Bond sale could pay pensions

House approves cities selling retirement debt

Posted: Sunday, April 23, 2006

The Alaska House threw its support behind what some lawmakers describe as another tool in the tool box for paying down the state's looming shortfall in its pension plans.

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The House voted unanimously Friday in favor of pension obligation bonds for municipalities.

The House also backed another measure for the proposed Hatcher Pass ski resort.

Rep. Mike Hawker, R-Anchorage, called the $6.9 billion gap between the retirement system's projected assets and liabilities a "ticking time bomb."

Alaska, like many states and municipalities, has seen its obligation to retirees balloon as health care costs skyrocket and baby boomers approach retirement.

The measure would allow municipalities to sell pension obligation bonds under the authority of the Alaska Municipal Bond Bank.

The bonds are considered a legal form of arbitrage in which proceeds of the sale may be invested at an interest rate that is higher than the rate paid on the debt.

Hawker said the bonds could result in a significant savings for Alaskans.

"We need to empower municipalities to go out and get a piece of that savings should they choose to," he said.

The House also gave its approval for the Alaska Industrial Development and Export Authority to sell up to $25 million dollars in bonds to help pay for a proposed ski area at Hatcher Pass.

That's in place of the $15 million dollars previously approved. The Matanuska-Susitna Borough plans to use the money to leverage private investment in the estimated $42 million dollar ski resort.

Both measures are now headed for the Senate.

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