second and he discussion and he changes all those in favor of the imposed rate thank you they are accepted all right so i'm sure you've heard patrice are for the war committee and how you expect to work with us so thank you all for having me i will say that i was the finance committee member in childhood i was a chairman for a little bit i have what i like to call of income mind  and what my work in surely would think tom i think i worked over there for four and a half of all the four years i think i missed maybe two finance committee meetings it wasn't just that it was you think it was a requirement i just of like to go on it it's a it's a committee that i enjoy the conversation i like the feedback i like the suggestions i'm very engaged with as i spoke to my early in the get more into the nuts and bolts of the about your preparation what i'd like to turn to now on the agenda is the the opeth liability study was presented to the a little while ago but given the complexity of the report and rob's familiarity with the issues and the importance for the ward committee to understand the open situation i thought it would be valuable up rolf actually told us directly his view on a patient of the study and he was gracious enough to come so it's a great pleasure to welcome ralph jones former chair of the work committee and every other significant committee  two thousand and sixteen it is frankly one of the best committees i've served on a low i also love to serve on the committee as well but it was a very interesting group of people member who i don't think is here the seed restore oil was also on our committee and provided service our fourth member was town moderator mi mike has a special background in all of this because back in two thousand and eleven when he was vice chair you know chairman or executive director of the mass taxpayers association he led a char poll health care deuced you may recall that was the time when there were ads saying this health care is gold plated because there were five dollar co pays and it was clearly something that was very expensive for cities and towns it was successful it helped belmont a lot we made some major changes unilaterally in our health care we also had as a member richard and she was replaced by timothy learmonth who is a very well known financial expert formally teaching at the harvard business school so now my quantitative group jeff and tim and i'll be doing a lot of meaning work on this committee just by background our starting thought on all of this was given to us as you might imagine by liz allison who raised who developed research for and this started out with the question what does it cost for us to pay for retiree health care and so we asked and nobody knew that's because belmont like most lumps together all the else one of the logical questions was how do you figure out this liability then that we have this huge if nobody knows what the cost is i had started actually working on this while i was a member of the war committee because i urged the town to do its first study of the actuarial liability for opeth before we were required to do that b well we estimate or we guess i mean we don't have any data from you so we go to the census or any other place we can get some ideas and and then we produce this repor found one town way one that actually had decided they were going to find out what things actually cost and then they were going to redo their actual words and when they did they found out that there actually were a liability it was thirty percent less than what it had been so it seemed to us that was not a bad thing to start with and we asked the town to gather the doing a lot of those were also assisted by gaps as well getting all of these things together and then we went out and decided to hire actually which turned out to be single assaulted her and then we ninety six million the savings of nineteen million dollars oh yeah we couldn't really bad ourselves on the back because not all of this was our our input i mean some of it helps but there are a lot of things going on and that's what i want to really talk about today i'd love to say that our committee deserves all the credit just ain't true let me start with the  highlight it's the fourth bullet down funding is not required by the accounting standards or by federal or state statute ordering pizza funding has not require by accounting standards or by federal or state statute what gaz be forty five and then gadsby seventy five said his we require you to estimate your liability as the seventy five state and we're going to require that you put it on your financial statements so that it's going to show up on your balance sheet but we do not require that it be fun this is very different than pentagon restaurants want to suck so is are concerned that at that if we just cut our liability in half they're probably going pretty good for now you know also speaking with floyd having some sort of funding in place no matter what the amount is is a signal to the rating agencies that we're taking it seriously so it's a good sign if you remember five fifteen years ago floyd came and said we have this liability and we need to do something  year the consistency of having a policy and enforcing it has held us up pretty well so far ninety million dollars duction in the liability should plasters for a few more years but it's right you're quite right in the end of the was certainly not my expectation that the war committee would recommend any change to the existing open policy was that something that the study group was contemplating are you concerned were you addressing sold me the size of the liability well the this assignment to us that i believe was written in the warren article had several parts one was to to study the issue and then there were two other questions one was to look and see if there are any ways to make reductions in the liability through say some tweaks in the healthcare system that's something