Pension Bonds Rejected as Water Deal Aids Allentown: Muni Credit
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Allentown, Pennsylvania, is leasing its water and sewer systems instead of borrowing to fund pension payments set to double by 2020. The deal shows how localities are exploring alternatives to debt to meet retirement costs.
Mayor Ed Pawlowski, a 47-year-old Democrat, didn’t want to sell bonds to plug an unfunded pension liability of as much as $170 million. Instead, the city of 119,000 will hand over its systems to a regional water agency for an upfront payment of $220 million in a 50-year lease that will finance pension costs.