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Date: 5/10/2022
SPRINGFIELD – Following an April 25 special meeting, the City Council endured extensive conversation surrounding the authorization of $755 million for the purchasing of pension obligation bonds. The council ultimately approved the bond authorization despite divided perspectives during their May 2 meeting.
Background
Chief Financial Officer TJ Plante introduced the order during the council’s prior meeting, explaining that the authorization would allow the city to potentially get ahead of the city’s growing pension obligation fund.
With approval, Plante said the city would decide whether to pay the full $755 million bond toward the pension fund, pay part of the bond or ultimately decide not to use the bond. Plante considered the request a “unique solution” as the city’s current pension payment plan will require a significant annual increase of expenses toward pension payments.
Currently, the city funded 35 percent of the pension fund, which is considered one of the lowest funded pensions in the state. Plante said the financial team continues to meet weekly alongside Ward 7 City Councilor Timothy Allen and outside assessment firms.
“This will allow us to position ourselves to potentially sell up to $755 million to address our 35 percent funded pension system,” said Plante.
City Council Meeting
After City Councilor At-Large Justin Hurst ended conversation via Rule 20 during the April 25 meeting, the council reassessed the conversation with the city’s financial team. Hurst reiterated that the bond request comes with a lot of unknowns.
“It just seems to me that we don’t know what it is we are approving for you to spend. I don’t know how folks in good conscious can just give [the financial team] all the authority to spend $755 million. To me, that’s just an awful lot of money,” said Hurst. The councilor stressed that process feels “rushed,” while advocating for more deliberation in subcommittee meetings and increased public awareness.
Hurst also cited his waning trust in the administration as source of skepticism surrounding the order. “I don’t think the track record is there…A lot of this revolves around us trusting the administration to do the right thing, and time and time again we get burned,” said Hurst in reference to the recent Elm Street Housing Project vote.
Plante explained that the city is accelerating the pension bond request due to the rising costs of inflation. The financial officer shared that the city must endure a 21-day moratorium period after the council’s acceptance before spending any of the authorized funds.
City Councilor At-Large Tracye Whitfield advocated that spending to address the pension costs now could limit the city’s finances during a potential recission. “It’s our fiduciary responsibility to do what’s right for the City of Springfield…If we go into a recission, we’ll face layoffs,” said Whitfield.
Whitfield argued for the money to go elsewhere. She said the city could better help residents by decreasing property taxes and improving other community projects.
Ward 6 City Councilor Victor Davila considered the order as an “opportunity” for the city to addressing the lingering pension problem. The councilor also expressed his faith in Plante’s financial acumen “We may not always agree, but I have no doubt you have the city’s best interest at heart,” said Davila.
City Councilor At-Large Jesse Lederman acknowledged the risk behind the bond authorization but said he felt comfortable moving forward with a potential purchase. “I feel comfortable voting to authorize it to go forward based on those models and based on the understanding that there are other checks and balances built in at a state level,” said Lederman. Ward 2 Councilor Michael Fenton and Allen expressed similar support for the authorization.
Ultimately, the City Council approved the pension bond authorization in a 10-2 vote.