Bloomfield Township Residents Air Concerns Over Pension Payment Plan

Bloomfield Township will seek state approval to sell roughly $80 million in bonds to pay off a lingering pension plan liability within a month, officials said at a town hall meeting Tuesday. 

The Bloomfield Township Board of Trustees, which unanimously approved the plan in May, will have a bond proposal for consideration by the State Treasurer's Office within two or three weeks. From there, it could take a month for approval, but officials said the sale could begin in October. That's well within the sunset provision of 2014 that Gov. Rick Snyder implemented in a new state law that makes the plan possible. Previously, municipalities could not sell bonds in order to pay retiree obligations. 

The measure is a pro-active step that could save the township millions in the long run, township Leo Savoie said during the 90-minute session at Township Hall.
The township contributed $5.2 million from the general fund this year to cover retiree costs, but would have to basically double that next year ($10.7 million) 
Savoie said he anticipates the township will have to pay roughly $6 million annually for the bonds, but that the plan will be fully funded with no contributions in 20 years.
 
The annual contribution, on average, would be about $9 million if the township does nothing. 

"There is a risk . . . but by doing nothing, next year we'll have to spend $5.5 million more," Savoie said before about a dozen residents and other elected officials. 

The gathering was one of two public town hall meetings Savoie organized after some residents questioned the idea of accruing future debt to pay the liability.

The magic number

Township officials and financial advisers noted the plan is predicated on a 6.25 average return on the investments, and not everyone is as optimistic.

The township investments earned nearly six percent returns over the past decade, which included two terrible years in the stock market. The extremely low interest rates over the last 10 years also hampered the township's ability to achieve the desired 7 percent return on investments, Finance Director Ray Perkins said.

As a result the current value of the unfunded liabilities jumped from about $29 million to $80 million.

Multiple residents asked about how they could predict the future market and anticipated retirement costs of 210 active employees when contracts will be negotiated over time. 

"We can't predict the future and have a rosy picture," said resident Isabella Tucci, who also asked why township employees were recently given 2 percent raises in light of the pending bond plan. 

"It's costing us now and it will cost us in the future through those salaries (in the retirement system)," she said. 

The union contracts don't call for new negotiations until 2017. Treasurer Dan Devine said those raises followed a four-year wage freeze for public safety employees and five-year freeze for employees in other departments. 
Devine also noted the township made significant changes to its pension and health care plans, which included the end of lifetime health care benefits for employees hired after 2011, and the elimination of longevity benefits. 

Other questions ranged from undisputed numbers from township officials and the need for stronger fiscal constraints. 

What's next?
In addition to the bond application, the township will deliver a comprehensive financial plan, which will be posted on website upon adoption by the board.

Tuesday's meeting was recorded by Bloomfield Community Television. Recordings of the first town hall on June 26 will be broadcast at 9:30 a.m. Wednesday;10 p.m. Thursday; and noon Friday.

This story was updated to reflect that the rate of return was 5.95 percent over the last nine years, including the two down years in the stock market.