Baltimore County sold $256 million in pension obligation bonds this week to fund its retirement system, and officials say the borrowing will cost less than they expected.
The county borrowed the money at a 3.43 percent interest rate, compared with the 4.25 percent to 4.5 percent originally projected. Officials said Thursday they expect to save $343 million over the next three decades, compared with the $250 million they previously estimated.
The county plans to pay the funds back over the next 30 years. The borrowing carries risk because the money will be invested in the stock market along with other funds from the retirement system. County budget officials say they will ultimately save taxpayers money because they will receive money now at a low interest rate to pay liabilities.
To save money, the county pension fund must earn more on its investments than the cost of its borrowing. As of July, the system's 10-year average return on investments was 7.4 percent.
The County Council in October unanimously approved legislation by County Executive Kevin Kamenetz to allow the borrowing. This past summer, the county lowered projections on pension investment earnings, which meant taxpayers must pay an additional $15 million into the retirement system each year. The bond issue is meant to close that gap.
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