Public voices opposition to county board on potential bond issue
AnnArbor.com file photo
For the past two months the board has been considering a bond issue of approximately $345 million to cover the county’s unfunded liabilities in both its pension and retiree health care trust funds at the request of county administration as a debt management solution.
Updated figures from the county now indicate the bond issue may be closer to $295 million.
Direct feedback from a strong showing of the public Wednesday night was in staunch opposition to the bond issue, as many people said they feared a such a bond issue would land the county in severe debt in the future when the county board members were long gone from their current positions.
About 40 people were at the meeting Wednesday. People stepped forward to comment on the potential bond issue at various public comment opportunities in both the Ways and Means and the following regular board meting, as well as the designated hearing.
An organized opposition group created about two weeks ago by Ann Arbor resident Doug Smith, Washtenaw Watchdogs, was present in full force at the meeting to debut T-shirts with the group’s new logo and to voice their opinions.
Smith, who spoke three times Wednesday night, warned the commissioners that he has an organized list of volunteers ready to collect signatures and a petition drafted to put the bond issue on a ballot for voter approval. The bond doesn’t automatically go on a ballot because the county is considering a limited tax bond that would not raise the operating millage rate.
“How many of you would go out and mortgage your house and put the money into the stock market?” said Ray Williams of Ypsilanti to the board.
Amy Biolchini | AnnArbor.com
“Any benefit from borrowing at current low interest rates will likely be lost in future poor performance,” said Stephen Ranzini, president and CEO of University Bank in Ann Arbor.
Les Heddle, an Edward Jones financial adviser based in Ypsilanti, also spoke several times Wednesday night. In addition to criticizing the data available on the county’s website recently created for the bond issue, Heddle asked why the county still did not have new actuary reports to make more accurate predictions of its future liabilities.
“You’re using 18-month-old data for the current standing of the unfunded amount in the pension,” Heddle said. “It’s hard to believe in this world that there isn’t a way to get more current data.”
Reports submitted to the county board in May regarding initial projections of the unfunded liability were based on 2011 actuary reports of county employees, which projected $340 million would be the amount needed to cover long-term liabilities for both trust funds.
An additional $5 million was added to that figure to cover any costs the county would incur in paying consultants and financial advisers during the bond sale and investment for a total of $345 million.
Commissioners postponed voting on the bond issue the first time - which was on the agenda two weeks after the measure was first made public at a working session - because the data was outdated to wait for new actuary and experience reports.
The actuary report is due July 24. Following the actuary report, McDaniel said the county will receive an updated report from its bond counsel and from an independent consultant they've hired to provide a second opinion.
Administration promised the experience report would be available by Wednesday, when a vote had been originally been scheduled on the issue.
As of 4 p.m. Wednesday, the experience report had yet to be delivered, McDaniel said. County staff was briefed last week on a preliminary draft of the report that gave them a better idea of the actual state of the unfunded liability, but McDaniel declined to discuss that figure publicly.
Through a communication blunder, that figure was published in a printed meeting agenda distributed Wednesday night: $295.12 million.
The Wednesday meeting had originally been slated as the day when the Board of Commissioners would take its first vote on a notice of intent to issue the bonds in both back-to-back meetings.
That is, up until a week ago when Chairman Yousef Rabhi announced in a joint press release from Administrator Verna McDaniel that the bond issue had been pulled from the agenda. Rabhi cited uncertain requirements from the state and unanswered questions from commissioners regarding alternative options.
Saginaw County is the only Michigan county to date that has submitted paperwork to the state treasurer to borrow money for its unfunded actuarial accrued liabilities, made possible by Public Act 329 of 2012.
Rabhi said the state has sent back Saginaw County’s paperwork for revision and does not have a template for how the issue should be presented, which prompted his decision to wait on the vote.
Additionally, Rabhi said commissioners need more time to pursue other options to cover feasible ways to manage the county’s long-term debt other than the bond issue, which has been the sole option presented by administration to date.
The bond issue is now on hold, as commissioners have not placed the item back on its agenda for a vote.
Rabhi said Wednesday that discussion on the item will now be a part of meetings regarding the county’s budget deliberation process, as it moves forward to draft its first four-year budget proposal to present the board in October.
McDaniel has stated that there’s an approximately $7 million hole that needs to be cut from operations - the bulk of which she was counting on the bond issue to account for.
The success of the bond issue would depend upon the market’s rate of return on investment being at least the same or greater than the rate at which the bonds were initially purchased.
Money generated from the bonds’ investment in the market would be used to fund the annual required contribution to both the pension and retiree health care fund, while the county would use its money to pay off the money it borrowed to purchase the bond, plus interest.
The payment schedule can be manipulated - and it appears county administration is interested in paying off less of the principal of the bond in the early years of the 25-year repayment schedule to lessen the financial burden on the county’s cash-strapped budget.
Commissioner Rolland Sizemore Jr., D-Ypsilanti Township, was absent from the meeting.
The Board of Commissioners next meets 6 p.m. Thursday night to discuss budget priorities in a public working session.