Pub. 6 2015 Issue 4

winter 2015 9 West Virginia Banker This ratio gauges the size of the unfunded liability relative to the asset size of the municipality by showing the percent of assets needed to pay off the liability today if necessary. • Pension Bonds (Benchmark=0) Pension bonds represent debt issued to fund pension or OPEB liabilities. Most of the time, the proceeds from the issuance of pension obligation bonds are used to pay current retiree pensions because the municipality has not been putting aside the required amount each year during the retir- ees’ employment. This is a way to defer the costs until future years. The proceeds can also be used to prepay the required pension contributions resulting in a net pension asset. The current regulatory environment for banks requires a municipal credit analysis process that includes pre-purchase and post-purchase documentation. This pro- cess needs to include reviewing risks asso- ciated with unfunded pension liabilities. The recommended credit metrics listed above and other information about un- funded pension liabilities can be found by reading the footnotes to the municipality’s financial statements. Baker has been man- ually collecting this data for our clients for over 3 years, and we now have pension data for about 80% of the over 20,000 municipal bond issuers and 130,000 cusips in our database. Below is an example of the pension specific portion of The Baker Group’s Credit Criterion Check tool for post-purchase monitoring. As the availability of pension data becomes more accessible, this tool will help identify municipalities with pension plans that don’t meet our preferred benchmarks. n Scott N. Drake, CPA sdrake@sek.com Scot E. Orndorff, CPA sorndorff@sek.com Luke C. Martin, CPA lcmartin@sek.com Gary D. Snyder, CPA gsnyder@sek.com DoriAnn F. Hoffman, CPA dhoffman@sek.com 717.263.3910 888.272.7351 SEK.com Get a new perspective on your success. Our experience adds value beyond the numbers. Partner with an advisor you can trust. Dana Sparkman is a municipal analyst in The Baker Group’s financial strategies group. She manages a municipalcreditdatabasethatcoversmorethan100,000municipalbonds,providingclientswithspecific credit metrics essential in assessing municipal credit. Dana earned a bachelor’s degree in finance from the University of Central Oklahoma. Contact: 405-415-7223, dana@gobaker.com.