FOR IMMEDIATE RELEASE: Filner’s Risky Pension Borrowing Plan to Cost Taxpayers $335 Million Tony Manolatos October 8, 2012 Press Releases / Media Advisories 6 Comments FOR IMMEDIATE RELEASE: Filner’s Risky Pension Borrowing Plan to Cost Taxpayers $335 Million
“Monday, July 30, 2012
Filner said that June’s passage of Proposition B, a pension initiative, made borrowing money through what are known as pension obligation bonds no longer necessary. Here’s the full statement from his campaign, which was released late Monday (emphasis added):
During the Prop B campaign, I suggested that pension obligation bonds be looked at as a way to reduce the city’s unfunded liability. San Diego County has utilized them several times, retains the highest bond rating in the state, and is widely considered to be the best-managed government entity in the region when it comes to finances.
However, voters have now approved Prop B and I have committed to implementing the will of the voters, so consideration of pension obligation bonds is no longer relevant. The most important issue now is realizing the nearly $1 billion in savings that results from successfully implementing a five-year freeze on pensionable pay for city workers, and I am the only candidate who can deliver on it.”
“In response, Filner said he dropped his pension bond plan already.
The idea is no longer necessary, thanks to savings from a five-year freeze on the type of pay city workers can use to later calculate their pension payouts, Filner said. That’s one of the provisions — called “pensionable pay” — in Proposition B that has yet to be implemented.
“These people apparently haven’t been following the campaign,” Filner said. “Two months ago I committed to implementing the five-year pensionable pay freeze — a provision only I can implement through collective bargaining — which will reduce the city’s unfunded pension liability by nearly $1 billion, and which eliminated the need to consider pension obligation bonds.””
The 5-year pensionable pay freeze has ALWAYS been a part of Prop B, even when Bob was touting his plan for POBs as the only REAL way to achieve savings. It was right around the time Bob was calling Prop B a fraud to whoever would listen to him. While Bob says he supports the freeze now (way to go out on a ledge there Bob), he DOES NOT say he would NOT support issuing POBs. There is now proof the plan Bob’s been pushing is a terrible idea for taxpayers. A plan Bob supported before he was against it before he supported it before he was against it.
Carl DeMaio introduces pensionable pay into the San Diego lexicon. It’s hysterical that Filner is riding on those coat tails.
This, from Filner: “Make no mistake, I will implement Prop. B. I’m the only one who can implement the costs savings, and the bonds are a moot point. They’ve been off the table since the voters voted on Prop. B. I wish Rip Van Winkle of Republican politics will go back to sleep.”
While the county’s retirement system has issued pension bonds over the last decade, the Taxpayers Association says investment market conditions have changed for the worse since then.
Prop. B, meantime, is tied up in state administrative law proceedings.
La Playa….love that you’re just cutting and pasting the Filner talking points, but they aren’t adding to the discussion. Filner can say what he wants, but he can’t run away from the fact he was recently praising his borrowing plan. And now when he finds out the public isn’t having it, he vacates the plan immediately. Now he really doesn’t want to admit his love for them when the costs are thrown in his face.
Hi Hugh. Exactly where is the full report from the SDCTA? I cannot find a copy. Please post it so that everyone can read the SDCTA assumptions. What about keeping the same time period of 15 years maximum, and Refinancing a portion of the debt at historic low interest rates?
For Unvested Pension Benefits like Retiree Healthcare; Pension Obligation Bonds (POBs) should not be used and may be too risky, depending on the assumptions. There are many potential Unvested pension benefits including Retiree Healthcare, 50/55 retirement age, 13th Check, all former unearned retroactive benefits increases, buying years of service credit, DROP, etc.
However for Vested Pension Benefits only, it would be smart to analyze the potential costs of refinancing a portion of the existing Vested debt with Pension Obligation Bonds (POBs) with the current time table, only if San Diego can get a much lower interest rate. The decision should be based upon the findings of a sound financial analysis, after public hearings in 2013, and only if Interest Rates stay low, and with the approval of watchdogs like the SDCTA.
As shown on Page 2 of the link above, the rich and financially stable County of San Diego who has over $1 Billion in cash Reserves siting in the bank, has refinanced their Union’s Pension Debt through issuing Pensions Obligation Bonds (POBs) three times within the last decade. In 2002, 2004, and 2008.
In 2002, when the County of San Diego issued $737 million in Pension Obligation Bonds (POBs), the UT San Diego article was on how the financial savings from Refinancing the Debt at a lower interest rate was encouraging County Employees to retire early to lock in their vested benefits. There were no jounalists’ or SDCTA concerns about the risks of POBs.
In 2004, when the County of San Diego issued another $400 million in Pension Obligation Bonds (POBs) to take advantage of lower interest rates, there were no warnings of excessive borrowing from the UT, local media, or SDCTA .
Issuing POBS was also part of Republican and County Board of Supervisors Ron Roberts’ platform for the 2004 Mayoral Race against Mayor Dick Murphy. Issuing POBs for a portion of the debt for a diversified portfolio was touted as a way to help solve the City of San Diego’s Pension problem.
In general, Interest Rates to refinancing debt are at an all time low. A 30-year fixed mortgage with zero points is 3.25 percent.
In order to make discuss POBs, first San Diegans need to know exactly what benefits are Vested, and the total debt that already exists, and is acknowledged by all including Taxpayer Watchdogs.
Although there are inherent risks to POBs and they are a gamble, our City should have a discussion on the merits after the Mayoral election is over. More information is needed before San Diego taxpayers outright dismiss the idea of refinancing existed debts at a much lower interest rate using POBs for Vested pension benefits only, for the same time period. POBs have the potential to save San Diego billions that could be used to fix our infrastructure.