Nashville Mayor Karl Dean is pressing pause on borrowing $200 million to shore up the city’s underfunded pension plan. But that doesn’t mean he agrees with experts in municipal finance who say the maneuver looks like an act of desperation.
A resolution to approve the issuing of bonds is on the agenda for the Metro Council to consider Tuesday night. Dean says he will ask that it be deferred. Before going forward, he says he wants everyone to be comfortable with the plan, which he argues is not absolutely necessary if the council, employees and pensioners feel it’s too risky.
“You need to have a frank and honest discussion,” Dean says. “If it’s something folks want to do, then we move forward. If not, then we don’t.”
The concept is essentially to borrow money with roughly a 4 percent interest rate and make a larger return by investing the funds. Even the $200 million wouldn’t completely erase the city’s unfunded liability, which stood at nearly $400 million last year.
Dean says outside financial analysts should not be comparing Nashville’s situation to other cash-strapped cities that have made the same move.
“I’m just a little leery of so-called experts flying in from somewhere else and saying this is just like what happened in California city X where they didn’t have a well-managed pension fund, where they’re not in the situation Nashville is in,” he says.
A nationally-known expert in Nashville for a conference this week told The Tennessean:
“You’re pushing today’s costs off into the future. You are risking that the costs will be much higher. And you’re avoiding hard decisions now. So it is not a strategy, typically, that strong and solvent cities adopt.”