Questions and Answers?

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Question 10

The under-funded retirement benefit liability is currently estimated to be $133 million and must be addressed in the 2008/2009 budget. To date, the current council has supported a yearly contribution of approximately $500,000 to funding. To meet this obligation, the city will need to either start funding the liability (at $10 - $12 million per year) and/or significantly reduce current retirement benefits in the next round of contract negotiations. What specific measures will you support to meet this significant liability?

	Answer:
Connolly	This City Council has and will continue to take measures to address under-funded retirement benefit liability. 1. Utilized unanticipated state monies. 2. Capital Improvement monies set aside. 3. Sale of City Property. 4.2006 Police contract: personnel now contribute to health and retirement benefits. The City will continue this with upcoming contracts. I will continue to support these effort.
Coyne	This Council was the first to negotiate cost-sharing of benefits into retirement with the FOP contract that was just agreed to a few weeks ago. We have been diligent and aggressive in that demand and have pledged to continue to work with other unions in the City to decrease our long-term retirement liabilities.
Dias	The Council just put an additional $770k from Lenthal - a good move. Keep allocations $500 to $750k until we do an in house study (no cost) and see where we are at. Example: Health Ins. Some effected are still teaching so we don't pay for those teachers when city is effected. The cost will be different as people retire. When will we max out of those retirees with this benefit and go from there. More study needs to be done on this issue.
Napolitano	The under-funded retirement benefit liability is an elusive number, which can change dramatically from year to year, but significantly large enough to be of grave concern to many, including myself. In the 80's, businesses were advised by government accountants, they would soon have to account for the future liability of health and pension benefits on their corporate books, and set aside money to meet this future obligation. It was at that time, there was a dramatic shift to the employee to pick up more of these costs through cost sharing of health premiums and supplemental voluntary retirement plans, Individual Retirement Accounts. During this time, municipal and state government benefits increased unaffected by this change. It was not until recently, government regulators required municipals and state government to adopt the same reporting requirements as private business. In 2009 we must add this liability to our audit, offset by any funds set aside by the city for this purpose. What does this all mean? We have to report our liability, although we are not required to have full funding in place. Because it is unlikely it will be fully funded, this will affect our ability to borrow money in the future for any purpose by increasing the interest rate charged adding costs to any endeavor. To correct this deficiency, I believe two paths should be taken: Future benefits should be more reflective of what employees are receiving in the community at large. Negotiations will not bring about these changes all at once, but over time, similar to way the benefits grew. Benefits must be reworked. All options with regard to health care and pensions should be explored, including cafeteria plans, coverage adjustments, co-sharing, and a greater choice of options for retirement savings. Effective negotiations will reduce this future liability. Secondly, we need to continue to find new sources of revenue to fund this shortfall, with a goal toward total solvency.
Oliviera	It is impossible to undo years of mistakes in one round of contract negotiations. In cycle after cycle, instead of seeing a contract as a "whole", city negotiators saw only the salary section as part of a "headline". "Keep the salaries down and out of the press; give the store away on benefits" was the mantra. Now, the bill has come due. Benefits have increased in cost at an exponential rate.Collective bargaining units see contracts in "whole" terms. We will be able to give away less expensive dollars, in salaries, to get more expensive dollars back, in benefits, but savings in one negotiation cycle will be minimal.The infrastructure, the surplus, the schools, and this issue are all interconnected. As we tweak one, unintended manipulations in the system occur. In order to govern effectively, we must take a world-view of our city.I would also submit that every other reform I have mentioned is part of the solution to this problem. Let me add one more:Conservation Planning. Not having it available to us this year has probably cost our great city $1.2 million. We gave up $600,000 when the comprehensive land use plan was not ready for the Newport Grand request. We lost another $600,000 when the Council did not follow the recommendation of the Planning Department on Eastbourne Lodge. Our comprehensive land use plan, as currently written, is not serving us as well as it could. Until it does, we will lose dollars instead of gain them.Finally, determining this contribution must be the first step in the process, not the last. That is the only way we can avoid bonding, a true last resort, to solve the problem.
