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FinComm Reviews, Votes More Warrant Articles

Finance Committee met for the first time in a couple weeks after being cancelled by ice, snow, and holiday. The members listened to and questioned a parade of town officials and citizens as several warrant articles were heard.

First up was the Director of Assessors Bob Greeley on Article 64. The state requires the town to do a physical inspection of all property every nine years. The plan is to inspect the town’s 14,000 parcels ($25 each) and 500 “personal property accounts” ($40 each) over the next two summers and then compute the assessments in time for the FY10 deadline. He requested $325,000 to augment his current balance of $61,000. FinComm approved this unanimously later in the evening.

He also responded to a question about Symmes. In January FinComm had heard that Symmes housing might initially be rented rather than sold, and would therefore be assessed at a lower value. The assessor explained that legally he had three methods of making an assessment: market, income, or cost. Houses were done by the market assessment; there are plenty of home sales per year to use to extrapolate market value. Rental properties rarely change hands in Arlington so he has to do an income assessment, based on the rental property’s income. The income method leads to a lower valuation than market method. The cost method required engineering work and was not commonly done.

He gave a hypothetical example of a 126 unit property in town that is assessed at $22 million by the income method. If it converted to condo it would be perhaps $40 million using the market method. The bottom line was that he agreed that Symmes would be lower revenue for the town as a rental property.

John Bilafer called in on a speaker phone, and Richard Greco, the retirement board administrator was there in person to discuss several articles.

First up was Article 26. Background: As you recall, Arlington has to recognize a $170 million liability of health benefits for current and retired employees. This was required by the GASB accounting group and affects all governmental bodies. Through the magic of accounting, if Arlington works to pay this down aggressively, the liability is valued at $110 million. To get that valuation the town would have to pay approximately $5-6 million/year. Arlington has created an OPEB committee to study ways to fund this liability.

The town is currently aggressively paying into a fund to cover its pension liability and has been doing so for 20 years. It is anticipated that the liability will be covered in the year 2023, and at that time the town will be able to pay much less for pensions – it will be paying only current costs, and no longer working off a debt. Note that the pension liability is different from the health (aka “GASB”) liability. It’s easy to confuse them, and you have to be careful about which one you’re referring to.

Article 26 seeks home rule legislation that would permit the town to pay less into the pension liability, about $3-400,000 less annually, and pay off that liability over a longer period. The theory is that the town would use that money to help address the GASB liability. There were several questions asked of the former treasurer of the possible benefits and risks of this plan.

Later in the evening the group discussed the article and the discussion followed the same vein as the questions earlier. It was noted that the pension liability is one that the town is legally obligated to fund while the GASB liability has no such legal requirement. The motivation to retire the GASB liability is that it would presumably make Arlington more appealing to bond rating agencies and protect/improve Arlington’s bond rating. Several members of the committee argued that since all towns and cities and states have this liability that it would not weigh against the town. It was further argued that since larger towns and cities are affected one year earlier by the ruling, that there was much to learn in the year about how ratings agencies viewed GASB. We could delay this action for a year while the issue matured with little (if any) risk to the town’s credit. We could then make more intelligent decisions on what debt to pay down first and how quickly.

It was also noted by several members that the retirement board may not be the best administrators of the the OPEB fund given their past performance. There was concern that this legislation would irrevocably link OPEB to the retirement board. Furthermore, the legislation recently proposed by Governor Patrick would sweep Arlington’s retirement fund into the state fund. (Arlington’s retirement fund has earned 3% less than the state on average over the last 5 years, and thus qualifies as underperforming and is targetted by the legislation).

Finally, it was noted that the OPEB committee had not yet reported and it might have a different angle on the plan. For all of these reasons, a recommended vote of no action was approved unanimously.

Earlier in the month FinComm had heard from Gordon Jameison on Article 27 which was another article on OPEB. FinComm asked Mr. Bilafer’s opinion on the article, and he thought it was superfluous to the OPEB committee’s work. With the forthcoming OPEB report, FinComm also deemed this article as premature and unanimously voted no action. Perhaps it will be appropriate (or refined) for next year.

Mr. Bilafer spoke to Article 56. This article has been approved every year for decades. For retirees with 25 years or more service in Arlington where the pension has fallen to 50% of the current office holder, a raise is given on the first $12,000 of the pension. This amounts to a few thousand dollars per year. It was approved by FinComm. I’m embarassed to say that I didn’t ask explicity or record the actual cost to the town. I believe that it is $36,000 this year, but I have to double-check.

