A week from submitting his budget proposal to the City Council, Mayor Joe Ganim is banking on legislative approval to allow municipalities to bond unfunded pension liability that would save millions in debt service payments. The bill cleared the state legislature’s Planning and Development Committee on Friday, but questions linger as it awaits a full vote of the State House.
Although Planning and Development approved the proposal by a 16-2 vote, several Republican members of the committee suggested language be inserted into the bill making it a Bridgeport-specific proposal, expressing concern the precedent it would set for all municipalities, according to Av Harris, Ganim’s legislative services director.
“Originally when we drafted the bill,” says Harris, “we really tried to steer clear of writing a Bridgeport specific bill because that is usually frowned upon in the General Assembly, and there may also be other municipalities with similar unfunded liabilities in Municipal Employees Retirement System that might want to take advantage of the bond market and pay off their unfunded MERS debt.
“Moving forward, however, we would be open to ideas from all sides and discussion as to what is the best mechanism to give the city of Bridgeport the authority we need to issue bonds to eliminate this MERS unfunded liability. This is very solid public policy and we are very pleased it was endorsed so strongly by the Planning and Development Committee.”
The proposal has its critics including city resident David Walker, the former U.S. Comptroller General, arguing that borrowing to cover pension costs is poor public policy that has bitten the city in the past.
Ganim, addressing the legislative committee last week, declared “We estimate that the interest rate on the taxable bonds we want to issue to pay off our unfunded pension liability will be in the 3.5% – 4.5% range–a major difference from the 8% we are currently paying on the unfunded liability … Our actuaries estimate the savings Bridgeport taxpayers will realize by taking this step will be approximately $2.8 Million dollars per year, for the next 26 years.”
This is a mundane public policy issue for taxpayers but not for their pocketbooks, says Ganim who wants to hold the line on taxes for the budget year starting July 1, following a large mil rate increase last year in a property revaluation year.
City finance officials are juggling a number of moving parts in their spending plan based on what happens with the legislature.
Most of the council review will be conducted by the Budget and Appropriations Committee including meetings with department heads and public hearings during April and May.
Ganim will submit his budget next week, per city ordinance.