we're about to address next and then the third was also look at how to fund this liability and that's something we're getting into now we had a meeting last night and i'll future retire and take advantage of our health care when i asked but this be done for the first time we've got a number i forget what it was seventy five million one hundred million and then two years later the same so you know the data on who is supposed to be included in these camps is very complex and remains complex to this very day i'm going to if you look down this on page three you will notice that the last bullet simple said there are five hundred eighty nine active employees coverage for medical benefits and one hundred twenty five percent are assumed to  retiree coverage upon retirement what they're trying to do is sort of square a circle here they've got the numbers from the previous consultant that got their numbers and they don't fully have their arms around all of  said well that the former actuary took the census of all current active employees who are eligible for health benefits and applied a percentage of that population to take health care benefits at the currently subscribing to health insurance and applied a hundred twenty five percent to arrive at the estimate of employees who will subscribe to health insurance coverage at the time of retirement and siegel's going to review their numbers next year i think when segal gets a uniform set of counts according to their definitions i think we'll have a much better number but if you noticed if you read the fine print in the detail of the forty three page report you will than currently get making their spouse has benefits and that upon retirement they end up using and that's what the that's the estimate that is it's a very round number and i think that what we're looking for really is siegel's next year when they begin to get much more accurate data i get my experience of having heard that we had hired three hundred eighteen employees one year makes me suspicious of all of these numbers until somebody can really get them and get get their hands around methodologies vary somewhat numbers yesterday three versus some thirty so that's right and i was led me to suspect that the one twenty five might have been used to sort of as a plug plug yes of by design they went with one twenty five to make this more conservative estimate because of the differences in the numbers and methodology and the plan is what the next update is to really get to the hard numbers and not have to do this adjustment in page four may not look like a lot when we actually heard the presentation from siegel there's a lot there they noted that the previous benefit estimation was done in big groups of ages to say fifty just fifty four sixty to sixty four and so forth and the valuation done by siegel was much more fine grained they were doing it by age and they were doing it very carefully i i was extremely impressed by this part of it and i can't recreate that part of the speech from this but i think what we're going to be getting from siegel is a much more fine grained analysis of what's going on with our cost and benefits than we had been getting before that yeah i would say in the past they were using the working rates of all insure all covered in the medical insurance for working and retiree and so it was a very average number and so now that we've actually get the claims based data from our minister harvard pilgrim or toughs we're actually getting the retiree rates and those are the numbers are now being used to calculate the liability and the projection of costs over time and they're able also to cut it to finer cuts by medical and prescription as well as by the different age groups and so you're getting much more detailed town specific data which is not relying on averages for the entire town or for the state and you're getting a much more accurate representation of the costs i think the key thing here is in the third boat and we can take credit i guess from our committee for this because it sa per capita claims cost for self funded plans were based on claims experience for the prior two years whereas in the past they'd just been using working rates so that was our our idea look at the real data what are you paying out in claims every month and attach it to have retiree then let us know what the retirees cost well can i ask was there a comparison of the belmont specific data stratified ho stratified in the study and the assumptions that were made in the prior kinds of work because my concern or question is whether belmont is large enough to have sufficient data in each of these categories to have reliable estimates of what to expect in the future that question i'll give it to jeff c i would say they still filled in where necessary averages are actual sometimes with the data was then to what five until you got down to four point five the current assumptions here from siegel are by specific types of health care not medical medical prescription and medicare advantage so they had four different next page six is our plan should probably heard the word or maybe you got with the medicare advantage plan i want to thank the town staff for implementing this over the past year and you will see in the summary it saved a lot of money in terms of our total liability case they use that and the discount rate of six point five percent as of drilling the discussion of their work and how it fits in with the guess beat regulations but i think that the bottom line and so they took that sixty forty allocation and came up with a six point five percent discount rate and they tied it back to all the instructions that gatsby and we were delighted because six point five percent what time horizon are we talking about well they're using actually they're looking at that and under the second large paragraph the discount rate was determined in accordance with gadsby seventy four and was doing pretty good job of defending what