Citys proactive approach to PERS liability is encouraging

As the City of Prineville officials and staff weathered the recession, they have stressed a desire to remain proactive and take of problems before they grow worse down the road.

They recently carried out that goal again, making a pre-emptive move on a major hurdle that the State of Oregon is still struggling to clear.

When the Oregon Legislature called its special session last year, the primary goal was to deal with a Public Employees Retirement System (PERS) crisis.

Employers throughout the state were facing substantial increases in their PERS contributions in order to keep the program funded. If they didn't take care of the problem, public entities, including the City of Prineville, faced payments soaring to levels that would severely hamper their ability to deliver essential services.

After the session closed, legislators managed to improve the PERS situation, but by some accounts, including those of Sen. Doug Whitsett and Rep. Mike McLane, who represent Crook County, the changes didn't completely eliminate the problem.

Still facing the possibility of PERS contributions for retirees reaching 30 percent down the road, the City of Prineville took matters into their own hands. Late last month, they completed a pension bond transaction that will enable them to pay off their $2.8 million in unfunded pension liability at an interest rate of 5.5 percent.

It should be noted that the move does not leave them out of the woods. Employer contributions will continue to go up even without the unfunded liability. However, instead of climbing as high as 30 percent, they are looking at an amount close to the low to mid-20 percent range.

The bond was made possible, first of all, by the financial reputation the city has earned in recent years, and secondly by leaders who were willing to think outside the box and take care of a problem before it became too great to manage. Both factors point to good leadership and we commend the city finance staff and councilors for taking the initiative and making a bad situation better.

The city may not be out of the woods yet when it comes to PERS contributions, but we suspect that as the situation unfolds down the road, they will be out of the woods sooner than other public employers throughout the state.




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