The transfer makes the retirement system look artificially healthy, a phenomenon unions could use to lobby for more lucrative pensions, Steuer said.
"A well-funded system heightens the prospect of granting new benefits, even when the liability on the employer's balance sheet hasn't changed," he said.
In addition, pension bonds ultimately expose employers to all the risks and rewards of investing. Proceeds from the bond sale infuse the pension fund with cash that will either grow or shrink with the market, said Sonoma County Treasurer Thomas Ford.
Poor returns would create new shortfalls and accompanying costs that could offset fiscal benefits from the bonds.
"There is no financial transaction that has no risks," Ford said. "If there are no risks, there are no rewards."
Peter Felsenfeld covers Contra Costa County. Reach him at 925-977-8506.
The Contra Costa Fire Protection District wants county supervisors to issue $120 million in pension obligation bonds to lower pension costs.
The move would carry risks and possible rewards. Here are some of the factors to consider.
Refinancing. If successful, the bonds enable public employers to pay off their long-term pension obligations at a lower interest rate. Con Fire has racked up a $120 million pension shortfall. Currently, the district must pay that amount back to the county's retirement system with 7.9 percent annual interest.
District officials are confident they can eliminate that debt by selling bonds with interest rates fixed at between 5 percent and 5.5 percent. The lower rate would reduce district costs by about $2 million annually.
New benefits. The bonds, in effect, transfer the shortfall from the retirement system to the district's debt services. That makes the pension system look artificially healthy, even though the district's liability remains the same. Unions may point to the flush pension system as justification for demanding more lucrative benefits.