Washtenaw County board chairman postpones vote on massive bond issue for second time
- Related coverage: Commissioners want more information as county considers bond issue to cover retiree benefits
Citing still-unanswered questions and uncertain requirements from the state, Washtenaw County Board of Commissioners Chairman Yousef Rabhi announced this week that a vote on a major bond issue the county is considering has been postponed for the second time.
The bond issue could be up to $345 million to cover long-term retiree benefit costs that the county estimates it will shoulder throughout the next 25 years.
Andrew Kuhn | File photo for AnnArbor.com
Those trust fund payments have been increasing year over year for the county. In 2012, that payment was about $20.6 million. Estimates for this year project the payment to be $22.3 million.
The board was slated to vote July 10 to issue a formal “Notice of Intent” to issue the bond at both its Ways and Means Committee meeting and regular meeting that follows.
A passing vote would have initiated a 45-day referendum period. Should residents collect 15,000 signatures on a petition, the bond issue would have to be placed on a ballot for voter approval.
Rabhi said that the commissioners still have questions about other alternatives to issuing the bonds to cover the county’s debts — and so he wasn’t comfortable having the board vote on the matter July 10.
Rabhi learned Wednesday from county Finance Director Kelly Belknap that the Michigan State Department of Treasury has not developed a list of items that a local government must submit for approval when considering a bond issue — which also prompted his decision to postpone the vote.
The ability of local governments to issue bonds to cover long-term retiree benefit debts was made possible by a state law — Public Act 329 — signed in October.
It’s not the first time Rabhi has announced a decision to push back a vote on the bond issue. Just two weeks after the bond issue was made public May 2, the board was facing a vote to initiate the bond issue process — though an updated actuary report had not yet been delivered.
Rabhi stated at that May 15 meeting that he would be pushing back the vote on the bond issue.
The major point of contention for most on the bond issue is that no alternatives have been discussed or presented by the administrative staff.
Additionally, the potential bias of the bond counsel team of John Axe of Axe & Ecklund and his daughter, Meredith Shanle of Municipal Financial Consultants Incorporated, has been called into question as they will only get paid should the county decide to issue the bonds.
Administrator Verna McDaniel presented the bond issue proposal to the Board of Commissioners as a way to manage the payment schedule of the increasing contribution demands to pension and retiree health care trust funds.
Though the county has been paying out its required amount to both trust funds, the funds’ under performance has contributed to the increasing amount the county must allocate to paying them off.
Based on a 25-year payment schedule, the county is planning to issue up to a $345 million bond to cover both the pension and retiree health care trust fund debts, based on an actuarial report of the employees covered by those plans.
After Jan. 1, 2014, employees will no longer be admitted to either of those plans.
New estimates show that the amount needed to cover the projected debt will be substantially less than $345 million.
McDaniel continues to present the bond issue as the only way for the board to continue to provide a number of services without having to make drastic cuts necessary in order for the county to conform to a new four-year budget process that McDaniel asked the board to approve.
Commissioners have asked questions about other options than issuing bonds for the debt.
McDaniel’s budget presentation states $6.99 million must be cut from the county’s operations to have a break-even budget in 2014-17. About $2.4 million of that has been accounted for in higher-than-anticipated property tax revenue.
Her plan proposes finding the cuts by reducing the county’s pension and health care obligations by $5.06 million, cutting operating costs by $1.83 million and eliminating $100,000 in funding to outside agencies.
A public hearing on the bond issue remains on the July 10 agenda. The hearing is slated to begin after the close of the 6:30 p.m. Ways and Means meeting during the regular board meeting at the Washtenaw County Administration Building, 220 N. Main St., Ann Arbor.