Tag Archives: Who should pay the pension deficit?

A gimmick to avoid putting the matter before the voters

19 Feb

I been busy lately, but I knocked out this letter to the editor after I read that article from Mary Walsh. I just can’t believe how stupid that plan is – rent city hall back from yourself? What a scam – who would buy that? Your silly council, and your board of stupes, that’s who! 

Something I couldn’t squeeze in here, is the fact that this money will be paid back at the expense of our city infrastructure.  The “pension fund” they are talking about is filled with a percentage of the payroll from each department – meaning, street money, sewer money, park money, etc. 

Oh yeah, did I mention, the county of Butte is pursuing the same bonds, so get ready to pay out of both ends. 

Juanita’s latest spit on the griddle:

Chico and Butte County are considering revenue measures to pay their pension deficits. Two options presented by consultants are Pension Obligation Bonds and Lease Revenue Bonds. Neither requires voter approval.

David Crane, of UC Stanford, says “Economically, a POB is no more than a ‘carry trade’… borrowing at a low rate to bet on hopefully-higher-yielding assets…”  Crane reports, “When the smoke clears, a POB issuer has the same pension obligations it had before, more debt, has paid investment banking fees, and  gambled the proceeds on products that beget even more fees for bankers.”

New York Times public finance reporter Mary Walsh explained Lease Revenue Bonds in a recent article. “The city creates a dummy corporation to hold assets and then rents them…” Meaning, the taxpayers pay to rent these facilities from the “dummy corporation”.   “The corporation then issues bonds and sends the proceeds back to the city, which sends the cash to its pension fund to cover its shortfall. In turn, the pension fund invests the money raised by those bonds in other assets that are expected to generate a higher return over time.”

A dissenting West Covina councilwoman called this plan “a gimmick to avoid putting the matter before voters, who she believed weren’t likely to approve a deal that would increase West Covina’s debt sixfold.” 

West Covina residents now pay rent on their own libraries, fire stations, even city hall. Who are the dummies here? Contact your district representatives, let them know what you think. 

Juanita Sumner, Chico CA