More trouble is brewing in California as the City of Oakland looks to issue $211 million in municipal bonds to fill a $426 million shortfall in pension funding.
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OAKLAND, Calif.—More trouble is brewing in California as the City of Oakland looks to issue $211 million in municipal bonds to fill a $426 million shortfall in pension funding, according to the The Wall Street Journal.
The municipal bond sale is scheduled for Thursday and will cover approximately 70 percent of the contributions the city is required to make towards the Oakland Police and Fire Retirement System.
Oakland officials told the Wall Street Journal the increased borrowing would cover the required contributions for the coming years while giving the city an opportunity to recover financially from the recession.
Experts say the city won’t have problems finding buyers, but they will demand higher interest rates due to increased risk.
"Folks who can make this kind of contribution from their operating budget generally do not borrow the money to do it," Michael Brooks, senior portfolio manager at AllianceBernstein, told the Wall Street Journal. "If they're borrowing the money, it's a sign that they have a weakness in their finances."
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Joey Ferguson is a business reporter for the Deseret News who focuses on public finance. He joined Deseret News after graduating from Brigham Young University-Idaho with a bachelor's degree in journalism in May 2011. He more ..
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California's finances have been in trouble for years and their problems are only escalating as their debts start to pile up. Borrowing money to pay pensions is a fool's game because you have to pay the debt off .... with interest.