opportunity to share more information about the pension report that the work committee recently generated i think everybody is aware of the fact that last year the town meeting voted to ask the one committee to do a deeper dive to do an investigation into pensions to report back and do that so we did that request happened in june and the request and the request was that we would actually report back in the middle of october we have that report which there are copies over here on the right hand side of my right hand side your left hand side and that material has been distributed to all time many members just after the fifteenth of october so what we'll do is we'll do a little brief summary of some of the material in there but then open the floor for questions and comments and i think just to be clear in terms of you know sort of ground rules and how we think about this evening tonight this is not designed to be a mini town meeting where we actually are hashing out the issues and and everyone's making their arguments for what we should be doing particularly about about pensions  so we'll have to kind of play that by ear i of you know give a little bit of latitude to talk about the topic of course but at the same time i don't want this to be a you know really and argumentative session were making arguments for one course of action or another and the town meeting is clearly the forum for doing that but to the extent that this evening can provide an opportunity for questions and comments and additional digging in on the report that we generated anything that might have not been clear to folks out on this for the work for me really leading the effort on this he is one of the nation's experts actually on pensions and so to have him on our war committee and to be able to provide the information that he's helped all of us provide is really terrific greg but and i'll just mention really quickly we are eight members of the work committee here right now which is not a quorum so i will not actually call the work committee to order if someone else shows up i may actually do that and kind of in the middle so i polish from from the standpoint of interrupting ok any questions at all before i before i dive in ok so what i'll do is i'll actually share between myself and greg will share a little bit of kind of summary material very  budget itself so the budget as everybody knows in two thousand and sixteen which is the current fiscal year that we are with then is one hundred million dollar budget and that budget breaks into on the right hand so you can see where it says fixed costs and then that kind of a fifteen million to fifteen point eight million dollars fixed cost and that leaves the operating budget and that operating budget splits fundamentally between the school side and municipal budgets like police and fire and public works and then capital  nine million dollars it is actually broken into these categories so you can see that pensions is the single largest area of fixed cost and we say fixed because there are from a town in perspective there's only a limited amount that town m do to actually affect what that number is and so we'll talk a little bit more about the process as a relates to that but you know the the amount for example of the payoff on the debt is that's debt that we've already incurred so we have to pay those payments prince when interest interest payments the roof the roads of course we can vote not to pay for the money for the roads and the time he can choose not to do so but those those amounts are are not thought of as essentially being kind of like operating budget numbers now the pension number which will dive into just to point out this is six point five million that's the amount that comes out of the budget so the total amount that was funded in pensions last year was seven point nine million dollars the difference between the six point five in the seven  is the amount that's actually funded out of the the sewer rates and the electrical rates in the state that's of the employees that are actually that are not part of the town government but instead are actually part of the utility side of things those are actually funded out of rates so that the six point five is the amount that actually comes out of the budget that makes sense so go to the next page and just to kind of reiterate for everybody some kind of major long term trends in terms of overall cost impacts and revenue for that matter so you know we are townhomes we see revenues growing typically in the two a half to three and a half percent range and what that means is that any time that  expenses actually if the expense growth over time is actually exceeding our revenue growth of course were about out of balance which can't happen so when there is any cost factor that is actually growing more than three and a half percent that's an issue that actually puts pressure on the rest of the budget so for example we'll talk more about the pensions growing at seven percent so and when a relatively large line item is growing at seven percent which is that which is roughly three half percent more than that's an three and a half percent revenue growth that's that creates  pressure on the budget the same thing is true for employee compensation which is historically grown faster than three and a half percent and it is nearly seventy percent of the overall budget and that you would argue is actually the number one challenge which is competition growth actually growing in excess of revenue growth we have large expenditures on capital and maintenance and infrastructure and then of course pension and health care obligations which is includes opeth just for early days clarification is retiring health that is different from pensions and we'll talk more about about of course pensions but the scope of today's discussion is really about the pension side of the world not the open up side of the world ok so what we'll do is i'll  