Wednesday, October 09, 2013

Councilmenber's comment on Dean's plan to borrow to fund the pension obligation.

From The Tennessean: Dean looks to borrow $200M to cover pension obligations

Josh Stites

Metro Councilman Josh Stites called the administration’s plan irresponsible. “It’s the nature of pension bonds: You’re borrowing money to pay an obligation,” Stites said. “We, as individual taxpayers, don’t use our credit card to pay our mortgage. And that’s essentially what this is doing.

Emily Evans
Councilwoman Emily Evans, a former municipal bond underwriter, said pension obligation bonds generally don’t work except in periods of high inflation, “and that’s not in the forecast right now.”

“This is widely considered in the municipal bond business to be a very bad practice,” she said. “To beat the interest rate, you have to take on more risk in your pension fund. And a lot of people out there are counting on that money who have no idea what we’re doing.”

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