The Chowchilla City Council has embarked on a program to handle the city’s unfunded pension liability debt and also save money on the interest.
Unfunded pension liabilities, a financial burden of most municipalities in California, began a few years ago when the investment schemes of the state Public Employees Retirement System did not pan out.
Losses on investments led to the pension system no longer having enough money to pay pension obligations for the future. As a result, cities, counties and other members of the retirement system became liable for the promised pensions — thus leading to the unfunded liabilities.
In Madera County, Chowchilla and Madera, and the county itself, all face unfunded pension liabilities.
On Tuesday night, the Chowchilla council voted to pursue a pension obligation bond issue which would allow the city to pay off the pension system liability and save money on the interest debt.
The total amount of the city’s unfunded liability is $10.2 million, due over a 28-year term. With interest, the total debt at the end of 28 years would be $18.9 million.
Using pension obligation bonds, in which the city would raise money by selling such bonds and using the money to pay off the pension system early next year, would result in the saving over 28 years of some $3.7 million, according to information from Wulff, Hansen and Co., Chowchilla’s bond advisory firm.