great thanks michael that the next lie the background of pensions include some of the material that we use as the foundation for the report and it's also a very high level summary of a lot of information was shared actually right here in this room last year where we had members of the retirement board the town's actuary and some other state officials come present on retirement liabilities more broadly so i'll just touch really quickly and some of this information i see a lot of familiar faces i think everybody's pretty familiar with the data that's here the first point we make is just a reminder that belmont's pension system does not apply to teachers the teachers across the state are part of a separate system that is run and overseen by the state the second point we make reference to the belmont retire the retirement board there's a board of trustees that oversees the town's pension plan first i would also note that one thing we've also talked a lot about is that state law governs a lot of the practice as an administration around public pensions for all of the communities in the commonwealth so for example the benefit formulas are the exact same ones that every other town in the state has the funding requirements to put in adequate money year over year are based on a broad set of rules and as we note here a common set of rules i should say and a note here think one thing we talk a lot about is that it is the retirement board that has ultimately is the decision rights on how the pension system gets funded year over year in the town budget that is reviewed every other year and during that process they set a schedule both for the next two budget years to follow as well as setting a schedule that's designed to fully fund the pension system over time and so we discussed a lot just recognizing the decision rights that the retirement board has and also respecting their process which is something michael and i can talk more about later on down the page we just get into some of the basic numbers on pensions the seventy four million million dollar unfunded liability that's simply the difference between the assets or the investments that the retirement board is currently managing it is that investment pool that pays out benefits over time for retirees from belmont and then the difference between that and the liabilities that the actuary calculates the liability is just a number that represents all  payments that are going to be in the future not only for people who are already retired but an estimate of what current workers will receive at some point in the future and so the difference between those two numbers the shortfall really is seventy four million dollars and what we talk about is a funded ratio that's the fifty one percent figure and all that means is that when the actuaries don't with their work they determine that the town only has about half of the assets that it's need going to need to pay for pension promises over time and so where it goes from there and this is common for just about every city town and state in the country is the actuary works with the stiction in this case the town of belmont to set up a funding schedule that's a payment plan to essentially get the asset level up to one hundred percent of liabilities over time it operates in a certain way similar to a mortgage where every year you're setting aside something to pay down what in fact is really a debt for the town and that fifty one percent funded ratio is lower than what we see in the other cities and towns the average is a little bit higher than sixty percent and definitely lower than the national average figure of about seventy percent if you look at all the states cities and towns in the country and the reason for that simply put is that in decades past and really all the way up until the early ninety's the town was simply wasn't putting the money it should've been putting into the pension system a lot of cities and towns in the state have the same issue but belmont is really has been towards the bottom of the class and in the bottom quartile historically but over the past ten years the town i a particularly good job of trying to really dig out of that hole so the next couple pieces of information here talk about how the funding schedule works the twenty twenty seven target date that's the date by which the town is projected to get to that hundred percent level having one hundred percent of the assets to pay for future benefit payments and then the seven percent growth figure michael i think already alluded to which is the annual increase right now that we're having within the budget for pensions so seven point nine billion dollars this year and then growing seven percent a year all the way after and two of the key findings from our report or first off that that seven percent growth rate will have a significant impact on the budget over time i think it's really just gravity that if your revenues are growing at three and a half percent and you have a an expense line that's growing at seven percent that will put pressure somewhere else in the budget there's no way around it and we also find that that twenty twenty seven target date is seen as particularly disciplined or aggressive a mong a comparative group of eleven other aaa rated cities and towns in the commonwealth it was literally the had the most aggressive target date other towns were projecting to fully fund by twenty thirty twenty thirty five or twenty forty and i think that's meaningful we looked at some of the different options that the town might consider going forward was not included here is we also provided some basic information on pension obligation bonds which michael and i can both touch on but i think we found it to be a pretty productive process in working through with other members of warren committee to understand what the impact of funding this this long term liability can have on the budget over time and looking at a little bit of