SHIAWASSEE COUNTY COORDINATOR Dr. Brian Boggs is shown explaining the need for the retirement plan bonding resolution adjustment during the special meeting in the Surbeck Building Monday, May 16.

   Commissioner Marlene Webster (R-Dist. 1) listens beside him. All commissioners attended the special meeting Monday, May 16. The ongoing effort has been toward addressing longtime debt accrued over decades due to the previous pension plan, which was often financially undersupported.

(Independent Photo/Karen Mead-Elford)

 

  A special meeting of the Shiawassee County Board of Commissioners was held in Corunna on Monday, May 16, directly prior to the monthly Economic/Physical Development and Health/Human Services meetings. The special meeting was held to adjust for the retirement plan bonding interest rate. 

   County Coordinator Dr. Brian Boggs offered, “We have a brief adjustment to the resolution because of interest rates. When you calculate them out now, the cap was at 5 percent. To make our threshold, the way the bank calculates it, it is at 5.02 percent. So, because of a legal technicality we do have to reapprove the resolution. The treasury has approved our sale of bonds. If the board approves this tonight, we will begin the process immediately tomorrow.”

   Commissioner John Plowman (R-Dist. 7) moved and Commissioner Gary Holzhausen (R-Dist. 3) seconded a motion to accept the interest rate change. The adjustment was unanimously passed.

   Upon request, Dr. Boggs offered the following statement as a concise explanation on the county bonding effort:

   “The goal of the bonding is really about two things – first, to save taxpayer money; and second, to structure debt payments. The retirement plan was created in 1962 and has a history of being underfunded over the last 60 years. 

    This has created a two-track problem in a fiscal year for the county – first, the money owed to the retirement system earned in the year (current workers working); and second, money owed from years past to catch the plan up (otherwise termed debt). These debt payments have a payment schedule from the Michigan Employees’ Retirement System (MERS) to catch the county up. This schedule is based on a short number of years with increasing balloon payments – not that different from a variable rate mortgage on a home that increases dependent on the market. This causes problems in making debt payments because the debt payment amounts increase substantially every year and at different rates, which takes more of the budget. This means that employee pensions are not guaranteed and each year as the payments increase, the county must reduce services to citizens. 

    However, bonding will allow the county to have a set payment that is lower than it currently pays, but for more years. Thus, it will end the increasing balloon payments each year that eats up money for services to the residents and allows the county to save money because of current low interest rates. Essentially, bonding fixes the payments on a schedule, makes it easier to budget, decreases the amount it will take from the general fund so there are more resources for county services, and guarantees the pensions earned. Moving forward, the Shiawassee County Board of Commissioners have already closed all of these pension plans and new employees receive a 401k-style retirement system – all paid during the year. 

    It took 60 years to get to this point and it will take several years to correct the problem, but this will make the retirement financials stable and a major step forward in resolving the issue. The bonding process will be complete within the next week.” 

Retirement Plan Bonding Adjustment Over Interest Rate Approved by Commissioners was last modified: May 24th, 2022 by Karen Elford