KANKAKEE — The long-anticipated approval for the $98.9-million pension obligation bond sale cleared its final hurdle.
At Monday’s Kankakee City Council meeting, council members voted 13-0 to authorize the city administration to move forward with this massive bond sale, which is aimed at bringing the lagging police and fire pension funds up to the 90% funding level.
The city’s public pension funds have been historically underfunded.
Both pension funds are behind where the funding levels should be. The police pension is currently funded at a 35% level, or about $33 million, and the fire fund is at 23.5%, or about $18 million.
The administration’s goal for the bond sale is to have the accounts at the required 90% level by 2042, the time when the state has made it mandatory the pensions are funded at this level.
The bond payments will then be made through the 2-percentage-point increase in the municipal sales tax rate the city established in 2018.
Through this method, the bond payment will be taken out of the city’s budget and paid through this separate funding source.
The entire city council has been in agreement regarding the need to deal with the pension issues. The 13-0 vote was short one council member as Danita Grant Swanson, R-4, was not at Monday’s meeting.
Mayor Chris Curtis said the city is anticipating to begin to sell these bonds in October.
The city’s action mirrors the action taken by Bradley in February 2021. The Bradley Village Board agreed to sell up to $14 million of government obligation bonds to get its pension fund fully funded after 20 years.
Curtis had repeatedly said Kankakee was going to have an exceedingly difficult time to get these pension funds up to the required level simply by making its yearly payment.
The city — as a result of numerous years of shorting the pension funds through small payments or no payments — had fallen behind on its pension obligation by nearly $100 million.
During the course of the past several years, the council had stepped up its funding of the pension accounts, but it was simply not gaining the needed ground.
In effect, the sale of bonds are much like a consumer making a purchase with a credit card. The use of the card allows for the acquisition, but the buyer must then repay the borrowed money over time.
The city — like the majority of governmental bodies — sells bonds to pay for something, and then tax dollars are used to pay the bond debt.
Kankakee would use two funding streams to pay off the bonds — the 2-percentage-point special sales tax which brings in $5.25 million annually and $2.8 million collected through property taxes — at a rate of $8.1 million annually.