Newton's plan to issue a bond to pay down its nearly $287 million pension liability is on hold because high interest rates have made the deal too expensive.

Mayor Marc Laredo and Chief Financial Officer Maureen Lemieux delivered the news at a Monday, Oct. 5, City Council meeting, as first reported by the Newton Beacon. The presentation doubled as the administration's financial forecast.

"Even if we were to find out tomorrow that we have the authorization to move forward with our pension obligation bond, unfortunately, the current market is such that a pension obligation bond is not viable at this point in time," Lemieux told the council.

The problem is math.

A pension obligation bond is a taxable instrument, so Newton would have to pay 1 to 1.5 percentage points above the base rate. That puts the city's borrowing cost at 5.5% or higher. When the City Council unanimously authorized Laredo to petition the state legislature for the bond in April, Lemieux estimated the rate at 4.7% to 4.8%, according to Finance Committee records. Treasury yields have climbed sharply since then, with the 30-year yield closing at 5.62% on Sept. 30, according to CNBC.

Senate Majority Leader Cindy Creem and State Rep. Amy Sangiolo are still working to secure legislative authorization on Beacon Hill. Even after that clears, the state secretary of administration and finance must also sign off before Newton can issue the bond.

Lemieux said the state would not grant that approval under current conditions but added that the administration is "cautiously optimistic" a bond will make sense within the next couple of years.

Longer payoff, shorter-term relief

While the bond stalls, the Laredo administration has bought itself breathing room by stretching the pension payoff timeline. Newton's Retirement Board voted 5-0 on April 14 to extend the fully funded date from 2032 to fiscal year 2035, contingent on a retiree cost-of-living adjustment increase. The City Council approved that COLA base increase 22-0 on May 20, raising it from $15,000 to $18,000 over three years.

Laredo said the extended 2035 schedule freed up roughly $5 million in budget relief while giving the city flexibility to wait for better bond market conditions.

The timeline has shifted repeatedly. Newton originally targeted 2030, then former Mayor Ruthanne Fuller pushed it to 2032 after inflation squeezed city budgets during a teacher contract dispute. The Laredo administration moved it again to 2035 earlier this year.

Newton's unfunded pension liability stood at $287,199,279 as of Jan. 1, 2025, according to city actuarial data. With the COLA increase factored in, that figure rises to roughly $295.5 million. Massachusetts law requires cities and towns to fully fund their pension obligations by 2040.

Bond rating agency Moody's has described its overall view of pension obligation bonds as "neutral at best" due to market fluctuation risks, according to the April Finance Committee report.

Lemieux said that once the legislature authorizes the bond, the city will work with financial advisors to prepare. No date has been set for a follow-up council vote.