she had done she has an entire staff behind her that obviously looks at the requirements of gaspy set seventy four and how it's supposed to operate so we gave her that after her presentation which i thought was first of all our unfunded liability increased by eleven point five million dollars due to what they call normal operations benefits earned plus interest plus benefits paid and contributions to the trust so first thing it goes up next there was an experience gain of six point one million dollars which is to the good that produces our liabilities and i'm assuming that experience came here has to do with our experience in this particular year versus other types of experience with other systems then i'm plan change that's the egg will reduce the unfunded liability by seventeen million dollars so thank you very much town of douma staff to a great job getting that implemented and then we have a series of four changes that are all important the total seventy eight million dollars over duction and liability first one was change in per capita costs and that has to do with their review of per capita cost given their more fine grained detail on our per capita cost second this change in trend assumptions again they broke it out by four categories instead of one then the next one is the big discount rate change twenty four point one million dollars when you add that discount rate and and then other changes which i've never fully understood and i happen to think might be proprietary to siegel but if we get any additional information it's definitely in methe different methodology and some of the assumptions the way they do the age there's some of the expense curves they're putting in i would say more analysis and data behind it they build national models and regional models so they're relying on a whole department that  does does these assumptions and so i think they're just it's a different approach and this is really taking a difference of solving the the new data in the existing framework that existed or came out and then solving it in their framework and that was  differential where one of the interesting things i heard her say at the presentation was that in some of their estimates about what the costs are going to be in the future the costs tend to be a little years rather than just straight line and so if you're moving costs into the out years and then you're using this discount rate you're going to have a savings because of those two two factors but we have not gotten into still bring up to date to go on to where we're headed next we met last night for the first time since we got this report and i started off the meeting with a question since we have and kathy made a big point of this in her presentation we have now shown at the original idea from the treasurer works we can take care of all of our liability in twenty four years by putting in two hundred fifty thousand dollars until twenty thirty and then twelve million after that not need to pay pension you was one perhaps we're finished and we don't need to do anything further however a week earlier the chairman of the board of selectmen had met with siegel and had commissioned some alternatives to restructure the reduction in the unfunded liability because you obviously believe it's very important when talking about this for a long long time and our committee met and we're going to look at these ideas and these scenarios and and my basic question about them i guess i don't know if you've seen this one page you know ok i mean this is this is a and what this is a report he would be reduced by twenty forty one hundred the current plan and then there is an alternative one that steps up the funding up to two million or more years and an alternative to woods runs it my basic question about them and this is now me speaking individually not for the committee is how will all of these options if we're not doing one we're doing now  how will all of these be funded because they get to be pretty substantial amounts of money right away and they will cost anywhere from six hundred thousand to two million dollars a year and  chair if you've been following the meetings of the board of selectmen has announced for a long time that one of his intentions is to take about six hundred thousand dollars out of user fee out of the basic accounts of the light department and then the water and sewer revolving funds in other words increase utility costs by about six hundred thousand dollars and then again my speaking personally i think this has some problems  largely because i've been on the white board i've also specialized in water sewer issues i don't think that the belmont light department right now has the funds to do all the improvements capital improvements it needs and so taking money there and change in the water rate structure water rates are now higher per gallon for people living in multi family homes and they are in single family homes so if we already have the highest rates and we're go charging even more we're basically saying that those of us who have the least ability to pay perhaps are supposed to be picking up this bill and finally from my work on wastewater we have not yet and if they decide that we're not meeting our objectives quickly enough they will issue a consent decree and unlike liabilities for hope that you can't push off consent decrees and say we'll pay you later they're doing whenever they say they are and will be enforced so that's the six hundred thousand and then the rest of it i assume is coming from tax increases via operating overruns i'm just not sure there's nothing that really backs this up so you know i think there needs to be some more thought given to this one of the things that struck me in problem only we can fix it and he also said i don't want to talk with anyone else i particularly don't want to talk with the war committee i don't want to talk to seventeen people about this problem regardless of his preferences the town by