Baltimore County plans to borrow $25 million from its pension system to upgrade recycling facilities, a move some County Council members and union leaders are questioning.
The county retirement system's board of trustees approved the loan last month at the request of County Executive Kevin Kamenetz's administration.
In an interview Thursday, Kamenetz called the move prudent, saying it would serve both the retirement system and the county well. The county plans to borrow the money at an interest rate of 7.875 percent and repay it within 15 years.
But the Fraternal Order of Police Lodge No. 4 questioned the legality of the move, union president Cole Weston said.
"The employee pension system has an obligation and responsibility to the people in the plan," said Weston, who served on the pension system's board for more than a decade until his June retirement. "And pension systems are not to be used as banks. … For the employee pension system to loan Baltimore County government $25 million for a project that may or may not be successful, is that appropriate?"
Both Kamenetz and Weston said the loan represents the first time the county has borrowed from its pension fund.
The loan is to upgrade an existing transfer station and to install a new, single-stream recycling system in Cockeysville. In November, the County Council approved legislation that would allow the county to issue up to $25 million in certificates of participation to pay for the project. At the time, administration officials said the facility would eventually generate about $200,000 a month for the county.
In a July proposal to the board, the administration wrote it was looking for alternative financing after its bond counsel advised that the county would face higher interest rates because the facility would generate a profit over the next 15 years.
The $2 billion pension system has about 9,000 active employees and 6,000 retired members.
Weston's spot on the system's board is vacant. He added that the situation highlights "the amount of control" that County Administrative Officer Fred Homan — who represents Kamenetz on the board — has over county fiscal matters, as many of the board members are county administrators who report to Homan.
County Councilman Tom Quirk, a Catonsville Democrat, said he wanted to meet with administration officials about the loan. At first glance, he said, the loan has favorable terms, but he has questions, including how long it will take the recycling facility to turn a profit.
"If things went bad with this loan," he said, "then we would have to deal with that through the general fund."
Quirk also questioned why the administration didn't tell the council about its plans, saying he feels the council is obligated to have oversight on fiscal matters, especially since members approved the previous financing plan for the recycling facility.
Kamenetz said the administration didn't have to tell council members about the loan.
"The charter determines the roles of each branch of government," he said. "And these are executive branch decisions."
Kamenetz said the county is making "fiscally sound" decisions, citing its AAA bond ratings.
One councilman, Perry Hall Republican David Marks, said he had been assured by the administration that "it was perfectly legal" to borrow from the fund.
"I'm withholding judgment until I get a better briefing," Marks said.
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