having less risk than your annunity from a AAA rated insurance company. Annuities have there own set of risks. AAA -ratings mean what anymore? It does means the Insurance company payed the ratings company for a rating as they all do. The past five years have shown these ratings have little to do with finacial security. As a bank I assume you disagree, but history has proven otherwise. As I have read, an annuity typically has no backing or guarantee by the FDIC, SIPC, or any other federal agency. Nor do they survivor benefits unless explicitly outlined, ie, if I die the month after benefits start my wife could get nothing. No wine & roses with an annuity either.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 5:47 p.m.

@kmgeb2000: If the bank had failed, the pensioners of the bank would have been screwed had I not terminated the pension plan and bought the annuity. They would have ended up with far lower pension checks from the PBGC (the Pension Benefit Guarantee Corporation - just ask some former Delphi workers how that worked out for them)! If the bank had failed after I terminated the pension plan and bought them the annuity, the AAA rated insurance company would have continued to send them monthly checks. As it is they do get their monthly checks from the insurance company regardless of whether or not our bank prospers or not.


Thu, Jul 18, 2013 : 5:36 p.m.

@Stephen: Ageed yours is the positive example and apparently based on good intent. History remains not in our favor for pension raiding turning out well for those recieving one for decades of service. Had the bank been one of the casualties the stories would not have been so rosy.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 3:49 p.m.

@kmgeb2000: The employees received *stock* not stock options. There is a big difference. The shares they received were freely tradeable on the NASDAQ Stock Market. Some employees sold theirs and cashed in over the years, others have kept them and benefited from the success of the bank over the past 25 years. The bank has been hugely successful over the years and is now the 9th largest bank in the state based on the number of employees, the 4th best rated in the state by the independent IDC rating agency, and has grown on average 40% per year for the past five years in revenue. When we started our 21 employees managed $34 million and today our 332 employees manage $13.3 billion. Please also see my comment on @belboz's post above.

Dog Guy

Thu, Jul 18, 2013 : 1:32 p.m.

Unfortunately, this plan would not give immense fees and commissions to the right people. More unfortunately, we don't have county commissioners who can understand it.


Thu, Jul 18, 2013 : 1:05 p.m.

As a financial layperson, I'd like to hear an expert explain why pay-as-you-go isn't the best strategy for Washtenaw. Why can't we match taxes to pension payments, 1:1, for the time it takes? I like this because it keeps the politicians from trying to be too clever, and keeps voters from fooling themselves into thinking they get something for nothing. Could Stephen or someone else explain why this would be risky or cost more?

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 4:54 p.m.

@Greg: While pay-as-you-go sounds appealing, the problem is the liabilities incurred surface 20-40 years down the road. For example, a retirement plan in the beginning might have no expenses whatsoever until the employee group starts to retire. Similarly, even it the pension plan's cash revenue/contribution and cash liabilities/payments are equal this year, there is no guarantee that you haven't run up a huge liability that isn't funded for future years. That's why you need actuaries and actuarial reports. It's very complex stuff! In fact, I'd say that pension fund accounting and actuarial analysis are some of the most complex things in the entire universe of accounting topics. I conversed with a local reporter for over 60 minutes about this topic assisting to bring him up to speed and we could have gone on for another hour.


Thu, Jul 18, 2013 : 12:52 p.m.

I really don't want to hear the ideas of someone who thinks they "outsmart" people by taking advantage of an overfunded pension. I'm sure the sellers were aware of it and planned on the surplus. Thinking it was a great safety net for the employees and proud of it. In fact, it would have been great if every pension years ago were over funded so they could deal with setbacks: we have seen some, haven't we? Putting in more when possible is a way of saving for the future when you can't. I see the author of this article as part of the problem with today's economy. Underfunded pensions, or none, because they were used for exactly the purposes stated above. Surpluses were unfortunately raided by unethical, self serving, and egotistical narcissists.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 3:42 p.m.

@belboz: Our bank employees not only received ALL the benefits they were promised and legally entitled to under the pension plan that was terminated, but they received a major ownership stake in the bank holding company which owns University Bank. Those valuable shares have substantial value due to the success of the bank over the past 25 years. The sellers did not know the bank's pension plan was underfunded and they thought that I was stupid to want to buy the bank from them because they knew that Newberry's major employer was going to shut down within a few years. I overcame that devastating blow to the town and the bank and the bank thrived anyway. In addition to the research I did on the overfunded pension plan, I did a lot more research and knew a lot more about some other major positive developments in the regional economy that more than offset the loss of the one major employer that there were not aware of. A surplus in a pension plan legally belongs to the company itself, not the employees, or the county in this case. I went above and beyond the law and the spirit of the law and what was required by distributing the surplus FREE to the employees. Many of them sold their shares and got cash. Not a single one was the slightest bit upset, and in fact, quite pleased with what we did for them. An annuity is a much safer and appropriate investment for many instead of riding the ups and downs of the stock market, because it is predictable and completely safe.


