Pension obligation bonds..

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jack1719
Posts: 361
Joined: Tue Mar 23, 2010 6:43 pm

Pension obligation bonds..

Post by jack1719 » Tue Sep 11, 2012 8:55 am

Recently where I live the city has changed new issued bonds from being tied to investment returns to being tied to property tax payments,I guess it a much more stable funding measure..I started looking this up on internet,I see other cities New Orleans for example has just done the same thing..is this a good thing in the long run? They would have an investment-grade rating,because they are backed by property taxes I also read.

Alan S.
Posts: 7741
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Pension obligation bonds..

Post by Alan S. » Tue Sep 11, 2012 5:20 pm

I guess it would depend on how securely these bonds are tied to property tax revenues. That said, in NO I don't know how secure property tax revenue is either given that a Katrina like event is always possible.

With respect to these bonds in other places, I assume the issuer is still just the city, and not having a separate entity (eg a turnpike authority or special district) as the issuer, there is more risk in some unforseen event triggering a problem. Right now, an epic battle is underway in CA muni BKs pitting pension interests vrs the muni bond holders to determine who is protected and who is wiped out. There is very little judicial precedent to go by since muni BKs have been so rare in the past.

jack1719
Posts: 361
Joined: Tue Mar 23, 2010 6:43 pm

Re: Pension obligation bonds..

Post by jack1719 » Wed Sep 12, 2012 10:15 pm

I wonder if this was done more to get an "Investment grade rating on the bonds"by the city than any other reason...In what ways does city benefit from the higher rating?

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