Finance Committee Passes Pension Obligation Bond Resolution

February 10, 2022


Finance Committee Passes Pension Obligation Bond Resolution

PROVIDENCE – At tonight’s Providence City Council Finance Committee meeting, a resolution was passed bringing the city one step closer to reducing its massive unfunded pension liability. The resolution requests that the General Assembly enact legislation authorizing the city to issue general obligations bonds to finance a contribution toward the $1.2 billion unfunded pension liability of the Employee Retirement System (ERS). According to the Providence Pension Working Group, the city’s pension system is among the lowest-funded pension plans in the country. The Council supports a pension obligation bond of not more than $515 million, contingent on several financial guardrails, including:

• Total pension obligation bond payments and the city’s actuarial determined contribution (ADC) shall not be less than $93.1 million for the first 10 years

• City shall not close any pension bonds without receiving the City Council approval and bonds shall not exceed an interest rate of more than 5%

• Expected annual rate of return shall not exceed 7%

• Salary scale shall not exceed 3% per the current actuarial experience study

• City shall make 100% of its annual ADC payments

“The Providence City Council understands that inaction is not an option here, but we needed to make sure certain financial guardrails were set in place for such a large transaction….

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