Slee	The liability that we have is scary. It shows that previous city councils, city managers and school committees have not been fiscally responsible. It is time renegotiate the benefit plans, reduce our unnecessary staffing and be more accountable for our expenses. I do not favor raising taxes if we can restructure and repay the debt through the sale of unused municipal properties or through more affordable benefit packages. If we treat our town like a company and offer stock purchase plans as opposed to pensions, I think everybody could benefit. This way, we can find a creative approach to reducing our cost of government without having to tax the residents.
Waluk	The figure for the potential healthcare liability is a moving target and can be addressed by employees beginning to pay a portion of the premium, finding creative ways of pooling expenses and growing the fund that has been established to pay for some of these expenses. There is no single solution to fix a problem that has existed for many decades since the city first gave employees free healthcare and it should also be noted that many communities are in the same situation we are.
Abney	The under-funded liability is a great concern of mine. As the total estimates may differ, the numbers are very large. In my view, there are three general ways to approach the issue. None will be without some pain. First, the city must maintain a budget that is lean and addresses only the most pressing priorities of which general funding are required. Second, our future municipal contracts must begin to reflect benefit packages that are in line the industries and businesses in our area. Most importantly, we must not promise, what we don't have. Third, we must find balanced ways to grow our economy and keep our cultural heritage intact, thus relieving pressure on our property owners. Reliance simply on property tax increases to address the upcoming liabilities is not feasible. This will not be an overnight process. Sacrifice will be required from all segments of our municipal operations.
Duncan	That in future contracts professional negotiators are employed by the city.
Cullen	The city has taken a couple steps already to allocate funds annually to help reduce the liability that we are currently faced with. The first step would be ensuring that future union contracts are negotiated to reflect current and completive pension packages. Also co-pay in health cost is essential if we are to shoulder the growing burden of rising health care costs. Councilman Coyne's resolution is another great example of how the city can help allocate funds directly to the liability. This is not just a local problem, but also one that faces the State and the Nation. I feel that we are entitled to lobby at the State for funding to alleviate this problem as well.
McLaughlin	First and foremost, we need a plan that everyone understands. The amounts set aside by the council to address the other post employment benefit (OPEB) unfunded liability are nice gestures, but they do not constitute a plan to deal with the problem. In order to develop a plan to respond to this liability, we need to better understand its constituent parts. An intelligent discussion about OPEB requires a complete statement of the current state of affairs, a description of all of the OPEB drivers, and a clear idea of when the benefits that constitute these liabilities actually need to be paid. Until all players in the process (e.g., the council, tax payers, beneficiaries) have a shared understanding of its true dimension and impact on city finances, it will be impossible to embark on a discussion about how to best address the problem. Of equal importance, we need to ensure that personnel contracts entered into by the city do not add to the current liability - the liability as it is represents a daunting challenge to the city - allowing it to grow would be unconscionable. The council also has to convey this message to the School Committee so that that body clearly understands that the city can not afford to permit growth in the school-related OPEB unfunded liability. Money spend on OPEB will be money that is not available for needed infrastructure investments. In order to engage the community in a dialogue about the dimension of this issue, and its threat to our financial health, the city needs to do a better job of sharing with its residents information about revenues streams and how much money is likely to be available in the future to address the entire panoply of competing demands on tax payer dollars.
Leonard	I support looking at the legal issues in proceeding with changes to the retirement system. Some communities have new contracts that have changed the number of years required to retire. This was done contractually. Some have new and different requirements for "new hires." In terms of new hires, if a person is hired and signs a contract, he/she knows what the rules are, so to speak, from the beginning. The State has changed the number of years for retirement, for example, for nurses who work in the Forensic units. Is a person vested in the system in ten years? It is a national issue, both in the private and public sector. Newport has to find a way to be fiscally responsible and financially stable. I think that we need to review the pension liability and what is needed to be changed or saved to keep it solvent.

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