BY BUDDY NEVINS
If you are a Fort Lauderdale home owner, I would be afraid. I would be very afraid.
The city appears at the end of its financial rope to knowlegable observers.
The problem is the out-of-control pension costs in the city.
The annual budget.
Pension costs are rising…fast.
They were $36 million five years ago. They are now approaching $60 million.
The city can’t pay the bill. Fort Lauderdale borrowed $30 million last year to cover the pensions.
Last week the city agreed to issue $340 million in pension bonds. To cover the pensions.
They are a special kind of bond called pension bonds.
Pension bonds are the ultimate kick-the-can down the road form of financing: Pay pensions now with money you’ll pay back later…with interest.
And this was a city hall that used to be fiscally conservative?
I can’t believe there isn’t a revolt of taxpayers at city hall. There will be, but that will be in the future when the bills come due.
Pension bonds have proven a spectacularly bad bet. Simply put, they are borrowing money to pay retirement benefits and paying them off by speculating in Wall Street.
Just two paragraphs from a Bloomberg story last week about Fort Lauderdale’s bond issue:
“Stockton, California, sold pension bonds in 2007. The city defaulted and became the biggest U.S. city to go bankrupt.
New Jersey sold $2.8 billion in pension bonds 15 years ago. The state’s pension-fund shortfalls soon appeared again.”
I could go on and on. Every financial news outlet has exposed them.
There is no way around it: This is an insane gamble with the public’s money.
For the bonds to make sense, they would have to have an investment return of more than 4 percent a year. Any less than that and “we’re going to be dealing with bigger problems,” City Manager Lee Feldman conceded to Bloomberg.
Anybody who has money invested know that counting on a return of 4 percent a year is as risky as roulette at the Hard Rock.
Or as Bill Gross, co-founder of the $1.7 trillion Pimco investment firm, wrote about the future this week:
“Historic returns are just that – historic. ..Returns from both stocks and bonds will be stunted.”
Oh, and here is the latest blow: Moody’s just downgraded the city’s credit rating. Downgraded ratings traditionally mean the bonds will have a higher interest rate, thus taxpayers will pay even more.
Then again, when your playing with the public’s money and not your own, you are willing to take risks.
Commissioners Bobby DeBose and Charlotte Rodstrom wisely voted against the bonds
Mayor Jack Seiler and commissioners Bruce Roberts and Romney Rogers voted for the bonds.
These three pols don’t have the brass to deal with the pension problem today. So they dumped it on future taxpayers.
Seiler, Roberts and Rogers should hang their heads in shame.