POB Pension Fix? TBD

Yes. Let's work to guarantee the generous pensions and early retirements, even at the risk of bankrupting the City?

It makes perfect sense if you have or had a plum city job. To the rest of us? Not so much.

Why doesn't the city scrap future pensions and move to a 401k/403b?

Pay what's owed but stop digging a greater hole of underfunded liabilities.

For this to make sense, not only will actual investment performance need to exceed the interest rate on the bonds, but there will have to be a firewall against pension "creep" in all future labor negotiations. Part of the reason for the current state of affairs is that it was easier to offer pension enhancements (which would be paid in the future) as a trade off to current salary increases. The argument will be made in future labor negotiations that with the pensions well funded, the City can afford to increase benefits. It is the nature of pension funding that the requested enhancements won't have a significant immediate impact ("And" the argument will be made "we have this huge pot of money in the fund") while the future cost can only be based on assumptions regarding investment returns, retirement timing and mortality risk; all of which are relatively easy to massage or at least rationalize with wishful thinking.

POB don't reduce liabilities, they just trade one liability, pensions, for another, bonds. All it really means is that when bankruptcy comes, the pensioners will suffer less and bondholders, or their insurers, more. If the city has liabilities it cannot pay, it needs to declare bankruptcy. The sooner, the better, to align costs with revenues.

Using debt to pay debt is still a bad idea.

Average Taxpayer-- would you have the City renege on the pensions it offered in good faith to workers who accepted and did the work? How is that just? Did the pensioner mismanage the city? Did the pensioner overbuild schools? No-- so why do they have to be skinned now on pensions they earned?

I don't know the answer but this knives-out attack on anyone who has any kind of pension security is sickening.

BTW-- where has the FRAC been?? Thought they left town!!

CY,

It's worth noting that labor has always had representatives sitting on the pension board and could have raised red flags and made noise about underfunding way back in the early days of the DeStefano administration. They were pretty silent and therefore own part of this problem.

CityYankee: Any kind of guarantee is only as secure as the guarantor. Bondholders, including union pension funds, loaned money in good faith, too, relying on the city's promise to repay. All liabilities, however, may be discharged in bankruptcy, both pensions and bonds.

Agree with City Yankee. City workers have always done everything asked of them to shore up the pension. I understand they are now paying 10% of their salary for significantly reduced pension benefits. With so much city financial mismanagement and short sightedness over the years, it's outrageous to single out and scapegoat retirees who worked hard as public servants to earn promised pension security in their later years.

I'm glad the NHI is covering this important topic, and I doubt it would have made news had I not responded so emphatically and persistently during the discussion. But I think we need to correct the record on a few items. Tom Breen is a good guy but he tends to paint my moderate views with an extreme brush bc they don't fit the far-left narrative. So, for the record:

The BofA should have allowed this under the Harp administration and as much as I don't trust the Elicker administration, they should allow it now. The cost of borrowing has not been less in the last 30 years. And it stands to reason the cost of borrowing will increase as the economy does. Thus, the window of opportunity is now. If a triple-A rated municipality can issue bonds at around 1.9% (https://www.barrons.com/articles/muni-bonds-have-started-to-rally-you-should-get-on-board-51585351171), and obtain a return in the market of close to 8%, or 10-15% with reinvestment of dividends, you would otherwise be committing malpractice not to do as much (https://www.nerdwallet.com/blog/investing/average-stock-market-return/). If inflation rises to 2% per year, as is the Fed's target, you would essentially be borrowing for free. The interest rate you're paying would be just enough leave the money at current valuation at the time of borrowing.

I get it, everyone knows stock picking is a risk. But don't pick stocks, invest in a fund that tracks the market. Understand that the timeline for success should be measured in a decade, and not merely two years, and allow the interest to compound. All while maintaining contributions at current levels adjusted for inflation.

Otherwise, go to bankruptcy now. Rip the band-aid off, restructure pension obligations to around 55% of their current levels, and have even more pissed-off officers. Those aren't the only options, but they are looking to be easily available ones.

Communities in CT are hitting a wall. They have underfunded pensions, negotiated with unions long ago, that they no longer can afford. They can't raise property taxes, because the independent homeowner, small landlords and small business owner can't afford to pay anymore than the already extremely high taxes. Landlords can't raise rents to cover taxes because the renters wages haven't risen at the same rate as rents and property taxes. The cities and towns with large amounts of non-taxable property that have no other significant source of income to replace the tax exempt properties and PILOT payments, while never fully funded, have been reduced more and more as the years go by. Companies that traditionally employed large numbers of people have fled the state in favor of states with lower taxes, better transportation infrastructure, and lower cost of living, or overseas where the companies don't pay benefits, living wages, or other costs associated with being located in the USA.
The State needs to overhaul the property and income tax system, tighten up the taxable and non-taxable properties requirements, and the funding system for cities and towns, etc.
Cities and towns as well as the state need to do away with pensions to move to 401k and other employee contributed retirement plans, and they need to renegotiate with state and municipal employee unions for more realistic pay and benefits considering today's economic realities. Otherwise many cities will face the extremely high mill rates, potential bankruptcy and near junk bond status of communities like Hamden, and a loss of residents who will opt for communities in other states with better cost of living, lower taxes and better services.

We need to recognize the City has a contractual obligation to the retirees. It also has an implied and explicit obligation to the residents, taxpayers, and CURRENT employees as well. The reality is there is only 1 pie and the pie is not getting larger quickly enough. So, the ultimate question becomes, how do you share the pie equitably?

How do you provide for the basic needs of today and at the same time provide the promised benefits to the retirees who earned them?

To me, it is clear that there is no way to do this under the current financial structure. The City has no money for Public Works/Parks/Police and what you see is fighting among New Haven neighborhoods for a few crumbs (see today's article about police resources in the Cove).

The new NHFD Union President recognizes this as well. He knows his pension isn't safe and the most recent Ricci $400K giveaway is the least safe. So, he wants to borrow at the City level, and lock the borrowed money in to the Pension Funds where they will be safe and untouchable from a Judge's whim when the City inevitably files for bankruptcy which it will eventually do. Eventually is the operative word. There will be years of New Haven Taxpayer and Resident pain (see today's Hamden as an example) before the City enters into receivership. The LARGELY suburban union retirees will be spared.

The politicos recognizes this as well. But they won't lay it out as bluntly in black and white as I have because they need to keep the unions happy while keeping the taxpayers in the dark. That's why the POB discussions aren't happening in the open.


Dennis Serfilippi

The obvious answer to this is:

The POB is mostly front loaded so you actually spend more money paying the new debt service than what you save on a newly calculated ARC. There is a break even point but that would be down the road some 5 or 6 or 7,8,9 years.

If the State had paid the full amount of PILOT over the last 20 or 30 years the pension funds would have been fully funded. When the city gets MERA in, or goes bankrupt, the State will own the problem it's created. Till then POBs are the last thing we need. It's just scoop and toss by another name.

@City Yankee

Actually the City gave substantial pensions enhancements to firefighters and police officers in the recents contracts. Contracts that the Board of Alders approved without any actuarial assumptions presented to them.

The Alders are the problem. They agree to things with out knowing or caring to know the costs. I guess when they are spending out money they don't care. A reckless disregard to the taxpayers and complete incompetence and malfeasance on their part. Fireman and cops retiring after 25 years with 6 figure pensions that far exceed there salaries is ridiculous. And don't talk about how the employees contribute. They contribute peanuts for the millions they receive in retirement.