Oregon’s Public Employees Retirement System (PERS), charges 8% interest on the debt of local governments that don’t have enough cash in the fund to meet their obligations, according to a report in the Oregonian newspaper.
“This is the most positive financial transaction in my whole career,” Oregon City Finance Director David Wimmer, told the newspaper. By refinancing the city’s debt through a bond sale, cash-strapped Oregon City will save $400,000 a year for the next 22 years. Salem will save more than $1 million a year.
“It’s a bit of a bump for every fund,” said City Manager Mike Swanson of Milwaukie, which has a $4.2 million unfunded pension liability. The savings should allow Milwaukie to avoid cutting library services or other popular programs, Swanson said.
In recent years, many local governments have refinanced pension debt to reduce payments, just like homeowners who have refinanced mortgages. In 2003, the state covered its pension debt by selling $2 billion in bonds.