The town of Longboat Key’s Investment Advisory Committee is working to figure out how to pay off the town’s more than $27 million in pension debt once the town’s three pension plans are closed.
At its July 10 meeting, committee members and town staff debated the pros and cons of dealing with the debt after town-hired pension actuaries pinpoint the exact amount of debt.
Finance consultants explained there’s a variety of options the town can consider.
There are banks that are in the pension-fund lending business, but the committee was told the interest rates they charge over a 20-year-to-30-year obligation are most likely too high for the town to consider.
The town could also purchase annuities to pay off the debt, but those are also deemed too expensive and risky.
Bonds are probably the most likely viable alternative for the town because they remove all the risk for the pension debt. Committee member and Vice Mayor David Brenner suggested the town could create a mixture of options to pay off the debt.
“We don’t have to do this all at once,” Brenner said.
Once the actuary lays out the debt and when it’s due, Brenner noted the town could possibly raise taxes down the road as part of a pay-as-you-go basis.
“But, a bond could also be done to pay off the longer-term debt,” Brenner said. “Of course, any plan we choose will have to be presented to the voters for them to approve.”
The town, meanwhile, is still waiting for the actuary to release its pension numbers for the fiscal year 2013-14 budget. Those numbers will be released for the Longboat Key Town Commission’s special meeting Aug. 14.
Committee members also discussed policies for town fund balances and agreed that the General Fund balance should always have somewhere between 60 and 90 days’ worth of operating budget expenses that could be used in case of an emergency. Town Manager Dave Bullock has already taken a stance and prepared the last two budgets by using that policy.
The committee plans to address policies for other town funds, including its beach fund and commission contingency fund.
“We agree we shouldn’t be sitting on taxpayer dollars we don’t need and need to have firm policies in place for all funds,” Brenner said.
Committee member and Commissioner Lynn Larson, though, says she worries that the town continues to spend more than what it is bringing in.
“We can’t keep taking money from the commission contingency fund, which is our rainy-day fund, whenever we need it,” Larson said. “We have two options: to raise taxes or control costs, and I’m not willing to raise taxes.”