NEW YORK — Struggling to pay employee pensions, local governments are increasingly borrowing money to cover their obligations — exploiting a loophole in federal law that allows them to issue taxable bonds without seeking voter approval.Oakland, Calif., took a bet on its pension fund that ended up costing the city an estimated $245 million — nearly a quarter of its annual budget. That hasn’t stopped the city from looking to try its luck one more time.
The bets are being made using an exotic but increasingly popular financial instrument known as a pension obligation bond. Cities, counties and states use the bonds to take out high-interest loans from private investors to plug shortfalls in their employee pension funds. Read More
