Planning and Development Committee

JOINT FAVORABLE REPORT

Bill No.:

HB-7296

Title:

AN ACT AUTHORIZING THE FUNDING OF UNFUNDED ACCRUED MUNICIPAL EMPLOYEES' RETIREMENT SYSTEM LIABILITIES BY MUNICIPALITIES.

Vote Date:

3/24/2017

Vote Action:

Joint Favorable

PH Date:

3/22/2017

File No.:

560

SPONSORS OF BILL:

Committee on Planning and Development:

REASONS FOR BILL:

This bill is designed to allow municipalities that join the Connecticut Municipal Employees Retirement System (CMERS) and which incur an outstanding unfunded accrued liability to the system the option of paying this obligation by issuing bonds instead of making payments in accordance with CMERS repayment schedule.

RESPONSE FROM ADMINISTRATION/AGENCY:

Secretary Benjamin Barnes Office of Policy Management (OPM):

OPM submitted testimony in support of the HB 7296. They stated that Connecticut already allows pension obligation bonds (POBs) to reduce pension liabilities. OPM however points out that the issuance of POBs (which require an OPM review and approval from the secretary of OPM and the state treasurer) would not be appropriate in this particular circumstance due to certain statutory requirements on POB's such as information on the municipality's investment strategy for locally-managed pension funds. They state that the bill provides an overall sound public policy measure.

NATURE AND SOURCES OF SUPPORT:

Mayor Joseph Ganim City of Bridgeport:

The city of Bridgeport testified in support of HB 7296. They state that this bill would allow Bridgeport and other municipalities to issue bonds to pay of unfunded pension liabilities to the CT Municipal Employees Retirement System (MERs). They state that this is estimated to save the cities taxpayers roughly $68 million dollars over the next 26 years. The give a figure that the bonded interest rate would an estimated 3.5-4.5% which is a major difference in the current interest rate of 8%.

The city's testimony is quick to point out that this does not reduce the payments the city is paying to the CT MERs on an annual basis only the cities unfunded accrued debt.

NATURE AND SOURCES OF OPPOSITION:

None expressed

Reported by: Wade Packer

Date: 4/10/17