laws give you a very specific role in terms of considering all matters that come in on the warrant that involve the appropriation of money and i don't think th unilaterally i think that the war committee has a duty and a role to play in it and i hope that you do when i was chair of the school committee and chair of  i had a very strong working relationship with the work committee because i valued the advice that was given and i value the expertise that present in this room so i'm hoping that by some mechanism you all can get together and start talking about this among other things that work committee could do and i think this is something that our entire committee would agree would be to help ensure that the town continues to collect actual data on retiree health this would be a job for the ministry or also to publish those data separately from the health cost of existing employees in the town budget right now you can see what those costs are so out of mind out of sight of mind so and finally i think that the company will have a role eventually and commenting on increases in either utility rates or taxes that might be used to accelerate the elimination of these unfunded liabilities these are my personal views although i think that the committee as a whole would agree with the last three and i also think that one of the people who has been thinking about this a lot and has some very interesting ideas is jeff libby and i want to thank all the members on the committee but jeff last night made one of the most interesting arguments in favor of some early reduction of that liability when he said look at this for this chart twenty thirty sudden the town is faced with twelve million extra dollars do you think they're going to spend all of it on a reduction of the liability or not and i always given him credit for raising this issue making sure that there was a committee to study it and i think we've all benefited from and then i have a follow up question which is you know because when i look at the fact that we would be that two thousand and forty one might be the time that we would pay this off that obviously i don't think we had any any expectation of that prior to this being done at all in fact i think it was a huge issue and so i'm the question is whether other towns or cities have any when we look at these different scenarios where they have all had a show that they can pay their self by two thousand and forty one or two thousand and fifteen wonder whether the last day that i saw on that was from mike would nurse association some time ago and i don't remember all of the details each of these numbers changes every year or two years so it's hard to say exactly what happened and well mostly did they have an operating override that ten million dollars into their opap liability output open trust fund and then and i guess i was just wondering related to that is is there a risk that i experience changes in the church or i would add to to this whole report the thing i like about this is that we've established some things in place to collect better data we get it on the budget every two years run the sigint i have a real strong feeling that we're not going to see a fluctuations we've seen in the past three because of all the structural changes and data changes and it will be pure experience as well as demographic shifts over one of the workforce or changes in the rules of reporting us so i think with each subsequent year that we run these reports we'll be able to reevaluating and make decisions because this is a longer term liability that is not mandated right now but should be kept up and i kept on and i think it will allow us to understand how much also well we can check how accurate were we in these productions and if were and were not accurate ok why we messin of one of the major reasons why we had a bad year then you may want to treat these options as a self funded program if you get a big case in spite of that you're sure it's for for extreme the high case because you can have a  second question so you talked about the fact that this isn't something that has to be done there is no deadline for doing this that the rating agencies like the fact that we have a plan we've been delivering on the plan every year so the that we've been doing up until now is two hundred fifty thousand a year and then once we finish with pensions we move start moving that money to open is that what we have is that the expectation we have set with the rating agencies that we are going to the point where we do twelve million a year that's been the plan that's been announced the rating agencies it's bashing and probably more than two fifty because it's a percentage of free cash  so but in terms of the shift over to twelve million that is their expectation as well yes so while we don't have a deadline to finish it by twenty forty one and  the reduction of it means that we are now finishing it much earlier than the average italy thought so if we were to reduce that twelve million could could we push out that date without upsetting the rating agen that's that's one of the options that i think jeff is looking at and hadn't had raised you know this is some of these it's a alternative three starts out fairly small thing grows eventually six million and extends the liability out for a number of years those are the sorts of things that i think rather than radically trying to come up with a million or two million dollars right now that sort of change i think if we have a source for the f a big part of the liability is public safety close to fifteen million and you have a school department had a little more than sixteen just over sevent yet the school department has three times as many movies so i would have thought that those actual real obligations would be a lot of head count so  was just curious as to what was going on there and what i'm missing and i think i think i can answer the first sex look i think public safety are able to retire