information about some adjustments that could be made i think as michael will point out i think we're centrally providing this information to keep the conversation moving forward we have some thoughts on how to do that so that's it for me like a great thank you ok so why don't i just hit a couple highlights very quickly from the report which you know again this material is actually in there just to illustrate the material that's in the report i won't go into in great depth but just to highlight for everyone so the next page just shows again from the report how the actual total pension contributions look as they grow at seven percent and fully fund the unfunded liability by two thousand and twenty seven so you can see that the pension contribution from two thousand and sixteen is about seven point nine million and that grows to sixteen point five million in two thousand and twenty seven and you see how it's the number split between the service costs which is sort of the current payments and then the amortization payments which of the piece that are out that are paying off the unfunded liability the next page just shows how that grows over time and how you can see that in twenty twenty eight we're paying the service cost and we're no longer paying those embers asian payments because assuming all of the assumptions actually come to bear which is you know a big set of assumptions because you have to actually have you know the investment performance that is expected and a variety of other factors but assuming it actually those assumptions actually come to bear then this would be the current set of expectations the next page just shows as greg was  to how the one compares from a funded ratio relative to eleven of eleven other movies aaa rated communities you can see that are being at fifty one percent is actually on the low side in terms of being funded and then on the next page you can see how our twenty twenty seven funding date is actually on the more you can call it aggressive or conservative if you're on your perspective but we're actually paying off that unfunded liability in a relatively rapid way the next page just shows how we think one might think about excess amortization excess meaning payments that we're making on amortization that are greater than one might make if you were just made you pay them based on that with the revenue that's coming in so if the revenues coming in for the sake of three and a half percent and you're making seven percent pay a growth payment if you're growing the payments at seven percent  then the excess portion is the three and a half percent and so that's how that math basically works again that's in the report if you go to the next page gregg then you see how that actually plays out in terms of showing the impact on the  dollars and so those numbers are not enormous in terms of growth in excess of of revenue growth but you can see how that number then grows to in the five roughly five and a half million dollar range  in two thousand and twenty seven now it's worthwhile pointing out as i mentioned before that the impact on the operating budgets is actually not the five point five million because that includes all of the utility payments as well so if you think about utility payments are roughly six and a half million the total expenditure right now is seven point nine that means that the operating portion is about eighty three percent of the total payment if you were to then apply that just for a rough order of magnitude to twenty twenty seven you would see that would be about four and a half million dollars roughly of impact in terms of access payments in there even larger than our revenue growth and that's that's what's in there the next page that shows some sensitivity analysis as as we looked at what would happen if the increase in pension contributions were in fact lower than the seven percent that is currently being forecast so you see on the left hand side increases examples of increases that are of seven six five four three you know running down the left hand side if you make an assumption that the rate of return that is being assumed the seven point seven five percent rate of return in fact holds then you can see what the it's a very important to note however that that is hugely dependent on that seven point seven five percent growth rate so if a seven point seven five percent growth rate were in fact instead six percent which you see on the right hand side what ends up happening is the we actually don't even pay off the unfunded liability before twenty forty and we are statue entirely statutorily required to pay it off before twenty twenty or before twenty forty so you can see how that of those different numbers so you know very very very broadly when it when we were asked to look at when the word me was asked to look at the pensions there were three kind of broad approaches that were named in the request by town meeting one was what would happen if things stay the same what would it look like in terms of excess payments being made that would come out of the operating budget that was on the previous slide then the next question was if  the the funding schedule were to be modified by the retirement board or what might that look like and so you can see some of those examples there in terms of what that would look like and that would that would differ a the on the previous page the excess growth numbers would actually be need to say with lower but it would mean that would be paying off the obligation for a longer period time the third thing that was requested was some thoughts on pension obligation bonds which are listed on the next page the basic notion of pension obligation bond which has been investigated actually in the past i was instructed earlier has been invested in the past by belmont basically the notion is that you borrow a certain amount of money as as a community and you invest that money into a pension investment fund and