news

Riverside County May Borrow $727M via Bonds to Lower Pension Debt

By Jeff Horseman

March 30, 2020 Source: The Press-Enterprise

The Equable Take

With interest rates at all time lows, there are likely to be a number of municipalities looking at “pension obligation bonds” (POBs). This is a special kind of government borrowing where a municipality sells bonds and then uses the money to invest through its pension fund. The key with POBs is to sell the bonds (borrow) at low rates — like 2% or 4% — and then get an investment return with that money that is higher. Because the stock market is relatively low right now, governments might see this as a good time to invest and catch the eventual recovery of the stock market.

But where governments have failed with POBs in the past is getting their timing wrong, such as borrowing money and investing it right before a stock market drop. POBs can be a good tool for governments with struggling pension systems, but they require excellent internal money managers in state, city, or county government to work well. Hopefully Riverside County has the right people in place if they issue $730 million in bonds.

Was this helpful? Yes No

Riverside County could issue almost $730 million in bonds to whittle down its $3.5 billion pension debt, a move meant to save money while tackling a massive, growing and chronic expense that looms over county finances.

The Board of Supervisors last week voted 3-2 go to the bond market to pay 20% of the county’s unfunded pension liability. The Tuesday, March 17, vote doesn’t mean the county will sell bonds right away, but it sets the wheels in motion to get to that point.

Even before the novel coronavirus pandemic upended the global economy and everyday life, county government faced another challenge – how to address a $3.5 billion debt that threatens to grow and consume already scarce dollars for police, fire protection, and other public services for the county’s 2.3 million residents.

That debt, and what the county pays to the California Public Employees’ Retirement System, or CalPERS, was projected to grow through 2030 – and that was before COVID-19 sent markets into a free fall.

Read the whole article in The Press-Enterprise.
_______________________

This article quotes selections from “Riverside County could borrow $727M via bonds to cut pension debt,” by Jeff Horseman in The Press-Enterprise, 3/24/2020.

Infographic May 28, 2021

Who We Are

Riverside County May Borrow $727M via Bonds to Lower Pension Debt

By Jeff Horseman

The Equable Take

Explore More

Montana Pension Laws: Infographic

Retirement Security Report Methodology and Open Source Data

Alabama Pension Laws: Infographic

Riverside County May Borrow $727M via Bonds to Lower Pension Debt

By Jeff Horseman

The Equable Take

Explore More

Montana Pension Laws: Infographic

Retirement Security Report Methodology and Open Source Data

Alabama Pension Laws: Infographic

Stay up to date with our newsletter.