At the May 15, 2013 meeting of Washtenaw County board of commissioners, board chair Yousef Rabhi pulled from the agenda a resolution related to a $345 million bond proposal, pushing back a process that was originally scheduled to start that evening. The proposed bond issue – the largest in the county’s history – is intended to cover unfunded pension and retiree healthcare obligations. The process is expected to be picked up again at the board’s July 10 meeting, when a public hearing will be held on this issue.
On May 15, the board also scheduled a special board meeting for July 24, to allow for additional votes and public commentary related to the bond proposal, if needed.
The resolution that originally appeared on the May 15 agenda would have authorized the publication of a “notice of intent” about the bond issue. Several commissioners had previously expressed concern at the timeline, given that the county does not yet have the updated actuarial information it needs to set the specific amount of the bond issue. In explaining the decision to delay this process, Rabhi said he wanted to provide more time for public input, and to move the vote until after the actuarial information has been received. He also announced his intent to hold a series of informal meetings at coffee shops in Ann Arbor to discuss the bond proposal with residents. He’s calling the meetings “Bonding Over Coffee.”
The notice of intent is a standard initial step in the bonding process. It must be published in a “newspaper of general circulation within the county,” and lets residents know that they have 45 days during which they can circulate petitions to require a vote of the people before any bonds are issued. The notice must include a maximum amount of the bond issue, a maximum interest rate, and a maximum term for the bonds.
The amount of the bond issue is an estimate at this point and will not likely be as high as $345 million, according to the county’s bond counsel, John Axe of Axe & Ecklund. To set the specific amount of the bond issue, the county needs updated actuarial information – but those reports won’t be ready until late June. The board is expected to vote on publishing the notice of intent on July 10.
The board has been briefed on this proposal most recently at a May 2 working session. [See Chronicle coverage: "County Board Debates $345M Bond Proposal."] At that time, the county’s bond counsel – John Axe of Axe & Ecklund – had indicated a timeline that included giving initial approval to two other bond-related resolutions on May 15, in addition to the notice of intent.
Those other resolutions were: (1) a resolution setting the bond’s maximum amount; and (2) a continuing disclosure resolution that’s standard for all bond issues over $1 million, indicating that the county will provide updated financial information annually during the term of the bond. However, neither of those two other resolutions were on the May 15 agenda when it was made available to the public prior to the meeting. It’s likely those resolutions will also be on the board’s July 10 agenda for an initial vote.
The bonding is made possible by Michigan’s Public Act 329 of 2012, which the state legislature passed in October of 2012. [.pdf of Public Act 329] The law enables municipalities to issue bonds to cover unfunded accrued pension and retiree healthcare liabilities, but has a sunset of Dec. 31, 2014. The county faces a $30 million contribution toward these obligations in 2014, and is looking for ways to manage that obligation.
The most recent estimates put the county’s maximum retirement obligations at $340.8 million. The board was presented with calculations for borrowing $344 million at an assumed average interest rate of 4%. The county would pay $239 million in interest over the life of the bond, for a total of $583 million in combined interest and principal.
County administrator Verna McDaniel is advocating for this move, in part to make long-term budgeting easier by having predictable bond payments. The bonding is also linked to new 10-year labor deals approved earlier this year, which closed the defined benefit plan to employees hired after Jan. 1, 2014. Unless the defined benefit plans were closed, the county would not have been allowed by law to proceed with this type of bonding.
This brief was filed from the boardroom of the county administration building, 220 N. Main in Ann Arbor. A more detailed report will follow: [link]