the borrowing actually is not tax deductible just by the nature of the debt if in fact then the investment returns exceeded the the debt cost there is an opportunity to actually create some savings and so if you had for example a seven point seven five percent returns and the borrowing costs were to for example be let's say for an after center last that potentially create an opportunity for savings  twenty five percent chance maybe i can just let you comment on that yeah i just real quickly i think we just made an effort to give people a little bit of information and there's no way around this being somewhat technical mathematical just to demonstrate that although seven point seven five percent is the assumed rate of return and that over long periods of time the entire importers come pretty close or in some cases actually exceeded that rate that the stock market goes up and down investment returns are inherently uncertain and there are just standard mathematical models that people run to look at a distribution that returns above or below this expected rate and so we were just pointing out that based on that kind of analysis there is you know maybe something like a twenty five percent chance that the investment return will be lower than the borrowing cost the chance of that happening based on all the assumptions that the retirement board uses is much lower over time but it's still the case that it would be more than ten percent possible that you would actually lose money over a long period of time and that kind of transaction and i think that's a real consideration as we say in the port the report pension obligations are not commonly used there's only a couple of instances where it's been done with other cities and towns in the commonwealth and it really comes down to knowledge the real quickly as as greg mentioned before the authority for overseeing our pensions is that of the retirement board and so you have two of the leaders of the retirement board here today so time gibson and roy so thank you very much for joining us and you know there may be instances where questions actually are kind of even more appropriate for the retirement board than for the work committee so i'll open the floor any questions that folks may have or you know gre understanding you might want to achieve on the subject we may have a short meeting i will say well you're thinking about questions you know i do appreciate i think the work committee in general appreciates the opportunity to look at this is a very important issue for the town there are there were a group of folks within town meeting that i think felt very strongly that the issue of pensions is an important issue for the town and from a town meeting perspective had not actually been delved into very carefully so i think it's a it's a very healthy thing that we're getting that outside of the charmin board you know other folks are you know gaining more clarity about the issue and the issues at hand and we look forward to following up with the retirement board  and looking at issues as they come up over time this is not the last time of course the work committee will will look at pension issues we expect to continue to look at this over time and evaluate any specific proposals that may come forward and continue to provide guidance and help for tommy on this topic identify yourself and janssen town meeting member precinct three i wanted it first of all thank you for this excellent report really well done very easy to read and understand so thank you very much for doing that one of the things that i think  as a town meeting member we need to understand is that not only this information but also how it fits in with the open liability as well as other town debt issues that we might be pristine so you actually recently different around how pensions are treated and what the community is required to do in terms of funding our own funded obligation for pensions as opposed to the requirements that towns and cities and towns have around  provide guidance and help on that topic as well what i would say is that is a reminder for everybody the expectation at the moment i would say for our community is that we are going to make recently aggressive payments to pay down our unfunded liability on the pension side currently that expectation is a seven percent growth and i think the retirement board as it does in all of its biennial every other year evaluations will continue to look at that structure but the expectation is that for the sake of argument if we were to pay down that liability in twenty twenty seven as it's currently in to separated the relatively small payments that we're making on the open side would then become large payments starting in twenty twenty eight so the current unfunded liability and actually greg i adjusted down to one seventy one because of changing expectations around health care growth so the big thing on the open side that is really an unknown i don't want to go too far into a pattern right now but the big thing on on one side it's unknown is how health care costs will actually grow so the hundred seventy one million dollars liability makes an assumption that the cost of health care will grow this year by eight percent then seven percent then six percent and then it will hold at five percent if you make those assumptions and you decrease them by one percent a year it reduces the hundred seventy one million dollars billeted by roughly twenty eight million dollars so there's actually some pretty big swings in terms of what our actual health care obligation is relative to the  growth of on that side and again i think this is an issue that the study group is actually looking at very carefully and as you pointed out there in addition to open pension we also have capital needs of which there are nearly two hundred million dollars by certain estimates of borrowing requirements that we will have if we in fact end up funding some of the