Thu, Jul 18, 2013 : 1:41 p.m.

Even to use the term "overfunded" gave me pause. Stephen clearly know more than most that the pension was overfunded at a moment in time only. It is dynamic as it is directly linked to the market and market forces. After the steep stock market dip it would have been likely underfunded at some other moment.


Thu, Jul 18, 2013 : 12:25 p.m.

Mr. Ranzini's suggested solution to the County's unfunded pension situation seems rational. However, I have two questions for Mr Ranzini: Do present laws allow the county commissioners to purchase an annuity that will defease its pension debt? and What will the annuity cost and how will the county finance the purchase of the annuity?

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 4:46 p.m.

@Veracity: Please see my extended reply to you and @trespass I just posted further down the comments.

Tex Treeder

Thu, Jul 18, 2013 : 12:03 p.m.

I always read (and usually agree with) Mr. Ranzini's articles and opinion pieces. He's a smart guy who thinks about local problems and solutions, and his analysis is usually on the mark. I encourage the Washtenaw County Commissioners to listen to Mr. Ranzini on this topic. The long-term economic health of the county depends on making the right decision here.


Thu, Jul 18, 2013 : 10:44 a.m.

How much would the deficit be that would need to be cut if we don't borrow the money? It is very hard to get reliable answers from the County administrator. On her website she says $5 million for the 3 year budget (2014-2017) but when I have asked a commissioner, he says that is for just one year. The County's financial officer doesn't seem to know where any of the administrator's numbers came from. The County should publish the report of the actuary and give us the annual contribution to the retirement accounts that he predicts would be needed each year. You can read more about the issue and volunteer to help with a petition drive to put this issue on the ballot at

Shawn Letwin

Thu, Jul 18, 2013 : 10:43 a.m.

Thank you for sharing an alternative solution that is much more fiscally responsible to the taxpayers and the community in general. Although I believe that the county needs to match its spending with its revenue and live within its (our) means, a more fiscally prudent alternative investment is worth considering. It is a shame that the hired professionals that compromise the management of our county have pursued a path of financial uncertainty that could ultimately require investing (gambling) $345M with a necessary return of $600M ..."to close a multi-million dollar annual deficit instead of cutting spending in line with revenues". As this editorial succinctly points out, the odds of almost doubling our money in the stock market (using the taxpayer's money) as required from the projections are unlikely. However, if the current and future retirees of this county are willing to accept not only the gains of any plan, but also the potential loss in the investment with no additional burden on the taxpayer, go for it. Otherwise, the county commissioners need to start serving those that they represent (the TAXPAYER) in the community. No more kicking the can, no more letting the tail wag the dog...let's put ACCOUNTABILITY back into the concept of accounting! If you want to learn more about this issue and be a part of the community that wants this issue put to a vote by the taxpayers, stop by the Washtenaw Watchdogs booth during the art fair near Liberty and Division (booth 69 and 70-located just east of Seva's on the opposite side).


Thu, Jul 18, 2013 : 10:38 a.m.

Mr. Ranzini made this comment at the last Board of Commissioner's meeting but no one from the Board replied. According to one of the commissioners, it is not legal for the county to buy such an annuity. It is hard for reporters to check out such a cliam when the commissioners do not answer Mr. Ranzini's comments at the BOC's meeting.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 4:24 p.m.

@trespass: Please see my extended reply to you and @Veracity I just posted further down the comments.

Stephen Lange Ranzini

Thu, Jul 18, 2013 : 10:27 a.m.

Two links were inadvertently left out of the column: For more info on the 10 Year Cyclically Adjusted PE Ratio, which is 50% above the Mean & Median of the past 122 years see: For more info on the Tobin Q ratio, which is more than 45% above fair value see: Also, for more info about what is pension plan defeasance, I offer the following definition from   The extinguishment of debt. While defeasance technically refers to extinguishment by any method (for example, by payment to the creditor), in practice it is generally used to mean discharging debt by presenting a portfolio of securities (usually, Treasury obligations) to a trustee who will use the cash flow to service the old debt. This procedure permits the firm to wipe the debt off its financial statements and to show extra income equal to the difference between the old debt and the smaller, new debt. Like bonds, pension funds can be defeased in a similar method.