earlier than a teacher they are there it's at it's going to have more people in public  safety retiring and you can have them retired for a longer period of time thank you that's a very good they tend to stand or stay with the town for a long time so there are benefits a number of public safety personnel also have some chronic conditions  this analysis is based on a six and a half percent expected return on assets yes but the discussion of the pension obligation we had a year ago was basing the liability going out assumed return of seven and a half percent and that this seems like a conflict because i would think you'd have the same expect d return for both sets of what i think the basic difference there is you already have the best or the fully on pensions and you're invested in higher you know the assets and the assumptions in differs significantly i could see there being a smaller amount available for all but you could invest them in the same in the same way as you're investing in fact you could if you could almost at the combined them funds for investment purposes  i don't see why there's a difference in that one percentage point difference is a very large difference but i'm not a percent sure on this but i think there's rules of the amount of the fund you out of the different rate of return was some mix of equities and read some investments that are i would think would be as available to a three million dollars fund the hundred million dollars that's a good question  kind of a broader point which is that i think it's clear when you look at the liability of this nature it's extremely complicated to know what it is and that this is a an estimate that may be more accurate than the previous estimates we were dealing with but at the same time there is considerable uncertainty because your forecast pretty volatile great deal of uncertainty about what we ultimately will actually counter as a hope of liability i based on what i know so far i think the strategy that we have o if there is a proposal on the if or if a proposal does emerge to significantly change the current funding strategy that we have then at least as long as i'm on  ask they have a large health insurance group we're going to ask them if there are any anything out there in the future that might help reduce costs we're not optimistic that there are but we're going to our job will be done i mean we're not a permanent committee were a temporary committee once we finished our last two jobs i think we will be available for a report to town meeting but i think we'll probably be does by the select n that's why i was urging earlier and i think our whole committee would that the work committee take up some of this we already have obviously a couple of more committee members on this committee and i would hope work committee would begin to follow up on some of these things to make sure that we don't get get them lost again which we stop collecting these data if we stop publishing these data if we stop thinking about these issues we could be back in a very bad situation very soon and since were not a permanent committee i would think to want committee would be a good a good place to lodge these these efforts and certainly both quest and jeff having have been charged to continue to do analysis and share it with the words like insurers with the work i mean i haven't thought about that at all i've not been real anxious to take on a new committee your that's right that's right there may be and it may be that this could be something that the committee members could continue with hand and make sure that the sort of continues o happy to take some ownership of it otherwise we'd have to look for a different structure it is a fascinating subject i mean i've said i've been involved army going back a number of years attempting to form another committee is there a way to institutionalize the gathering of this knowledge and who would do that with the board of selectmen that part of the charge of the town administrator and just brainstorming as to how could make sure that we institutionalize gathering this information i think that was the hope of the committee and one of our recommendations was to make sure that these processes are in place now so that the data is collected accurately and the cost basis and would be a function of the town and a minister's office and then i've i've had some conversations with my good mare about similar to how the war committee took up the pension work is that this would be folded into oversight of the war committee over the longer term which you know twenty twenty plus years you know to work with the town and segal or whoever to kind of keep the story there and part of the overall view so welcome we're adding but it sounds like if there is a standardized kind of data collection project that we could develop for a some kind of spreadsheet template could be developed so that actually collecting the data and maintaining it would not be so burdensome and so i think about it works already been done in particular keeping track of the retirees the recent major overhaul that had to be done outside of his work so i think a lot of the heavy lifting has been done already i can tell you you know there are certain things in the budget you know that fix this i'm going to change too much but we are completing those department head meetings and we are meeting with the schools again as you know the school is a big portion of  t i've met a couple times at the superintendent and we're working with him on his budget submission revenue i can tell you the governor's budget was the least i got an email today at five o'clock  he's projecting you know as nominally increase in highly restricted general government aid as well as chapter seventy is pretty much in line with what the staff was budgeting for nineteen so there's really no extra there and i'm also targeted the favorite twelve to distribute the budget that's still pretty much on target i don't