This article is republished from Press & Guide, originally written by Briana Gaskorski and can be found here.

Dearborn city council held a public hearing to discuss their concerns with post-employment healthcare funding for their retirees.

“In January, the original proposal was to bond up to $90 million for post-employment healthcare,” Dearborn Financial Director James O’Connor said. “We came back in the summertime and talked about a $20 million bond issue. That item was withdrawn by the administration and in September we discussed a $45 million bond proposal.”

The bond issues were raised based on the actuarial reports from June 2016.

“Our liability at that time was at $226 million, our assets at $65 million, our unfunded liability at $162 million, and our funding ratio at 28.5 percent,” O’Connor said. “And to get to a 40 percent funding level based on those numbers would require $26 million.”

With the state law, Public Act 202, going into effect, each city is required to have a funding level of 40 percent.

“We came and talked about issuing bonds,” O’Connor said. “We updated the asset number but we didn’t update the liability number so the liability was from 2016 at $226 million while the assets were the current assets on hand at $82 million. This resulted in an unfunded liability of $144 million and a 36 percent funding level. Based on that, with the numbers disjointed from timing, we had an $8.7 million number to get to the 40 percent funding level.”

Councilman Michael Sareini, said retirement funding and health care funding are two separate things.

“They’ve always been funded, we just aren’t funding enough to meet new state requirements,” Sareini said. “We have no issue funding retirement but healthcare is different. We have to fund retirement at 60 percent and healthcare at 40 percent, which we have been funding at 36 percent.”

The bond of $45 million would require payments of a $3.7 million principal balance annually with a 4.49 percent interest rate. This bond option would take 19 years to pay off in full.

“I want to be at the 40 percent compliance,” Council President Susan Dabaja said, “My concern is locking ourselves at the $45 million to get the 48 percent, I mean there is a big difference between $24 million and $45 million. And if we default, there’s a bigger price to pay for us there versus a public act that still hasn’t put any consequences for us as a city.”

Debaja says that even without using the phrase of defaulting, the concern is being locked into this bond for 19 years.

“Forget the default term,” she said. “We’re locking ourselves in at that interest rate and we aren’t coming up with other solutions.”

With the Public Act 202 going into effect, the state offered the bonding option for cities to apply for a bond to help fund healthcare.

“There’s no guarantee that we would be granted that large of a bond,” Sareini said. “We had to issue out a public notice stating that we wanted to apply for a bond of up to $45 million.”

Councilman Robert Abraham says it’s a mix of art and science.

“Things change over time, good and bad,” he said. “You can only use the information and knowledge you have and understand the risks based on what we know today, what we’ve experienced in the past and try to make sound decisions.”

Sareini says he has a concern that this could affect taxpayers at some point.

“If we make a charter amendment, that would go to the residents for a vote,” he said. “This definitely could affect our taxpayers at some point and we need to streamline our services to provide a better and more efficient government.”

Dabaja says that the bond option is inevitable.

“We need to determine if we do the bonding,” she said. “Which I think we are leaning towards the bond, we just need to determine if it will be for the full $45 million.”

Sareini says the bond is inevitable also, but that it’s a just a matter of deciding how much we want to bond for.

“I owe it to the residents to ask these questions,” he said. “The bond is inevitable, but we really need to decide how much we need. We have an obligation to our retirees to ensure that they get what they signed up for.”

The deadline for the bond application is Oct. 26th. The council will be voting on this issue at Tuesday’s meeting held at 7:30 p.m. at the Dearborn Administrative Center, 16901 Michigan Ave.