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County Pension Bond Sale Saves Additional $83M

The proceeds of the sale will be used for the county employee's pension plan.

County officials say a better than expected bond sale to be used for the pension system will save county taxpayers $83 million more than originally estimated.

The county sold $256 million in bonds at an interest rate of about 3.43 percent—nearly a full percentage point lower than expected. The better than expected result means the county will pay $416 million in principal and interest over the next 30 years instead of nearly $500 million.

The County Council approved the bond sale in October.

The borrowed money is needed because the board of the Baltimore County Employees Retirement System voted to reduce its expected rate of return on investments. That change, made in July, would result in an additional $15 million payment from the county next year.

Without the bond sale, county officials estimated it would have to contribute $4.8 billion to the retirement system. Now, with the bond sale, the county will reduce that contribution to $4.1 billion over the same time period.

The overall savings to taxpayers, after principal and interest payments is $343 million.

County estimates on saving are predicated on earning more on its investments than interest on the borrowed money. If those assumptions are wrong, the county could lose money and taxpayers could end up footing the bill.

"When we can protect employees and save taxpayers $343 million, it's been a very good day," said County Executive Kevin Kamenetz, in a statement.  

JDStuts November 30, 2012 at 03:47 PM
Luckily for all involved if the investments go south like MainSail II they will no longer be in office and the taxpayer gets to pick up the bill! You haven't saved anyone a penny yet KK, but you did just put the county on the hook for $416 million, again, provided the investments pan out.
John T. November 30, 2012 at 09:18 PM
How are you able to justify these pensions for government workers that are funded by taxpayers that, in many cases have no pension except for what they save on their own. Something is wrong with this picture.
Cal Drummond December 01, 2012 at 11:54 AM
JD you obviously skipped Econ 101. The County is not purchasing investments, people are investing the County. Why? Because Baltimore County is a great investment. And if saving over $350 million is not saving a "penny" as you suggest, then you not only missed Econ 101, you also missed kindergarten. JD put down the Cheetos and come out of your mother's basement.
FIFA December 01, 2012 at 07:54 PM
Welcome to the Patch Cal. As this is your first post, let us hope you are not a KK troll. First, I am disappointed in Mr. Sears reporting on the subject. He repeats the KK talking points without a single bit of analysis from any other point of view. Secondly, JD is capable of defending himself, however Cal, your ignorance shines through the thickest of fogs. This issue has nothing to do with Economics 101. It is solely about arbitrage, actuarial assumptions and smoke and mirrors. It is nothing but numbers on paper mixed with very optimistic projections. KK and Homan have pulled the wool over the eyes of most members of a County Council that doesn't understand basic finance and accounting. The pension plan "assumes" it will earn 7.25% on it's investments while in the last 10 years it has barely averaged over 4%. That is where the "savings" come from. Assume you earn 7.25% and pay 3.43% and you "save" the difference times what you borrowed. What a shell game. Mr. Sears, please do some journalism instead of just repeating KK talking points.
FIFA December 01, 2012 at 08:43 PM
Yup.

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