To Bond Or Not To Bond: That Is The Question Facing The Legislative Council

For everyone in the audience Wednesday at the forum on Pension Obligation Bonds, their financial futures hinge on the outcome, but for different reasons.

For town employees and retirees, their pensions lay in the balance.

For residents, their tax bills hinge on what action the Legislative Council takes.

But everyone agrees the situation has become untenable: with the Pension Fund only 14 percent funded, something has to be done.

Several former and current town employees urged the council to move forward with bonding the $125 million infusion into the fund, which would bring it to 40 percent funding.

Others said now is not the time to take the risk: with the stock market at record highs, a correction is likely, which would lead to more financial uncertainty as the fund would lose money.

The experts brought in to advise the town said that the current low interest rates make now an attractive time to act.

Currently there's about $50 million in the Pension Fund when there should be more than $400 million. Years of underfunding — and some years, no funding at all — led to the crisis that now threatens the town's fiscal health and leaves hanging the possibility of a state takeover should nothing be done.

Under Mayor Scott Jackson, the yearly pension contribution has risen — this year, $12 million was allocated. But the town's consultants say that number should be about double that. Each month the town pays out about $2 million to its retirees, so even with the higher contribution, the principle is still deplated to make the payments.

On Monday the council is expected to vote on whether to bond the money. Many Wednesday urged them to postpone that vote.

Former Councilwoman Ann Altman, who is now chairman of the Planning and Zoning Commission, couldn't attend Wednesday's forum but resident George Levinson read her comments at the hearing.

"The bottom line is even if bonding is a good idea, now is not the time to make such a risky move," Altman said. She has "strong negative feelings" about Pension Obligation Bonds, she said, and as a member of the council made her feelings known about underfunding the fund.

Levinson too expressed his opposition to bonding. "It's too risky," he said.

Republican mayoral candidate Bob Anthony, a retired Hamden firefighter, said he too isn't sure this is the right time.

"I'm not opposed to bonding, but I want to make sure we bond at the right time," he said. If there is another correction in the stock market, it will be up to the town to make up for any losses the fund incurs, he said.

As a member of the Retirement Board, he's advocated for full funding for year, Anthony said, which would have avoided this situation.

"We have to honor our commitments [to the unions], but I don't think the timing is right," said Central Avenue resident Paul Larock. "We need an era of shared sacrifice, but sometimes I don't think the sacrifice is truly shared."

The unions have done their part, said Wayne Gilbert, the regional director of the United Public Service Employees Union. Over the past six to eight years, his union has made concessions three times, he said.

"We are in the mess we are today because previous administrations and previous councils failed to act," he said. "Real money has been given back to the town by the employees, and that has to be considered," he said.

Town Bond Counsel David Panico, a Hamden native and Hamden High School graduate, said he doesn't want to see his hometown head for disaster. He said that this is the time to take the action.

"There is no more time for delays," he said.

Eric Atwater of the Segal Company, who did the study on Pension Obligation Bonds, also recommended bonding now, noting that his company has no financial stake in the town's ultimate decision.

"For us, this is black and white," he said. "We have no incentive for you to bond."

If the town does decide to bond, it also must take other actions to achieve the goal of making the fund solvent, including making the recommended yearly contributions — which under the bonding agreement become mandatory and negotiating more concessions with the union.

Even so, it will take decades for the plan to become solvent, Mayor Scott Jackson said. "It took 30 years to get into the position, and it will take 30 years to get out of it," he said.

The council next meets Monday at 7 p.m. at Miller Library's Thornton Wilder Auditorium.