Phoenix Using New Strategy to Chip at City Pension Debt

Concept being applied to additional city departments.

To make a dent in reducing its $4.4 billion pension debt, Phoenix  is implementing a new strategy that’s projected to save the Arizona city $10 million over a 20-year period.

According to AZCentral, the plan involves paying off its $74 million liabilities to wastewater department beneficiaries in cash, then borrowing the money via bonds for the wastewater improvement projects the money was originally supposed to be used for. While the new debt will be applied to the projects over the next two or three years, city staff confirmed with AZCentral the bonds will have a lower interest rate and more sustainability than the pension deficit, and save the city roughly $500,000 per year.

The website also reports that Phoenix is incorporating this move with some of its other departments as well as the wastewater group.

While the strategy may not be the be-all-end-all solution to an ever-growing problem, it should provide insight for other cities and states—such as Chicago and Kentucky—also facing pension issues.

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