Friday, November 16, 2007

Peterson May Ditch Pension Bond Deal

Mayor Bart Peterson may ditch his planned $460 million pension bond obligation issue to shore up city finances and, instead, leave the decision up to his successor. Peterson planned to use some of the revenues from the 65% increase in the COIT to pay debt service on the proposed pension bond obligation issue. Mayor-elect Greg Ballard wants the state to assume the debt. The Indiana Daily Insight, quoting Bond Buyer, reports:

Bond Buyer reports that "Indianapolis’ planned $460 million pension obligation bond issue, a key piece of Mayor Bart Peterson’s plan to shore up the city’s finances, is up in the air following his surprise defeat last week at the hands of Greg Ballard, who campaigned on promises to hold down debt and eliminate property taxes. With Peterson out at the end of the year, the pension obligation bond is one of several projects and financial plans that have come under renewed scrutiny. As a result, officials have yet to decide whether they will move forward with the deal under the current administration or wait until Ballard takes office, said Barbara A. Lawrence, executive director of the Indianapolis Bond Bank. “It was our intent to move forward with the bond issue, and obviously that is still an option, but we are weighing our options given what happened in the election last week,” Lawrence said. The bank — which would serve as the issuer for the pension deal — plans to decide by next week. While Lawrence left the door open to moving forward, it still requires city/county counci approval. If the deal is put off until Ballard takes office, it’s uncertain whether the city would proceed as Ballard has said in published reports that he wants the state to assume the liability. Other debt transactions that may come under fresh review include a convention center hotel financing, some refunding issues, and possibly a water works issue, Lawrence said ... “From a timing standpoint, with the change in leadership at the city, we want to review that process again and see if it’s prudent to proceed at this time” .... Under Peterson’s proposal, the pension obligation bond issue would fully fund the city’s currently under funded pre-1977 police and fire pension funds. The post-1977 police and fire pension plans are mostly funded. A first lien on the county option income tax would secure the bonds. Raising the local option income tax to 1.65% from 1% was a key part of balancing Peterson’s 2008 budget, which earmarks $30 million to cover debt service on the pension issue. The income tax increase, estimated to raise an additional $87 million, also will fund public safety programs and compensate for a decrease in the city’s property tax levy. Some observers say Peterson’s measure to raise the income tax at a time when rising property taxes have sparked protests across the state cost the Democratic incumbent the election to a Republican political newcomer .... Standard & Poor’s ... revised its outlook on the city’s AAA GO credit to stable from negative, citing the income tax increase as leading to a structurally balanced budget, as well as the city’s plans to fund the outstanding pension liability. “We feel the city has made strides toward getting their budget back into structural balance,” analyst Eden Perry said. “We’re not going to have a knee-jerk response to the city putting it on hold.” Fitch Ratings rates it AAA and Moody’ Investors Service rates the city Aa1. The city has $318 million of debt that carries an unlimited-tax pledge."


Anonymous said...

Ballard was opposed to the raise in COIT and said the shortfall could be paid from trimming the "fat" in the budget....the voters dont want him. The Dems should give Ballard and the voters what they want and rescind or sunset the increase and let Ballard trim, trim, careful what you wish for or say you can do.

Anonymous said...

6:39's comment is the unfortunate kind of "gotcha" that too often prevails in politics today.

Let Mayor-elect Ballard determine, while in office, how he continues the pension balance act. I am interested in his solution.

I'm not interested in rinky-dink politics with approved budgets.

Whether you voted for Ballard or not, the quicksand underneath him shouldn't be shifting by the hour.

Sidebar: to the geniuses in Petersons office and campaign, who determined that August 2007 was THE ideal time to address the unfunded pension liability. The police pension fund was in bad shape in 2000, and in 2004. Why now?

It was the nail in the mayor's political coffin, especially in the same timeframe he publicly embraced hideous council leadership.

Anonymous said...

bart peterson bragged for months about raising the income tax to pay for pension shortfalls.

Now we find out the truth: "which earmarks $30 million to cover debt service on the pension issue."

"Debt service," Virginia, is INTEREST on a loan or obligation.

Anonymous said...

Peterson sought the COIT this summer because the legislation required this be done by Aug. 1st. It wasn't until the full extent of the property tax crisis was known that Daniels extended the window to pass a COIT. Now, the legislature must act on Organization Day to change the original legislation to account for Daniels' extension. If they fail to act, all COITs passed around the state AFTER Aug. 1st will be invalid. We need to secure these pensions.

Anonymous said...

Wonder what other financial traps are going to come up for our city before Peterson leaves?

I fear things are far worse than we ever thought.

Peterson was hell bent on getting that COIT through no matter what. I smell something and it stinks.

I suppose we will all know soon enough.


Zappatista said...

So, how are the problems of Indianapolis the states problem? I just don't get it. The taxpayers in this state should not have to pay the tabs for this city/county.

Anonymous said...

Ballard and the republicans and the FOP were all opposed to the COIT repeal it and let them fikgure out an answer to the pension mess left by Goldsmith WITHOUT raising taxes.

Anonymous said...

Ballard and the republicans and the FOP were all opposed to the COIT repeal it and let them fikgure out an answer to the pension mess left by Goldsmith WITHOUT raising taxes.

Anonymous said...

What about the 20+ million increase in pension deficit by IPD and Marion County? The dropout provision allowed 155 IPD officers to receive 100k if they retire in the next three years. Then Frank added another 5 million for his staff.

Just saying it's not all past history 20 million isn't chump change.