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Debating The Risks Of Bond Sale To Reduce Debt Service Payments

January 4th, 2018 · 6 Comments · City Budget, City Council

Last week, Mayor Joe Ganim announced a pension bond sale that officials say will save the city approximately $2 million per year in debt service payments covering retirement costs for uniformed services. City financial scrutineer John Marshall Lee is skeptical about the numbers. He shared his thoughts Tuesday night with the City Council. From Lee:

Last month when I spoke to you I asked you to stop, look, listen, and understand the “larger picture”of the City of Bridgeport. I point to fiscal pictures because the City chooses activities that require funds, things like education for youth, safety for citizens from predation by people who have negative intent on people and property and fire safety, especially in times of severe cold. But what priorities are used?

It would seem easy to keep these things in mind but there are many things to be counted and for which to be accountable. And when the data is not presented in a fashion that is easy for you to compare your task is more difficult. You need help that has experience, that can be trusted, and that knows how to ask questions and receive full answers.

Last month I called to your attention Pension Plan A that serves retired police and firefighters including their widows with a retirement benefit.

It was a Ganim1 plan from 2000 that borrowed $350 Million and is paying it back at more than $30 Million annually until 2029. Over $900 Million from taxpayers was to be the cost of Ganim’s plan, or so the actuaries assumed. But investment markets fall as well as rise, and assuming 8% is earned when you are earning less is kind of living a lie, hoping things will turn in your favor.

By the time Ganim2 returned to office less than $70 Million of the original $350 Million was there to pay benefits. Taxpayers were paying an additional amount for the actuarial liability present in the form of ADDITIONAL PLAN CONTRIBUTIONS that today amount to $15-17 Million annually and are scheduled to increase by 5% per year. The Pension Obligation Bond has about $360 Million to be paid before 2029. But the public is paying an additional and unexpected $250 Million or more with these necessary incremental contributions to fund Plan A. How does the Ganim1 plan from 2000 look at this point?

I am not trying to say that he is responsible for all of the risks. But I am pointing out that leaders who share only the positive parts of a story cannot be fully trusted. And if I cannot trust your statements about money, what can I trust.

On December 28, just last week, Ganim2 who is running for Governor, used a recent bond sale where all politicians declared a victory, because MERS plan has accepted a $90 Million down payment on former Plan B public safety employees. Taxpayers, it was not mentioned in the article but this is the payment for police and fire OVERTIME benefit expense. In 2015 when the City signed a contract with the Police, we had no money set aside to pay retirement benefits on overtime earnings. Actuaries had to get to work and figure how to fund it. And legislators came bragging back to the City that they saved the difference between a contribution to MERS calculated at 8% and a bond cost of 4.25% and have told us that this has a lower expense of $2 Million annually to the City. But did they ever tell us that this recognition of “overtime” for certain personnel was to cost $6 Million or more per year beyond the time when most current safety employees will be receiving checks?

And since the MERS plan has earned only 4.74% on average for the past ten years, while MERS is assuming 7% or more, is it likely that this plan too, like our own Pension Plan A will find the MERS actuaries returning to our City and increasing our contribution? But this is the way plans work. Actuaries look at reality. Politicians look to the best way to explain. And in this City telling the public what Labor Relations worked out has been too explosive. So, this major giveaway, specifically to provide benefits for external overtime, where life and limb are at lesser risks than on 24/7 patrol, limits the City ability to educate youth, or do other important tasks. If you had been told the entire story, shown the entire cost structure what decision would you have made? And Ganim2 has taken Ganim1 lessons in pension benefit funding and refused to acknowledge the future risks that are causing us $15 Million problems annually today by selling us $2 Million dollar savings? How do you feel about that? How does the big picture look? Time will tell.

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6 Comments so far ↓

  • Jimfox

    Correct me if I’m wrong, but didn’t we inherit this bond debt from G1′s (.com) investment Fluck-up?!
    Ganim’s decision back then, to sell $350 million in pension bonds to fund the Public Safety Pension Plan A did cost the city more than it was worth.

