NEW CASTLE, Pa. -- City council has approved an $8 million pension bond that officials said will be used to help eliminate a $14 million deficit in the city's pension fund.
The bond or loan is to be repaid over 30 years, with interest rates varying between 4.75 percent and 5.8 percent. The city's annual debt service payment on the bond will be about $560,000.
The money from the bond will help reduce the $14 million unfunded liability, which resulted from significant losses in the fund in recent years, officials said. They explained that having an unfunded liability means there is not enough money in the pension fund to cover all of the payments to current and future pensioners.
Officials cited past mismanagement of the fund along with the market fall after the Sept. 11, 2001, terrorist attacks as reasons for the deficit. Council hired new managers last year as part of an overhaul of the pension fund program and is looking to require city employees to contribute more money to the fund to avoid future problems.
The bond's underwriter is Legg Mason Wood Walker Inc. of Pittsburgh.