Despite additional challenges for municipalities working through the COVID-19 pandemic, the City of Westland has continued to find solutions to tackle some of the biggest city issues, including the unfunded pension liability.
The City of Westland has issued $82,470,000 in bonds to pay for a majority of the costs of the unfunded pension liability for the defined benefit pension plan for government employees administered by the Michigan Employees Retirement System of Michigan (MERS), according to Mayor William R. Wild.
The 2021 bonds will allow the city to fund 95 percent of the unfunded pension liability (up from 40 percent) by borrowing at a low all-in fixed cost of 2.39 percent, Wild explained.
By issuing the 2021 bonds at this low fixed rate, the city is expecting to see considerable cost savings over the life of the 2021 Bonds as compared to their existing projected pension cost repayment schedule. The city financing is expected to generate more than $78.04 million in cash flow savings or 70.21 percent in Net Present Value (NPV) savings (as a percentage of bonds issued) during the term of the city projected pension liability payment schedule, Wild said in a prepared statement.
Westland began phasing out the defined benefit for employees beginning in 2010 and by Jan. 1, 2014, all new employees hired in under are in a defined contribution retirement program (similar to a 401(k) for private sector employees), Wild added.
“The City of Westland remains committed to finding creative solutions to the problems we face, along with many other municipalities,” Wild said. “With the much appreciated support we received from the Michigan Department of Treasury, we were able to take advantage of low interest rates and our excellent bond rating in order to honor our commitment made to our retirees without increasing taxes.”
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