MAYOR AND COUNCIL APPROVE SALE OF BONDS TO FUND PUBLIC SAFETY PENSION OBLIGATION
At Tuesday’s Regular Meeting, the Tucson Mayor and Council approved the sale of Certificates of Participation (COP) to fund the City’s growing obligation to the Public Safety Personnel Retirement System (PSPRS). The PSPRS system funds the fire and police personnel pension program. The PSPRS obligation currently stands at $1.5 billion and is projected to grow to a peak annual cost of $240 million to the City’s General Fund.
The strategy, approved by Mayor and Council, addresses the long-term PSPRS obligation by borrowing funding at unusually low interest rates and investing those funds. The investment earnings will be used to fund the pension obligation. This has the potential, over the 25-year plan, to save the City more than $800 million, reducing future burdens to the General Fund, preserving essential services, saving taxpayer dollars, and helping to stabilize the City’s financial future.
Mayor and Council also created the City of Tucson Public Safety Pension Trust to manage, invest, and safeguard the bond proceeds. In addition to the composition of the trustees, the Trust will have an independent investment advisor and trust administrator. The trustees will adopt an investment policy and guide the investment of the funds. Additionally, the Trust will be audited as part of the City’s annual audit.
“This is a historic, once-in-a-generation decision that puts Tucson at the forefront of our state and our nation, when it comes to securing our public safety pension system,” said Mayor Regina Romero. “This move has the potential to save Tucsonans more than $800 million taxpayer dollars over the next few decades and ensure the retirement security of our first responders. My thanks to the City Manager and his financial team for their diligent work and commitment to positioning Tucson on such strong financial footing.”
“The approval of the pension obligation bonds shows great vision by the Mayor and Council,” said City Manager Michael Ortega. “This plan will positively affect future generations and ensure Tucson continues to thrive.”
City staff and financial advisors are working to issue the bonds in the next few weeks to take advantage of the market’s historically low interest rates, approximately 2.95%. Total issuances of the taxable bonds will not exceed $670 million. The COPs are collateralized debt, secured by City assets. When combined with the current investments at PSPRS, the City anticipates achieving at least a 75% funded level; one of the highest funded levels in Arizona. An improved level of funding also has positive credit implications for the City, potentially resulting in further taxpayer dollars savings.