In the view of some members of various town boards and committees, the idea of taking approximately $200,000 – using last year's budget numbers – of scarce dollars from the town's annual budget to draw down a roughly $200 million unfunded liability to town retirees is like attempting to fill the Grand Canyon by throwing handfuls of dirt into the gap.
But to Floyd Carman, Belmont's Treasurer and Tax Collector who has long championed the creation of a policy to begin to pay off the town's growing Other Post-Employment Benefits (OPEB) account – those benefits other than pensions that town employees garner after their retirement – the amount is not as important as knowing who notices the policy.
"It's a drop in the bucket, but it's not to those who see us approving it," said Carman in May.
And yesterday, Oct. 22, the Belmont Board of Selectmen approved the creation of an OPEB Trust Fund in which the town is committed to annually to set aside a certain percentage of the town's budget excess reserves to fund retiree health insurance benefits.
Under the new policy and using 2011 calculations, the formula would have required Belmont to set aside $200,469 from general fund revenues totaling $81,933,792.
"It is clear, predictable and a stable amount," said Town Administrator David Kale who supported the policy as did the three selectmen.
And even during distressed economic times when the town is forced to dig deep into reserves, Belmont will pay a minimum of $50,000 into the account.
Critics question use of funds
Critics of the new policy have said removing a significant amount of town revenue that could be used to fund critical town departments and the school department is misguided as it will likely take intervention from the state to bailout Belmont and most other Bay State municipalities (for example, Arlington has a $260 million OPEB liability and Cambridge's is nearing half a billion dollars) that are swamped by post retirement costs.
To set aside valuable funds for an account that will be rescued by the state is a misallocation of funds during questionable economic times, said critics.
While the phrase "drop in the bucket" was used last night to describe the impact on the liability – the 2011 budget example used constitutes one thousandth of the debt – Carman, who has presented his policy proposal at May's Town Meeting and the Warrant Committee (Town Meeting's fiscal watchdog) last month – has long stated his main focus for the new policy is how it is precieved by Wall Street rating agencies.
While credit ratings for US cities and town as well as the United States have been downgraded, Belmont continues to be one of the few municipalities that have retained the gold standard triple A rating through prudent budgeting and maintaining healthy reserves.
Yet in his talks with the Wall Street companies, Carman said the rating firms are keeping a keen eye on long-term debt held by municipalities.
"The first thing they've told me is, do you have a policy (on OPEB)," said Carman.
The need to retain Belmont's triple A rating, said Carman, is paramount today as the town begins a round of heavy borrowing to construct several significant projects including the building of a new Municipal Light Department substation (approximately $55 million), a new library ($12.5 million to 7.5 million) and the complete renovation or construction of a new building at Belmont High School (from $50 to $90 million).
Carman said without the OPEB policy, Belmont is betting against the credit firms taking action to drop the town's rate to double A which Carman said is a losing bet.
While double A is a very good rate, the addition of several tenths to the interest rate to a bond to finance the projects will require taxpayers to dig deeper into their wallets to pay the difference.
"Right now we have no problem selling our paper (bonds) in the market. That might not be the case if we are downgraded," said Carman.