By BRETT WILKISON
THE PRESS DEMOCRAT
Sonoma County has begun selling roughly $291 million in bonds to refinance debt owed to its pension system.
The sale started Tuesday and is set to close Sept. 1. The bonds are selling at an secured interest rate of 5.91 percent, less than the 6 percent the county set as the maximum rate it was willing pay on the bonds.
The transaction caps a controversial move by the county to borrow more money to pay off mounting pension costs, including $289 million of the $402 million in unfunded obligations currently owed to the Sonoma County Employees’ Retirement Association.
The county has twice before refinanced pension-fund debt through bonds. The new bond package will double the county’s pension-related debt and push its current $30 million annual debt payment to a peak of about $57 million in 2023.
County officials say the new borrowing is better than leaving the unfunded liability on the books, which would require the county to significantly increase its contributions to meet the pension plan’s annual projected returns of 8 percent, which is the basis for promised benefits.
Savings from paying the lower interest rate on the new bonds are expected to be about $99 million over the bonds’ 20-year term, according to County Auditor Rod Dole.
The bond sale involves about $1.7 million in fees to a number of legal and financial advisors, including JPMorgan Chase, Bank of America Merrill Lynch and Goldman Sachs.
The bonds are rated AA- by Standard & Poor’s and AA by Fitch Ratings, the fourth- and third-highest rankings, respectively.