A bond sale to reduce pension liability is not generally a sexy story line, but when a mayor is trying to reduce costs, especially as a candidate for governor in a state with crippling debt issues, it’s certainly something Joe Ganim will leverage as a talking point. It also helps Ganim contrast his city with Hartford Mayor Luke Bronin, considering a run for governor, who received a state bailout by virtue of his close relationship with Governor Dan Malloy. Wall Street financial analysts reported recently that Hartford’s in dire financial condition compared to other Connecticut cities.
The city on Thursday kicked out a news release highlighting a pension bond sale that will save the city approximately $2 million per year in debt service payments covering retirement costs for uniformed services. The city received legislative approval of the financial restructuring that included assistance from the city’s eight-member legislative delegation. Underwritten by Morgan Stanley, it was coordinated by city finance officials and the city’s bond counsel Pullman & Comley led by attorney John Stafstrom.
Instructive in the release is how Ganim will needle Bronin on the Democratic campaign trail. “This is the kind of outside the box thinking we need to tackle our short and long term fiscal challenges as a city and as a state,” says Ganim vying for party support with Bronin who’s aligned with many Malloy political operatives. “We’re showing we can do this while operating more efficiently and lowering borrowing costs as we search for savings to absorb major state budget cuts.”
Ganim translation: Bronin has a tin cup, I get things done without one. It’s a classic showhorse versus workhorse contrast in campaigns. Get ready for a lot more.
Mayor Joe Ganim today announced that the city of Bridgeport recently completed a pension bond sale that raised $96,000,000 to pay down a major $200,000,000 long-term unfunded pension liability the city faced covering retirement costs for current and former police officers and firefighters. This measure will now save Bridgeport taxpayers approximately $2 million per year in net debt service payments for the next 26 years over the life of the bonds, resulting in total savings to taxpayers of approximately $48,000,000. The bond sale was made possible through special legislation sponsored by the Bridgeport delegation and overwhelmingly adopted by the Connecticut General Assembly during the 2017 legislative session. This gave the city of Bridgeport the statutory authority to issue taxable bonds to pay off more than $200 Million in unfunded pension liability into the Connecticut Municipal Employee Retirement System (CMERS).
“Selling these bonds empowers the city of Bridgeport to eliminate a major piece of unfunded pension liability in a way that is saving taxpayers millions of dollars–a win-win!” said Mayor Joe Ganim. “This is the kind of outside the box thinking we need to tackle our short and long term fiscal challenges as a city and as a state. We’re showing we can do this while operating more efficiently and lowering borrowing costs as we search for savings to absorb major state budget cuts. We could not have completed this significant transaction without the persistent, hard work of the Bridgeport legislative delegation. We have a great team and I am so thankful for their efforts. I also want to thank both Democratic and Republican legislative leaders for helping Bridgeport gain the right to take this major step to strengthen and stabilize our municipal finances.”
House Bill No. 7296, “AN ACT AUTHORIZING THE FUNDING OF UNFUNDED ACCRUED MUNICIPAL EMPLOYEES RETIREMENT SYSTEM LIABILITIES BY MUNICIPALITIES,” was proposed by Mayor Ganim’s Administration and introduced by Bridgeport State Representative Steve Stafstrom (D-129). It achieved significant bipartisan support, passing both the CT House of Representatives and State Senate by wide margins. It was also backed by State OPM Secretary Ben Barnes, State Comptroller Kevin Lembo, and State Treasurer Denise Nappier. Governor Dannel P. Malloy signed the bill into law in June.
The bond sale was approved by the Bridgeport City Council in August and was coordinated by the Bridgeport Finance Department. It was underwritten by Morgan Stanley, coordinated with outside financial advisor Public Finance Management, and attorneys from the firm Pullman and Comley as bond counsel for the city. The bonds were sold with an average interest rate of 4.53%. All bond proceeds will be deposited into the CMERS pension fund at the closing date in early January, ensuring that the CMERS fund has received all outstanding payments due from the City of Bridgeport. Prior to this legislation, Bridgeport was locked into paying $7.5 Million in amortization payments for the next 26 years into CMERS to cover unfunded pension liability. This liability was created because the city did not transfer enough assets into the fund when it moved the fire and police pensions to state management in 2013. The CMERS fund at the time covered the Bridgeport deficiency but charged the city an 8% interest rate on the its annual payments.
“Bridgeport residents continue to be burdened by the city’s high property taxes. By passing legislation that allows the city to restructure some of its unfunded pension liabilities, we are giving our residents some of the financial relief they need. Decreasing the city’s tax burden will help attract new residents and business owners into calling Bridgeport their home,” said state Rep. Jack Hennessy, chairman of the Bridgeport legislative delegation.
“Improving the city’s economic climate by restructuring a portion of our unfunded pension liabilities will allow Bridgeport to enhance its standing as a dynamic and livable city that is able to attract and retain businesses and new residents. This legislation is expected to save Bridgeport taxpayers tens of millions of dollars over the next several years, which will hopefully help the city give homeowners some of the tax relief they need,” said state Rep. Steve Stafstrom, D-Bridgeport.
“At a time when municipalities are feeling the pinch of diminishing state resources, this is very welcomed news,” said state Rep. Christopher Rosario (D-Bridgeport). “I applaud the hard work by the Bridgeport delegation on this measure and look forward to continued innovative approaches that benefit the city.”
State Rep. Ezequiel Santiago, D-Bridgeport, said, “Any action we take that moves Bridgeport another step towards better financial footing is worthwhile and this sale is a major accomplishment for our beleaguered city taxpayers. I am proud to work with a delegation that always comes together when it comes to legislative items that improve our economic standing.”
“With an almost evenly split House and Senate, it’s not easy to pass legislation so I really want to send along my sincerest gratitude to my legislative colleagues from across the Connecticut who recognized how important this bill was for the people of Bridgeport and voted in favor of it,” Senator Ed Gomes (D-23) said.
“This is significant financial victory for Bridgeport thanks to the hard work of my colleagues on the state delegation and city leaders,” Senator Marilyn Moore (D-22) said. “I’m proud we were able to work together to save Bridgeport taxpayers millions of dollars.”