Mr. Bilafer spoke to Article 57. This is about the specific financial vehicle the town will use this year for storing money to be put towards the OPEB liability. The town has acted on this in the past, but for reasons that I don’t totally understand we can’t put our money in the actual OPEB fund until December 31, 2007, so we need a piggy bank, cookie jar, or mattress to put the money in until then. The actual money has three sources: money previously saved by past Town Meetings, anticipated payments from the federal government related to Medicare Part D ($350k) and the money that retirees are paying as a result of increasing their insurance co-payments from 10% to 15% ($155k/year). Later in the evening the board approved this in principle in anticpation of a more detailed motion to be voted on in the future.

A couple members of TAC talked about Article 51, George St. sidewalk by Dallin school. They want to make a narrow, one-way private road into a town-owned, one-way road with a sidewalk for kids to walk on. The warrant article uses words like “eminent domain.” There was no sense of how much money this will cost, if anything, and it wasn’t completely clear that the DPW was ready for the road even it was obtained. Overall, this one came across as one-quarter baked; there are too many unknowns for FinComm or Town Meeting to take action on it. Perhaps there will be progress over the next few weeks, but I’m guessing this goes as no action in April.

Roland Chaput spoke to Article 59, requesting a $6200 appropriation for the 200th Anniversary Committee. He reported on activities, planning, and fundraising. FinComm was impressed with the progress that had been made since the last presentation. The board decided to wait for more information before voting. I signalled that I was going to vote no because it was too much ($1000 seems more in line). I love the work the committee is doing; I like it even more when it’s done through private donation. I will put my money where my mouth is and send them another check.

Annie LaCourt spoke to Article 18 which would split the IT group out from the Comptroller and put it under the Town Manager. She explained how it would put the IT group on its own rather than a part of another function, on its own footing, and at a level where will be more able to serve all of the departments. There was discussion about integrating the school’s IT group. There was discussion of what level and skillset the IT leader would need and the costs that might be saved. FinComm may take a position on this if it determines that there are financial issues in play.

The meeting closed with a review of recent statehouse activity. Alan Tosti recommended that everyone review the municipal legislation put forth by Governor Patrick.


Pingback from Dan Dunn’s Podium » Finance Committe hears the Town Manager
Time: March 20, 2007, 1:41 am

[…] Article 57 was up next.  This had been discussed in general terms at a previous meeting.  The article is to further fund the OPEB liability (general discussion of OPEB here).  The article combines the money that has previously been funded, this year’s contribution, the increased retiree health care payments, and Medicare Part D payments into the base OPEB fund.  I made a motion that 50% of the Medicare Part D payments go into this fund with the intent that the other part of the Medicare Part D funds go towards the health insurance budget. Keep reading – I’m about to take a U-turn. I said that I was concerned that the federal government was giving us this money to compensate us for providing health care prescription benefits, and we were spending the money on something else.  I said that I knew that the Selectmen had chosen to dedicate these funds to the OPEB liability as a part of their vote to increase the retiree health care premium from 10% to 15%, but I noted that doesn’t require that FinCom agree with the decision.  The counter-argument was made that we are spending the money entirely on health care, particularly for retirees.  Furthermore the change would disrupt a political practicality: the selectmen would be in trouble if we removed one of the terms of their deal. The subtext to this argument, of course, is the 5-year plan.  If the health insurance line item can be made to look smaller than a 7% increase, then the plan allows for the town and school budgets to rise by more than they did in FY07.   I made the amendment in good faith.  Until that night I hadn’t heard the argument for putting the Medicare Part D funds towards OPEB.  I had heard that it was true, but hadn’t questioned the decision.  I should have asked the question earlier; at least I asked it before the vote, not after!  The argument against my amendment was compelling. It was the end of the meeting and we were running out of time.  I didn’t get a chance to explain my vote.  As it was, I voted against my own amendment.  I’d been convinced by the discussion to change my mind. I’m sure that everyone in the room thought I was crazy or wasting their time or both.  It wasn’t my intent.  I had real questions about the motion, and the discussion resolved them. My amendment failed 3-12.  The main motion carried. […]

Pingback from Dan Dunn’s Podium » Finance Committee on School Building, Rink, and Rec
Time: April 5, 2007, 1:00 am

[…] Al Tosti had met with Town Counsel John Maher to review the warrant. There are a couple articles that the Selectmen endorsed that the Finance Committee voted down. The Selectmen appear to think that it is a good idea to pay down the OPEB liability aggressively (Article 26), and they think it’s a good idea to create a special fund (Article 28) to separate funds for town building rental. It will lead to a lively debate, I think. We didn’t get the whole way through the review before we moved on. […]

Pingback from Dan Dunn’s Podium » FinCom Hears Article 26 Again
Time: April 26, 2007, 12:34 am

[…] John Bilafer spoke to FinCom about it’s recommendation of no action on Article 26.  I missed the very beginning so I’m not sure if he proposed a wording change or just a different interpretation, but the upshot was that the town could optionally choose to pay off OPEB while delaying funding the retirement obligation. That change removed at least one objection of FinCom. […]