Granite City's pension mess makes national newsArchived Message
Posted by Riverbender on December 18, 2019, 8:00 am
Granite City, Illinois, a rust-belt town of 30,000 people on the Mississippi River, is facing a $130.8 million pension shortfall and has put part of its sewer system up for sale to raise funds. Illinois American Water -- a subsidiary of American Water Works Co., the largest publicly traded water utility in the U.S. -- has offered the only bid, though city officials won’t say yet for how much or how they would spend the cash.
Pension Bond
Granite City sold a $40 million pension obligation bond in 2017 to make a payment into its pension systems that have roughly 42% of the cash they need to pay future benefits, betting that borrowing costs for the bond would be lower than its pension investment returns, according to Moody’s. Still, the city has not made its required pension payments for the past two fiscal years, according to budget documents.
“It wasn’t paying into its pension system when it should have been paying for many years,” Amanda Kass, associate director of the Government Finance Research Center at the University of Illinois at Chicago. “For some places like Granite City, yes the problem has kind of snowballed and they may not be able to remedy it on their own.”