Mount Clemens— County officials are considering a plan to issue bonds to cover part of an estimated $550 million unfunded retiree health care liability.
Macomb County Executive Mark Hackel said the health care costs deficit hadn’t been addressed in a decade and no money was allocated to address the issue.
“That is setting ourselves up for a disaster,” Hackel said. “We don’t want that and we are not going down that path.”
Peter Provenzano, county finance director, presented the proposal to sell $295 million in bonds for healthcare costs and capital improvements to the board of commissioners on Thursday.
Provenzano also outlined a five-year capital plan that includes all the infrastructure improvements recommended by Plante Moran CRESA planners in October. The downtown revitalization plan would cost an estimated $35 million, with $25 million of the cost covered by the bonds. Project design is expected to take place this year with construction beginning in late 2015.
The downtown revitalization plan includes renovations to the Administration Building, the Old County Building, Circuit Court building, the Talmer Building and the Clemens Center.
“What we have been able to forecast is that we can pay for health care, the downtown project and the critical projects in the next 10 years and still maintain a healthy fund balance,” Provenzano said. “But it takes a tremendous amount of discipline.”
Provenzano said the county reduced the unfunded retiree health care by closing the retiree plan to new hires starting in 2016. A recent actuarial study estimates that by doing so, the liability will be cut to an estimated $270 million.
“It is still a massive number but it is now at a size where we can attempt to get our arms around it,” Provenzano said.
The county is required to make an annual $30 million payment toward the liability but it can only afford $15 million, he said.
Bonding for the unfunded liability is allowed by Michigan Public Act 329 of 2012, which expires at the end of this year.
The money would be deposited in an interim trust. An additional $40 million from the general fund balance and $30 million from the delinquent tax revolving fund would also be placed in the trust. The plan would pre-fund future retiree health care contributions for the next 50 years, Provenzano said.
The board must adopt a resolution at its June 19 meeting to meet the Dec. 31 deadline.
Board Chairman David Flynn said selling bonds to cover the unfunded healthcare costs, day-to-day maintenance of county facilities and downtown renovation project is “necessary in order to keep our commitment to our employees and modernize our facilities so we can offer services in a more effective manner.”