Tuesday, February 21, 2006

Community College Uses Bond Issue To Secure Retiree Benefits

Writing for the Hayward, California The Daily Review, Michelle Maitre reports that Oakland's Peralta Community College District is the first in the nation to float a bond issue to cover the ever-increasing cost of retiree health benefits. "Like many districts, Peralta had promised to pay retiree health benefits for life," but funded those benefits on a "pay-as-you-go" basis. However, an aging workforce and rising health care costs are increasingly making that plan untenable.

The bond money has been placed in an irrevocable trust that can be used for only two purposes: paying retiree medical benefits and retiring the bond debt. Peralta Chief Financial Officer Thomas Smith anticipates a 6% annual return over the 45-year term of the bond, enough to finance retiree health benefits and enable the district to repay its debt.

Source: "Peralta innovates funding of benefits" The Daily Review (February 20, 2006)

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