Keeping to a long-standing practice of finding creative solutions to protect the City’s taxpayers, Mayor Koch is pursuing an innovative proposal that will save tens of millions dollars by changing how the City pays for its outstanding pension costs.
The City has more than $400 million in outstanding pension costs, primarily costs associated with retirees who stopped working for the City before major state pension reforms many years ago. A budget line is included every year to pay down that liability over the course of time to meet a state deadline of 2037 to have it completely paid in full.
That’s $30 million this year, and it grows every year. It will max out at nearly $70 million a year. The Mayor’s plan calls for paying the full amount up-front and paying back the debt with a set interest rate — which will almost certainly be extraordinarily low right now based on market conditions
The move is something akin to refinancing your house with a better interest rate. The annual payments will be reduced by nearly $20 million in the first year and tens of millions more every year after.
“There is no doubt this will save money for our taxpayers, as well provide an added layer of financial stability, which is even more important as we work through the current financial challenges caused by the COVID-19 pandemic,” said Mayor Koch.
Mayor Koch will formally present the proposal to the City Council this spring.