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Kalamazoo Commission gets ball rolling on big bond sale


KALAMAZOO (WKZO) -- Kalamazoo City Commissioners have taken the first step toward borrowing 100-million dollars to help erase a 188-million dollar projected deficit in their retiree healthcare fund.

The numbers are huge and Vice Mayor Dave Anderson who was a member of the Task Force says the issues are as serious as they get . An agreement will commit the City of Kalamazoo to a course of action that will take decades to play out.

Commissioners formally received a task force report on the matter, and initiated the paperwork to take out an Other Post-employment Benefits Bond, or OPEB bond.

The special municipal bonds permit cities to borrow money at a low rate, and if all goes as planned, invest it for a higher rate of return, and use the difference to fund legacy healthcare agreements.

The state only allows OPEB bonding under certain circumstances and the availability of the bonds will expire at the end of the year.

There are risks involved because while the debt payments are required on a regular basis, investments can be risky.

Commissioners have not committed to the bonding scheme.

They have only agreed to start the paperwork in case they do agree to sell the OPEB bonds

They plan a lot more open discussion on the proposals before they take any actions.

Covering the rest of the 188-million dollar deficit will depend on negotiations with current workers and retirees on ways to cut the estimated value of the city’s obligated healthcare costs. That may mean new plans, signing some up for federal coverage or pursuing other options, if that is even possible.

Commissioners concede that both efforts will be difficult and require risk, but they say not doing anything will almost surely leave the city in even worse shape financially in the decades ahead.

Commissioner Don Cooney, who was also a member of the Task Force, wants to hear from opponents to OPEB bonding to find out why they dislike it.

Commissioner Bob Cinabro will be abstaining from the votes and discussions because he is a former city employee and may have a conflict of interest.  

They plan more discussion and votes at their September 2nd meeting.