The Oakland County Board of Commissioners tonight, Wednesday, Nov. 28, is expected to consider a proposal by county Executive L. Brooks Patterson to refinance bonds issued five years ago to cover the county’s unfunded retiree health care liability. The move, which county officials say is expected to save Oakland taxpayers an estimated $100 million, appears to be a sound one, and county commissioners should grant its approval.
The county was forward-thinking in 2007 when $557 million in certificates of participation were issued to fully fund the county’s retiree health care obligations, and it’s attempting to continue that mindset in issuing limited taxable general obligation bonds, which is expected to save $8.1 million annually for the next 13 fiscal years, from 2014 to 2017.
When the county issued the certificates of participation, it moved its newly-hired employees to a health savings account system after closing out the defined benefit program. Currently, all new employees have defined contribution plans for retiree health care.
Prior to issuance of the certificates of participation five years ago, when interest rates were 6.2 percent compared to the current 2.9 percent, the county had been paying about $60 million annually over 30 years, while the current annual debt service obligation for the certificates is about $48.5 million per year over 20 years.
The principal on the outstanding certificate of participation balance will be whittled back by at least $75 million due to increased investment value of the county’s two retiree health care funds.
If approved by the Board of Commissioners tonight, following the blessing of the board’s Finance Committee two weeks ago, the general obligation bonds would be issued in August 2013 and December 2013.
The county hasn’t been immune to the financial stress put on governments by the economic crisis, and Patterson and others, both Republicans and Democrats, have generally been eagle-eyed when looking for possible cost savings, whether in the form of $1 million or $100 million.
This is just another example of the county administration taking the bull by the horns to save taxpayer dollars in a prudent manner. When the Board of Commissioners meets at 7 p.m. tonight at the Board of Commissioners Auditorium in Pontiac, we hope the 25-member board grants resounding approval of the proposed refinancing.