Was the pension financing essentially the same as replacing a re-financeable fixed rate mortgage with a homeowner’s adjustable-rate mortgage?
No. The 2008 financing is the exact opposite of a variable-rate mortgage, which is at the mercy of rises or falls in market interest rates. NYT: “The Denver schools essentially made the same choice some homeowners make: opting for a variable-rate mortgage that offered lower monthly payments, with the risk that they could rise.” Even the article itself later exposes the inaccuracy of this statement when it notes that the DPS financing, like most variable rate transactions, includes an interest rate hedge or “swap” to mean that the district, unlike a homeowner on an ARM, has no exposure to fluctuations up or down in market interest rates. In addition, the article erroneously claims: “Like a homeowner, Denver essentially started out with the equivalent of a standard, fixed-rate mortgage that allowed it to refinance if interest rates fell.” This is not true. In 2008, Denver’s pension debt it took out in 1997 was not callable and could not be refinanced like a standard home mortgage when in
