Politics & Government

Watch Dog Committee Backs Debt Reduction Plan

Warrant Committee supports a new payment stream to tackle unfunded obligations.

Pick a number. Any number. Just pick a number.

That request by Floyd Carman at the Warrant Committee's weekly meeting Wednesday, May 2, was an invitation for representatives to approve a Special Town Meeting article creating a new policy that each year diverts a small stream of town funds in an attempt to fill a huge debt reservoir. 

At the end of his appeal, the Warrant Committee – the financial watch dog for the Town Meeting – voted unanimously to support Carman's plan before Town Meeting despite what one selectman recently said any payment is just a "drop-in-the-bucket" in resolving the massive debt obligation facing town taxpayers.

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Other post-employment benefits – known as OPEB – are town payments other than pensions that town employees and teachers receive at the start of their retirement. In Belmont, the big one is health care premiums.

And it is indeed a big one dollar wise. Belmont taxpayers currently are on the hook for $182 million in benefits, nearly twice the size of the town's entire fiscal 2013 budget, all unfunded. 

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For Carman, the town's chief financial official, the time to make at least a dent into the deficit has come.

Saying he was not wedded to any one number or percentage the Board of Selectmen finally agrees to, Carman feels it is in the town's best long-term interest to establish a "simple" policy that can be explained in "two minutes" how the town deals with millions of dollars of benefits town retirees are expecting. 

Under Carman's plan, 10 percent of the $4 million in the town's adjusted reserve level, or $403,000, going into the OPEB account.

"But if you want it four percent, five percent, that's up to you. Select your comfort level," said Carman. Ralph Jones of the Board of Selectmen said he sees a much more modest percentage being adopted as well as a provision that will allow the town to skip a payment when general economic conditions become catastrophic. 

While some Town Meeting members may see the new policy as a missed opportunity to direct scarce funds – $109,000 this year in start up funds and a greater amount each following year – into much needed programs and projects such as repairing roads or additional spending for schools and town departments, the new policy will be just as important influencing Wall Street that Belmont's financlal outlook is bright, said Carman.

Carman said in an interview Wednesday, "no one's going to come rescue us out of (OPEB)" as state and federal bailouts are no longer seen as a viable backup plan. In the past year, several Rhode Island municipalities have filed for bankruptcy while Stockton, California nears the same fate. 

No little amounts 

"Any payment, no matter how little, is better than ignoring the issue," Carman said this week. 

While the objective of the payments is to take the first step paying down the ballooning debt, Carman said the new policy will influence how the all-important rating companies view Belmont's fiscal health. 

Belmont currently holds a coveted triple A bond rating – as compared to a double A for the United States – from Moody's, the credit rating firm, allowing the town to borrow at a lower rate than the more prevalent AA municipalities. 

Carman said the town's prudent financial practices such as keeping an annual 10 percent operating reserve is keeping Belmont in the top level of communities. 

"But Moody's is asks about what we are doing with our debts," said Carman. "What's Belmont doing about OPEB?"

Several other triple A towns have already taken on OPEB with Wellesely looking to finance their obligations with bonds and others setting aside a fix dollar amount each year. 

"I'd like to say we have a policy so we can stay in (Moody's) good graces," said Carman.

Any drop in Moody's credit grade for Belmont will cost the town in the long run. While that rate may appear small, it adds up when discussing projects the town will need to tackle in the near future.

Carman said over the next five years, the town will be financing $53 million for the Belmont Municipal Light Department's new substation (while rate payers rather than tax payers will pay off the bonds, the Light Department is using the town's superior bond rating to sell the municipal paper) and another $75 million to upgrade Belmont High School.

"That's $130 million in obligations. If the difference is 40 to 60 basis points for a double A rather than a triple A rating, that difference is $5 to $6 million," said Carman. 

While agreeing to support Carman and the Board of Selectmen's OPEB proposed policy, Warrant Committee Chairwoman Elizabeth Allison believes that there should be a "quid pro quo" of possible changes to the entire OPEB debt structure similar to the state's Health Care Plan Design that gave cities and towns the opportunity to require municipal employees to enter into plans that increase their out-of-pocket expenses and resulting in local government savings. 


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