Kane County bond issue fraught with peril

I believe that Kane County's proposed $55 million bond issue does not have a favorable risk reward ratio and should be rejected by the county board.

I am dismayed that there has been no discussion in recent finance or executive committee meetings on the risk and high probability of losses resulting from the issuance of these bonds. Similar pension obligation bonds have been significant contributors to many municipal bankruptcies in recent years, including Detroit.

As the Robert W. Baird firm advised the board in their presentation, the amount actually saved by the bond issue will depend on the rate of return IMRF will realize when the county gives IMRF the $52 million from the bond proceeds. If IMRF earns less than the proposed 3.5 percent cost of the pension obligation bonds, Kane County will end up owning more money than it did to begin with.

While the official estimate of the long term rate of return for the purpose of calculating IRMF pension fund liability is 7.5 percent, we all know that this is just a political fiction and exists only to allow the state of Illinois to avoid facing up to a larger pension fund deficit. In June, IMRF officials reported to Kane County officials a rate of return last year of 0.44 percent, similar to the low returns realized by New York, California and other state pension funds. Hopefully the future will not be that bleak but using a 7.5 percent IMRF return assumption in assessing the potential savings from this bond issue is unrealistic.

This issue will be on today's county board agenda (Tuesday, Oct. 11). Call your board member and ask them to reject this highly speculative proposal or at the very least table the issue and insist on a thorough examination of the considerable risks.

Bill Scown

Geneva