Providence and Pension Obligation Bonds

The use of POBs rests on the assumption that the bond proceeds, when invested with pension assets in higher-yielding asset classes, will be able to achieve a rate of return that is greater than the interest rate owed over the term of the bonds.

Rhode Island State House; Photo by Mohan Nannapaneni on Pexels

The Trouble with a High Discount Rate, Low Assets Levels, and Cash Flow

Source: Providence July 1, 2020 Actuarial Valuation

POBs May Limit Future Debt Capacity

Studies Generally Show POBs are a Bad Idea and Depend on Timing

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