By a unanimous vote Wednesday night, Allentown City Council approved transferring cash received from last summer's privatization of the city's water and sewer operations to underfunded pension accounts for the city's fire, police, and other employees.
Council's vote provided for a required by the end of this year accounting move of $170 million of the $211 million the city was paid from leasing out its water and sewer services to the newly created Lehigh County Authority.
Council recently voted to appropriate $150 million to the three city pension funds to be portioned out depending on what each still needs to be at full funding capacity.
Councilman Peter Schweyer, head of the finance committee said, "We're spending $150 million on pensions and the balance ($20 million) will be used to diffuse their costs and pay down pension obligation bonds---all resulting in improved cash flow for the city."
However, as required by state pension laws as part of Act 205 for municipalities, Allentown finance personnel had to arrange for a "restricted" pension fund and in turn borrow from that account to infuse cash into the actual pension accounts.
Council's vote allowed for a complete forgiveness of the debt in the form of a note..
Schweyer remarked, 'We're doing this like a free loan to the pension board, so to speak."
Attorney Kevin Reid of the Bethlehem-based law firm King, Spry, Herman, Freund and Faul retained by Allentown as its financial advisor, will charge the city $20,000 for helping facilitate the entire transaction.
He noted the way in which the e transfer of funds was executed was to allow the city the most savings with regard to what it contributed this year to its pension accounts.
In addition, Reid said Allentown pays no interest on the note because the debt was forgiven by the city almost immediately.