Baltimore County will borrow up to $260 million for its pension system under a plan approved unanimously Monday by the Baltimore County Council.
The proposal was part of a two-bill package approved by a 7-0 vote.
The borrowed money is needed because the board of the Baltimore County Employees Retirement System voted to reduce its expected rate of return on investments. That change, made in July, would result in an additional $15 million payment from the county next year.
"That amount would grow to a much larger level over the next 30 years," said Keith Dorsey, the county's budget and finance director.
Without the change, county officials estimate that it would have to contribute $4.8 billion to the retirement system.
With the change approved by the council, the county estimates it will now have to contribute $4.1 billion over the same time period. The county expects to save more than $260 million after factoring the more than $499 million in principal and interest payments on the bonds, Dorsey said.
Of course, all of that is predicated on the county earning more on its investments than the nearly 4.25 percent interest. If those assumptions are wrong, the county could lose money and taxpayers could end up footing the bill.
A second bill added increased pension contributions recently negotiated by the union representing corrections officers. The bill also granted a death benefit to adult children of retirees with at least 15 years service to the county. Previously, only minor children of those employees were eligible for the benefit.
Would someone please share the specifics of this?
What's the county to do? Go deep into leverages and derivatives and get their hands chopped off at the elbows? They screwed up MainSail II and then went mute about who was responsible. These are local pols, not licensed brokers, playing with other people's money with the knowledge if anything goes south, they'll be retired and the taxpayers will foot the under. The only winners here are the deal brokers and bond salesmen.
If this solution is good for the pension system, why don't we just float bonds and eliminate income and property taxes on all of the residents of Baltimore County! Now let's go another step, have the state of Maryland and every other county and state in the country do the same thing!! Something really smells fishy here. Using arbitrage for this purpose has to catch the IRS's eye one would think. Be nice if someone who specializes in government issued bonds would comment on whether or not these bonds qualify as tax-free upon review by the IRS.
Now the really bad news. The problem is not solved. They will be back.
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