    Is this legal!

    This is why the City Council needs their own Attorney! ASAP

  • Tom White

    As I have commented many times, this is just another example of the city council having one source of information, the mayoral administration.

    Twenty-five years ago the Financial Review Board recognized this problem and influenced charter revision in 1992-93 to address it.

    JML has tried for years to provide council members information to help them make a decision. Unfortunately, John’s five-minute spiel prior to council meetings is treated like an inconvenience.

    This bond sale is already being used by the ‘Ganim for Governor’ campaign as an example of Ganim’s brilliant leadership. Brilliant? Did council members make notes of JML’s points? Are you kidding?

    I understand the city council nearly set a record for shortest council meeting recently but some members had the audacity to make statements other than voting. What a concept!

    No Jimfox, the council does not need their own attorney, they need to pay attention to what JML says. They also need more members with three-digit IQs so they understand what he is telling them.

    Motion to adjourn………

    Everyone have their debit cards? Let’s have dinner on the taxpayer.

    • The Bridgeport Kid

      I’ve attended a few City Vouncil meetings, heard John Marshall Lee. The Council members were dismissive, as if he was a pain in the ass that had to be tolerated.

      The City Council must have its own legal counsel because Christopher Meyer’s City Legal Department is maintaining the status quo for Little Joe and the Evil Emperor. We live in a democracy, Mr. Meyer. This is not Venezuela. Some of people of the city of Bridgeport elected Little Joe; many others will vote him out of office because we are right fed up with the return to the dysfunctional status quo. Joe Ganim, Mario Testa and the DTC district leaders don’t give a rat’s ass about the people of the city of Bridgeport. Quite the contrary, we are regarded with contempt.

  • Tom White

    Kid, many people have expressed their opinion that the city council needs dedicated legal counsel. It has been demonstrated may times over many years that the charter, supported by state statute, clearly gives the city attorney the role of legal counsel for the executive and legislative branches of government.

    It has been demonstrated for decades that the city council needs data and information to make decisions. Where does the data and information come from? It comes from the executive branch of city government, including the city attorney.

    Another significant factor in the effectiveness of the city council is the ability of the people on the council.

    When I was on the city council the Budget and Appropriations committee was lead by a practicing attorney with an accounting degree and a bank officer with an MBA.

    Currently, the committee leadership includes a high school drop-out who lives in public housing and has not been employed most of their life. This may seem like a hurtful comment, but there is a new member of the council with appropriate education and work experience who was not even appointed to the budget committee.

    In recent years with Tom McCarthy as council president, council members have been lead to believe they are celebrities, attending NLC conferences which from my first-hand knowledge, are interesting but offer nothing to address the skills lacking by most members of the Bridgeport city council.

    In addition to superior education and work experience of members of past city councils, during my terms in office our stipend was a $500 per year reimbursement for out-of-pocket expenses compared to the $9,000 per year current members can spend from a loaded debit card. We even cut our stipends in half as a show of support to efforts to reduce spending payed for by taxpayers.

    Recent city councils have become underinformed, underskilled and arrogant in the use of taxpayer funding of their stipends.

    Motion to adjourn?

  • John Marshall Lee

    Thanks to the few reading these articled/talks to the Council, but do you understand the real issues:

    Why have all of you let our State legislators, local Council members and Joe Ganim to celebrate bonding $90 Million of assumed expense for Police OVertime that would never have been necessary if Plan B has not been “retired” during public safety negotiations of 2012-2016? Overtime got no credit for retirement benefits in Plan B, and the plans were better funded actuarially than a couple of State defined benefit pension plans.
    The MERS plan, if it continues to earn a low rather than assumed rate, will call on communities for more funds in the future, likely. Just as our own Plan A, from Ganim1 administration, is costing us EXTRA tens of millions today and into the future. Anybody upset by fake news instead of fair news from City Hall? Time will tell.

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