Special to AFN

City Councilman Sal DiCiccio scored a small victory last week as his counterparts approved a plan that will add an estimated $2.4 billion to Phoenix taxpayers’ cost of eliminating the city’s pension liability obligations for police and firefighters.

With DiCiccio and Councilman Fred Waring opposing the move, Council voted 7-2 to take advantage of a state law that extends by 10 years the deadline for paying off its state Public Safety Personnel Retirement System liability.

DiCiccio produced a plan that would pay off the liability through lower-interest borrowing and save the city as much as $4 billion over the next 30 years.

Municipalities had until June 28 to inform the PSPRS if they wanted to extend the payment time to 25 or 30 years. While council okayed the longer term, it also directed Phoenix administrators to try to develop a plan for paying off the debt in 25 years.

Neither repayment term sat well with DiCiccio or Waring, who argued that the city was “kicking the can down the road” and creating huge burdens for future taxpayers.

They and a number of speakers said the city should set new spending priorities, reduce services and stick to repaying the debt in 20 years.

Stating that the city’s move “may not sound like a big deal,” DiCiccio said:

“It is a huge deal, and comes with the real possibility that in the future the City may not be able to make those payments at all. Just making that shift increases the cost to pay off those pension obligations by $2.3 billion – an amount equal to almost twice our entire general fund budget.”

DiCiccio’s victory came when several other councilmembers supported his proposal that the city investigate borrowing the money from either the bond or capital markets to pay off the entire liability, fix the city’s monthly obligation and save as much as $4 billion in interest payments over the next 30 years.

The total savings would depend on the interest that would be charged, but DiCiccio argued that his plan would result in interest rates far lower – and the money spent several billions less – than what council agreed to last week.

“We like going to general obligation debt as a substitute,” DiCiccio said. “We have a giant pension obligation we have to pay no matter what. We should start trying to be responsible in this generation. Council is adopting a shortsighted policy.”

DiCiccio also noted that by borrowing from a bank, the city’s costs would be fixed and that it would reduce annual payments by tens of millions of dollars.

Several organizations and individuals spoke against Council’s debt-extension plan. But others applauded it, saying that it protected vital city services from massive cuts.

Although councilmembers Thelda Williams and Debra Stark joined Waring in supporting the city’s study of the plan, there was no binding action taken by council to force the city manager to return to council with the results of its evaluation and a recommendation.

“I want to make sure we’re going to bring this issue back,” said Councilman Michael Nowakowski.

Mayor Greg Stanton said city officials continually study ways to restructure Phoenix’s debt so that it’s paid down faster and for substantially less total interest costs.

“If we can find ways to have a lower interest rate, we will,” said Stanton. “City staff, they do that all the time. We’ll look at all those options.”

Stanton also lauded Gov. Ducey and the State Legislature for providing the deadline extension, stating:

“It gives us the flexibility to keep providing the outstanding services the city has been providing its citizens.”

DiCiccio also criticized the city administration for waiting until the last minute to bring the plan before council.

Although the PSPRS had notified the city May 18 that it had until June 28 to take advantage of the extension, it did not come before City Council until June 21 – one week before the deadline for informing the retirement board of its intentions.

Although the city had to make its intentions know to the PSPRS board by June 28, Phoenix could adopt DiCiccio’s plan without a problem later this year.
It’s like Council won’t get that opportunity until September.

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