The town’s three pension boards approved 2008 valuation reports at special meetings Thursday, May 7, which agree with a proposal to pay back $21 million in unfunded liabilities over a 20-year period.
But the first payment alone already puts the town in a hole.
The first installment for the current budget year, which includes pension enhancements and a payback of losses, is estimated at $2.1 million.
However, the town has only set aside $1.7 million in the current budget year to fund the town’s police, fire and general-employee plans, $757,000 more than the $943,000 that funded the plans in fiscal year 2007-08.
So, the town must account for an additional $400,000 in budget deliberations this summer to pay back the state for its previous budget year.
Out of that $400,000 shortfall, $300,000 will be used to pay off losses and $100,000 will be used to fund the plans moving forward.
And, the next 19 installments, expected to be $2.1 million per year, will vary depending on how pension investments fluctuate.
To pay off the millions of dollars in losses that occurred between 2000 and 2002, the town’s pension actuary, Foster & Foster, worked out the deal with the Division of Retirement to make up the losses in a 20-year payout.
The 30-year amortization method that the town currently uses was a point of contention with former state actuary Charles Slavin, who retired earlier this year. Slavin had previously suggested the town pay back the entire $21 million over seven years, which would have required a $3 million per year payment.
Town Manager Bruce St. Denis said the new valuation reports will be sent to the Division of Retirement immediately and an official decision on the reports is expected within 30 days.
Funding for the plans moving forward will change if the proposal is approved. Any losses in the plans starting now will be paid back in 10 years.
Police pension board Trustee Peter Kasdan said during the meeting that he “was glad this ordeal is over.”
The burden now shifts to the Town Commission, which agreed with the pension fix, but must come up with $400,000 in extra money to pay for the solution.
The $400,000 must be accounted for at a time when town revenue is expected to drop at least an additional $1 million, because property values are expected to drop an additional 10%.
Said Vice Mayor Robert Siekmann: “Finding an additional $400,000 tempers the relief of this solution. That’s still a big number.”
The property appraisers’ offices will release preliminary property values Monday, June 1, the same day the
Town Commission will receive its first preliminary budget for fiscal year 2009-10.
TOWN’S FUNDING REQUIREMENTS OVER THE YEARS
(Year ended Sept. 30)
Police Fire General Total
2005 $102,620 $346,748 $380,983 $830,351
2006 $126,834 $358,128 $414,964 $899,926
2007 $222,256 $290,827 $429,684 $942,767
2008 $353,986 $797,183 $400,059 $1,551,228
*2009 $420,832 $813,499 $465,898 $1,700,229
**2010 $577,421 $886,180 $629,837 $2,093,438
* Numbers anticipate state acceptance and receipt of state monies to partially fund police and fire pension plans.
** The 2010 contributions are estimates, based on payroll reported by the town ending Sept. 30, 2008 and reflects state acceptance and state revenue the town may use to fund police and fire plans. Actual funding will be based on precise payroll numbers as of Sept. 30, 2010.