TRUSTEES’ CORNER

CHEVRONS – March 2018 • by Sgt. Brian E. Wright #1575, Recording Secretary

Policemens

PENSION OBLIGATION BONDS

Recently the City of Chicago has introduced a plan to borrow pension obligation bonds (POBs) of $10 billion dollars. This is good news for the pension funds. While we do not know exactly how the money would be distributed, we would like for the City to distribute the money to the funds immediately. If the City can issue POBs at a lower interest cost than what’s required for pension debt, and uses all the proceeds from those POBs to pay down pension debt, the funded ratio of its pension systems would immediately increase, and the interest rate differential would save taxpayers money. The more money the funds have to invest, the more money can be made and correspondingly, the higher the funded ratio gets.

The one caveat I would have though, is that the current legislation remains and is not changed by the City in the future. This means the POBs would not relieve the City of their annual pension payments as outlined in the statute. If we can receive an influx of money from the POBs, and still receive the scheduled payments from the City as detailed in the statute, the funded ratio would increase steadily. This would, in turn, actually lower the actuarial required contribution, or ARC, payment by the City because the funded ratio would be higher and the amount needed to obtain 90% funded by 2055 would be lower annually. This saves the City money on an annual basis in addition to the interest differential savings mentioned above.

Needless to say, I support the POBs and their immediate benefit to the fund, as long as the City does not change the statute and keeps making their payments as required. The POBs show willingness by the City to address the funded ratio issues of the pension funds and hopefully resolve the problem going forward.

FUND PRESIDENT KEN HAUSER

I was just informed that Pension Fund President Ken Hauser will not be seeking reelection to the Fund. I wish Ken all the best, but he will be sorely missed at the Fund. Ken has been a Trustee for 25 years at the Fund and has a wealth of knowledge and experience that cannot be replaced. I have been on the Board for 7 years and Ken has taught me a tremendous amount. He has introduced to me to colleagues and professionals in the industry that are beneficial to the Fund. He has explained to me how the Fund has operated over his 25 years, what has worked and what can be improved. He is honest, speaks his mind and always supports the members, annuitants and widows of the Fund.

Ken has been a great asset for this Fund and will always be remembered here. Hopefully, the next Trustee can follow in his footsteps and take up the torch for the Fund just as Ken did. Thank you for your lifelong dedication and service to the Chicago Police Department and the Chicago Police Pension Fund. We appreciate everything you have done here. We will miss you Ken but wish you good health, happiness and success for the next chapter of your life.

Sgt. Brian E. Wright, Elected Trustee • Recording Secretary • [BACK]