renovation or work on on the high school a new police station potentially new library certainly d p w i didn't mean to do them in any particular order many people think that was actually first on the list but nonetheless there are there are there are quite a few things that need to be funded from from a catheter perspective as well so i'm not sure if i'm speaking to your question yet so i think what a well with the numbers that you just mentioned we're looking at say twenty percent of our kind of major financing concerned so the seventy one million being that less than one seventy one plus a two hundred million in capital and just roughly doing this  alluded to but when we have that picture as a town in a community i hope that we can come together to figure out how we're actually going to fund it because we're defining the gap but you know that the key thing is how  pretty fruitful results you know the capital budget committee is charged in particular with looking at capital but i think that you'll see you know a lot of work that's happening on the capital side as well so i think you're actually right there we'll be looking at all three of those issues as well as compensation and other issues that are that are deeply affecting the town over time ok thank you so much for a wonderful great start to this big important discussion our pleasure all long time jim in my back roy i don't mean to turn it on you this is a very valuable tool for for everyone who is a stakeholder in the retirement system and michael and greg have done a great job and this information and making it readable i'm still digesting it i know other members of the retirement board are still digesting it but i think this is a very useful tool that can be relied upon for the future as the board reviews be looked at by the time board sometime in the summer next summer and that we expect to have more input from other stakeholders in that defining schedules well but also point out that as you may know from one from two thousand and nine to two thousand and eleven the legislature enacted several series of reforms to the pension system most recent one in two thousand and eleven changed to benefit structure for new employees coming into the retirement system after april second two thousand and twelve so they extended the timex in retirement age and lowered some of the age factors and the predicted results of that legislation by the administration of the time was somewhere in the area of five to six billion dollars in overall savings great guy you know you're smiling over there but you were actually on correct i think at the time that i came through so there are  forms in place that hopefully will play a role in some of the calculations that the board has to do the retirement board as you know is an independent body and we are fight to sherry's to the retirement system and funding schedule worked with us closely in creating the existing funding schedule and we expect them to continue to work with us next time around as well as the one committee so i want to thank you commend you for this report thank you very much so are there any other questions or comments yes communities the thirteen or so of the aaa rated community in terms of our funding status you know in the bottom or tile but in terms of our payoff status we're here we're in the top four tile from the bottom to the top in fact we're number one so we're an outlier as i see it in two respects there and the only way you get from being at the bottom tile of finding status and to being the very first one to pay off seems to be this what i would consider and others may disagree or feel the aggressive funding schedule the seven percent i call it a kicker elegant mathematical term for that but the fact that we're increasing our our funding by seven percent a year obviously is what i see as achieving this this result i may be wrong there and that's great but i think  realizes it that is going to squeeze and you've made that point the other parts of the budget you know i don't know if this is an apt analogy that would be helpful for folks but in terms of personal finances if increasing the amount of money i pay towards my mortgage every year by seven percent a year in order to pay it off thirteen years earlier than i have to with scientists and if the legal reform is twenty forty where i am for twenty twenty seven but i decide that i really can't continue to do that because maybe we're having more kids  analogy is the increase in our studio in rome which is i think we all understand dramatic and they tend to be kids so that's my analogy if i decide i can't keep doing that and i have to make a change this goes to the my understanding which is when you have to do it to impact the f y seventeen by the star through my first two thousand and sixteen you really i get it it's a little bit frustrating to me because i made the choice that i can't keep on putting seven percent more into my mortgage payment every year i probably wouldn't wait twenty months that schedule as a way to solve or dress are other post employment benefit costs or building a town yard or building a police station or a high school or a library just come up with what we think is a rational schedule for the pension liability and let other issues be dealt with on their own i think would be a nice way to approach it and if we do that i think that we're going to decide that seven percent when our annual revenue growth is around three and a half  percent is something we should consider lowering obviously what that number comes down to you know who knows maybe forty five percent and still above our revenue growth would probably still as i look at these numbers get us paid off with maybe a five year or more margin ok well unless someone else comes up i'll just again thank you all for coming out and for and for reading the report if there are any ongoing questions feel free to send them my way the work more committee has a