Champaign Council Rejects Pension Bond Plan
Champaign City Council members have unanimously rejected the use of pension obligation bonds as a way to avoid service cuts during tight financial times.
Council members sided with administrators, deciding that using a low-interest loan to fund police and fire pensions carried too much uncertainty. City Finance Director Richard Schnuer said the investment risk was just too high. Council member Deb Frank Feinen said she made up her mind after reading a memo from Schnuer, and doing a quick web search on the bonds.
"When our financial adviser sits before us and talks about governments being risk averse, he's right, and there's a reason for it," Feinen said. "We're not individuals. I'm not playing with my home finances. Instead, I have a wider obligation not to take the easy way out."
Schuner also said issuing the bonds could affect Champaign's triple-A credit rating, making it harder for the city to issue debt in the future. Council member Tom Bruno said the city should only consider such an option if it wants to place today's financial burden on future generations.
"This is the year we should be feeling the pain," Bruno said. "Because this is the year that the recession has really hit the municipalities with a loss of revenues. I wish it wasn't a painful year. But if there's going to be painful years, maybe it ought to be this year, and not when my kids are my age."
Council member Mike LaDue said the city has managed its debt conservatively in the height of a recession. And he said those kinds of decisions, and not the issuing of the pension bonds, have allowed the city to take on a project like drainage improvements along John Street, where several homes have experienced flooding.
Champaign Mayoral Candidate Don Gerard said the pension obligation bonds would have been an option had Schnuer started researching the idea about 10 months earlier, when interest rates were about 2-percent.
"This will go right down the chute, but it's a shame that a year ago this wasn't looked at," Gerard said. "Because a year ago, it could have been a great opportunity. And I think the budget is something that we've been looking at for two years. These type of options should have been looked at a year ago. I'm very disappointed that they weren't."
The plan to use the bonds lost 8-0, but Mayor Jerry Schweighart said the discussion will likely go on for one more night. He and Gerard will debate one another Wednesday evening.
The debate, organized by the Junior League of Champaign-Urbana, begins at 6:30 at the Champaign Public Library.