Finance Committee – POBs and more
Black text is mostly objective, red text is mostly subjective in nature. These are notes from 2/11. I missed 2/6 meeting because of a work dinner.
Charlie Foskett chaired in Al Tosti’s absence.
The hearing for the assessor’s article is canceled – he won’t need the article. Minutes were approved.
Article 74 – The committee heard and voted this article on 2/6. It is related to reporting from the retirement board. We voted to amend the recommendation made on 2/6. I don’t have the full text, but I gather the result is a request, not a requirement, with some other language softened.
Next up was Treasurer Stephen Gilligan talking about bonding our pension requirement (POBs). He brought Peter Frazier from First southwest. Gilligan is proposing that we request special legislation that would permit (not require, permit) the town to to borrow money and use it to pay down the pension obligation. (Note, the pension obligtion is NOT the OPEB obligation – one is pension, the other is health care). The crux of the argument is that the retirement board plans on a 7.75% return on its investments, and we can borrow money at maybe 5.3%. That percentage difference would free up $6.8m (present dollar value) over the next decade or so that could be used on OPEB or other town obligations.
There was more than an hour of discussion. The investment would be managed by PRIT. If POBs are actually sold, it reduces flexibility for the town. It is an increased financial risk. 10 towns in Massachusetts have the permission, but only Worcester and Brockton have done it. Gilligan recommended against doing this for OPEB, only for pension. This was an interesting presentation and discussion. The Treasurer tends towards longwindedness and is not afraid of repeating himself to make his points. Still, the presentation was an idea that was new to me. I’ve been thinking about it and talking about it ever since. At lunch the next day I told a co-worker what I’d heard the night before: “The treasurer wants to borrow $50 million and invest it in the stock market.” That’s a gross oversimplification, but it got a laugh!
I haven’t decided what I think about it. I lean towards thinking its a good idea. I know we don’t have enough information to decide if POBs are right for Arlington, let alone right for Arlington and right now. The “right now” decision will be handed to the treasurer and selectmen – a big responsibility. But I can certainly see the logic of the arguments. How do we decide whether the increased risk is worth the saved money we keep in return? I’ve heard the knee jerk-reactions that “market timing is dumb” and “the stock market is always a good bet in the long run.” I reject them. This is a very complex question that requires a careful response.
Afterwards, we turned to budgets. $10,778 was recommended for the FinComm budget, approved unanimously.
The zoning budget was approved at $23,111 total.
The cemetary was approved on a 15-0-1 vote. There was consideration that the outsourcing might not come back at a good price.
We decided to have a hearing on Article 7 about affordable housing trust.