Council to Consider Pension Obligation Bonds Next Month

Mayor Scott Jackson is going to ask the Legislative Council to approve as much as $140 million in Pension Obligation Bond next month in order to shore up the struggling Pension Fund.

The mayor said the move is part of the recommendations from the study the town commissioned from the Segal Company several months ago on how best to address the shortfall in the fund that should stand at more than $400 million but currently contains only about $56 million

"The first few years we are going to bring down debt service — that will allow us to add additional debt service with the pension obligation bonds," Jackson said. "What we are looking to do, and it can't be sized until the budget is passed by the Legislative Council, but what our anticipation is in full according with this document we have been provided is to seek approval from the Legislative Council, probably in May of this year, for a pension obligation bond in somewhere between $125 and $140 million. We will then issue those bonds probably in the fall.

"Our pension fund itself over the last several years has overperformed 88 percent of municipal funds but the corpus as they call it — the pot of money — is so small that it hasn't been able to generate a lot of investment returns, so one of the critical components of the POB is providing a larger corpus on which to generate investment returns," Jackson said. "The goal is to work with the Legislative Council over the next few weeks to provide all the information we can on how the restructuring we are currently working on gives us the space in which to do this and ultimately work with the state to get approval for the issuance and do the issuance this fall."

His 2013-14 budget proposal follows the Segal recommended pension contribution, Jackson said, despite talk that what's he's recommending isn't what the study calls for.

"There's been some confusion that we've already gotten off track from the plan with the pension contribution in this year's budget," the mayor said. "In the study, the fiscal year 2014 calls for the single largest contribution — $12.5 million, which is exactly to the penny what is my proposal. We paid for this study and are following this plan that brings us to full funding of the pension fund over time but in a way that is completely sustainable from a tax standpoint.

"We are talking about fixing generations of underfunding is a way that is sustainable from a tax standpoint," Jackson said.

Ultimately, much of the town's fiscal problems originate in Hartford, Jackson said. 
 
"I hate to point fingers — it seems elected officials spend all of their time pointing fingers — it's not my fault, it's not my problem, it's his fault, it's his problem — but we have a problem, we have a dollar and cents problem that's the educational cost sharing grant from the state of Connecticut, a grant that delivers $55 million a year to the great city of Meriden and $23.9 million to the town of Hamden," Jackson said.

"The formula is unfair. If we got only half the grant of Meriden I could have delivered this budget with no tax increase at all so after three years I have to start talking about this," he said. "It's affect on our taxpayers is dramatic and our taxpayers have to understand one of the reasons why they have a high mill rate is that this grant is inherently unfair."