Tuesday, June 11, 2013

"POTS of CASH" ... to... "SAVE" YOU MONEY

Hi All,
$85 Million Bond issue in Bloomfield Township, MI.

Please read this article first:
Free Press article by Bill Laitner.    
Bloomfield Twp. set to be 1st in state to cut retiree costs by selling bonds

Now, more comments and opinions from me.....

I wanted this $85 Million bond issue to go to a REFERENDUM...for a vote by the people and so the discussion and the decision making of how to spend OUR tax dollars was more OPEN and TRANSPARENT.... and for many to finally face the reality of this unsustainable form of pension for public employees.
By limiting the process to get to a referendum in a 45 day time limit via a petition with signatures of 10% of the electorate .... is unfair.  There should have been a mandatory series of Town Hall type meetings before the vote of the leadership.   Honestly, I just couldn't afford the attorney nor afford to give the time needed to succeed in the referendum process.  

However, I did get people talking.  Now I need to get people THINKING .  When it comes time for more Township millages and trustee elections,  I hope all taxpayers will be paying attention, listening, talking, thinking, questioning, demanding facts and taking appropriate action by voting.

For those looking just at the $85 Million BOND issue:   I get it.  We owe the money... a bond at this time potentially  "saves" us money.    I understand an argument about lower interest rates save  money.  I understand investing money can make money or lose money.   

However, everyone needs  to look at both sides of investing RISK.   My question is WHO should be taking the RISKS?   In this township pension plan... the risk taker is ALWAYS  the taxpayer....  as the pension must be 100% funded until the last man/woman is gone. 

Our elected officials need to make contracts/agreements/ pension plans/  that are fair to the employee.... yet mindful of the taxpayer and what costs result from each decision.  
Did our leadership make payments to satisfy all those contracted  expenses EACH YEAR  from the taxes collected?   I'm not sure.
How did the pension fund become UNDER-funded?   
Was it:   Failed to make payments?  Lost money in investments?  What is it?

I still would like to know more about the pension plan and how it has been funded to date.  Where are the details of this plan?  What assurances are there that this new "POT of CASH" from the Bonds will 100 % satisfy the taxpayer obligation to this fund?  There are none.  This type of pension is unsustainable for many reasons.  This is not the last "pot of cash"  that will be needed for this pension fund...in my opinion.

What I don't understand is WHY the fund was UNDERFUNDED? 
Just three years ago this pension fund was FUNDED  @ 82%.   
NOW... with a new deal from the legislature and the Governor for municipalities to pay for underfunded pension plans,  the Township pension plan is mysteriously...to me...  now only 61% funded.  (keep in mind this fact:  one could only borrow what was "underfunded")    
So if the bond "funding" can drop 21 % in 3 years in today's world, how much will the fund be underfunded in twenty years when THIS bond ends?   
We have current employees still in that fund. 
They might not retire for another 20 years and live for another 30 years.  Bless them.

This pension was closed to NEW hires....not existing employees.  What I argue is that this TYPE of pension plan should have been closed to ALL.  Something should have been done/ offered/ negotiated/buy-out/ reorganized.....years ago because this kind of pension is unsustainable.  The taxpayer may "save" some money by borrowing $85 million...for twenty years...  but that may NOT be enough to keep the pension funded for the NEXT twenty years...thirty years.  
This is what the taxpayers should know.... and going to a referendum... to discuss the wisdom of bonds versus OTHER OPTIONS should have been discussed by the community.

A quote from the article:   "Bloomfield Township closed its employee pension plan in 2005, switching all new employees to 401(k) plans that are funded by the employees’ own deductions, officials said."  
This quote needs a FACT CHECK.  I recall that the township DOES make a contribution to the new employee 401(k) pension plan.   The amount ??.   Something to look into.   Probably need to FOIA. 

The article used the buying of a home as an example of saving money.... Yes, some people refinanced to "save" money.  I get that.  Some of those people that refinanced their homes... may still be on track to lose their home.    On the other hand, in order to "save" money, some people faced reality and said..even though borrowing money is cheap right now...I don't have the financial resources to pay this amount of money back any more.     Some people said .. this isn't working.  I can't afford this home anymore.  What else can I do?   Give me some other OPTIONS.  Sell.  Rent.  Buy a RV or boat and live there  or  even go  live with family or friends.  What other options do I have to "save" money other than borrowing cheap money? How can I get out of debt?   Have the discussion/ exchange of ideas/ listen to each other before making the final decision. 
That's what I wanted and still want  from the Township officials:  the taxpayers should be part of the discussion/ decision making.   I can hear their come/back.... we had two study sessions and this as an agenda item at the Board of Trustees meeting. True.  But who knew this was happening?

Think about this quote from the article:  "Those tens of millions of dollars would be invested, and the account would be used to pay off the amounts due to township pensioners over the next two decades, Perkins said."
My question is:   what about the pensioners AFTER the next two decades?   Has anyone thought that far ahead?    
Now I want you to think about YOUR investments and all the money you have left in YOUR retirement account after 20 years of investing and coping with reality.   Some people have LOST money.  Will the Township lose this money?  Did the Township lose some money from this pension plan in the 2008 to now period ... or any other time period?  A touchy subject...but where are the financial reports from those years?  FOIA?
There is NO difference between the township pension plan funding  and your personal retirement plan funding  ..... YOU fund it.   The difference is the township pension plan MUST always be re-funded by YOU, the taxpayer  ....  Your personal pension plan is what amount you can still afford...and only then.

Another quote:  "The savings comes from the big increase in the pension plan’s expected  investment returns, made possible by the large pot of cash provided by the bond sale, he said." 
Whoopee...I'm at the end of the rainbow!  Not.
There were OTHER OPTIONS  to fund this pension.   I want to know what they were.    I want to know more about Township finances... more than what is found in the annual budget page.  I want to know what facts gave the township a AAA rating?  Is there another  "large pot of cash"  somewhere  that could relieve some of this problem without incurring more debt  to  "save"  money?

Please....do some thinking. 
The township wants to spin this issue to be.... saving you money.... by borrowing cheaply.  
They are the ones that put you into this debt by their decisions. 
We are not getting out of this debt...we are attempting to manage the pension fund for 20 years....with a lot of risk,  and all the risk is on YOU... not the employee.   We are not solving the problem.
"POTS OF CASH" .....  the government/ taxing authority way to try to convince you that it's not costing you money... you are "saving money".

 Sorry,  a debt is a debt.


PS:  for my friends in the Bloomfield Hills School District living in Bloomfield Township:
I see the Bl. Hills Schools are patting themselves on the back in this article about how much money they are "saving"  YOU in today's bond market.  I wonder how much TOTAL BOND debt the Bloomfield Township w/ Bloomfield Hills Schools taxpayer is obligated to pay?  Over $200 million?

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