After inviting public comments at public hearings in September, the Gila County Board of Supervisors approved a shrewd plan to take advantage of low interest rates to finance debt accumulated by unfunded pension plans for public safety and corrections employees. A statewide issue that other public entities are also grappling with, the Public Safety Personnel Retirement System (PSPRS) obligates Gila County to fund $16.59 million in pensions for Gila County Sheriff’s officers, detention officers and dispatch personnel.
Created in 1968, the PSPRS administers the statewide retirement program for public safety personnel who are regularly assigned hazardous duty while employed by the state of Arizona or its political subdivisions. According to arizonatax.org: “PSPRS is one of the most underfunded public retirement plans in the nation with a funded status of only 47%.”
The Board of Supervisors aims to change that in Gila County with smart financing.
As of today the unfunded pension liability is accruing at over 7% annually. Just as homeowners refinance to capitalize on interest rates when they’re at an all-time low, Gila County manager James Menlove and finance director Mary Springer proposed the county issue taxable bonds with interest rates below 3%, with a present value savings of more than $7.5 million, and fully funding the pensions of county public safety and corrections officers. Securing a low interest rate was key to maximizing the overall savings with the financing plan.
The Gila County finance team once again displayed solid management practices by making significant progress in catching up past due audits, recently achieving a credit rating of AA Stable from Standard and Poor’s.
The Board of Supervisors voted unanimously on the plan after public hearings led by fiscally-savvy Gila County management staff, who contracted with financial underwriter firm, Stifel Nicholas in Phoenix to broker the transaction.
The work sessions over the summer and public hearings in September offered a chance for the supervisors to explain to Gila County citizens the long-term financial ramifications of this unfunded debt — and how they propose to take the bull by the horns and resolve it. Taxpayers should be proud of the supervisors for dealing with this head-on, taking a proactive approach, and unanimously acting on financial advice that both protects our public safety personnel retirements — and saves money, in the long run. In addition to approving the taxable bond financing, the supervisors also approved a pension contingency reserve policy that sets aside reserves to address future market or actuarial adjustments if necessary so the pension plans remain 100% funded.
Many other public agencies are looking for similar solutions and Gila County, Pinal County, and City of Flagstaff were the first in Arizona to take advantage of historically low interest rates that will save taxpayer dollars for years to come.