By DUSTIN BLITCHOK Of The Oakland Press

PONTIAC July 1, 2013.

That's when a structural budget deficit caused by $180 million in future retiree health care costs will rear its ugly head again and threaten to drive Pontiac into bankruptcy, according to the citys emergency financial manager, mayor and finance director.

Days after voters repealed Michigans emergency manager law and Pontiac voters overwhelmingly rejected a millage to pay for retiree health care, city officials are proposing the privatization of a city pension plan thats 150 percent funded, then taking the leftover 50 percent and placing it in a trust account earmarked for retiree health care.

Watch a report on Pontiac's financial status on today's News at Noon.

One municipal finance expert said its a groundbreaking idea.

I have never seen, in my memory, a situation where a (pension) issuer is trying to do it retroactively: Taking existing pension benefits and privatizing (them); I have not seen it. Its an interesting idea, said Dick Larkin, director of credit analysis at the Iselin, N.J.-based investment firm HJ Sims. Larkin is the former chief municipal rating officer at Standard & Poors.

Mayor Leon Jukowski said the city has pension obligations to about 1,000 retirees. Current city employees are on a defined contribution plan, so the citys pension plans are closed, meaning no employees will join them in the future.

We think that we have more money than we need to cover those obligations, so we (could) go into the market and buy an annuity equal to the retirement benefit due for every person who has a benefit coming. If we do that, we set them all up with an annuity that covers their retirement obligation, (and) theres money left over that the city can use to cover retiree health care, the mayor said.

Emergency Financial Manager Lou Schimmel said: If they dont eliminate retiree health care or (go through) with the privatization plan ... the only option left for this city is bankruptcy." Continued...

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Retiree health care costs could drive Pontiac into bankruptcy WITH VIDEO