see any problems so that's kind of where we are but it's been great so far and the staff's been great i can be more happy with the staff very knowledgeable think giving me the history of the numbers as well as   timing is working with your rule to have two prior experiences i have a couple of observations on the have maybe mike lee vincent also has a few but this is definitely later than in past years i think because of the  split between town and school and i haven't seen any discussion of that i gather one reason that's still up in the air is that the teacher's contract has not been formally ratified yet i gather also that patrice expects to involve the warren committee and potentially other groups in town and more in those types of discussions i know in the last year know i'm not close enough to it just because i don't really know for example what the departments are doing individually and what the school department is doing is it's on its own because it you know there's a lot of work that they do that happens behind the scenes before the w many gets involved in really looking at the numbers so i don't know how far you know whether they're on track road with they've done in the past or whether they're behind i just i can't comment on that so i don't because you have an opinion about that but i know the contract is a big piece of  salaries can be worked on charge don't know whether doing that you know mr whether they're waiting or i don't have any sense no i'm trying to get a sense of that myself and i think that it's an ongoing process because of some of the union negotiations i know they're putting in the increases assuming you know some some things are going to happen i do know that though there are other departments that aren't putting in those increases yet because they're waiting for the the union contracts settled so it's kind of a mixed bag of tricks in the past we received budget no books i think by early february does your first date mean that budget notebooks will be ready for distribution correct ok that's that's  isn't directly related to the budget is really related to sort of the kind of think at our last meeting when we had some information on new growth presented it struck me that we have an opportunity here so we have a significant increase in new growth coming primarily from the substation but also if you look back at the financial taskforce projections the new growth has been significantly in excess of that and so is there a discussion if you if you say that this is going to be it's it's somewhere between a million and a half and and two million net of what was projected in the financial taskforce so is there a discussion about or will there be a discussion about how that might be allocated or split up for example would we take some of it and put it into more cap ex for example or is you know is it just going to sort of be absorbed into each budget without really thinking through how this opportunity because this new growth is new growth we haven't had especially the substation which comes with no no costs school costs or other costs for particularly with it seems like it's an opportunity for the town to think about more strategically how they take those funds and and how they want to know what they want to think about them a great i i don't know how much of the new growth could be viewed as surplus so to speak because at least in the spring there was still a question of whether the f one team budget was going to be in balance or not so whether the whether the new growth ends up being utilized in part to reach the balance that we expected or whether it's whether people used for especially with a big school building and i think i spoke to the superintendent probably several months ago i think that was one of their the exercise that they're fully aware of and going into the next couple of months i think is something we all need to talk about  that i agree and remember at the beginning of this year i presented my hope that we could actually gain a more multi year analysis and i know that has not happened yet but you how we can help move that along and distribute it to the siteman and so we can start working on it as soon as possible again and again that the new growth to offset some of that should offset what we thought was going to be the hole that was coming and that's what i'm trying to get  is it's not just the substation there are also there has been new growth or the timing of the new growth that was expected as well as the actual new growth has changed it is is is in excess of what was projected and so if you add those together that's a pretty significant chunk of what the override was and what we might need going forward that's all i'm saying and well you know then we should look at why costs are why the budget is out of whack more than that if that's the case janet just i mean i'm sure none of us are forgetting it but we have at this point have three active building committees as well and obviously the high school is the biggest thing that towns ever did and understanding the need to have even more capital investment in the schools if the new school is built seven to twelve what does that mean for every public every other building and so just in the context of this discussion about increasing the contribution to the liabilities that go out many years there are just a lot of things right now going on that are going to be put to the taxpayer shortly in the you know one to five year term that are going to be very significant and so anything we can do to even out the operating budget as we go is good jack again a comment as somebody who certainly wouldn't advocate zero based budgeting we have to justify every dollar but it does seem to me that starting with the split and then kind of saying ok if you had one percent more or two percent more  with the money go or if you had to cut one percent or two percent what would you give up i know the school department did that as part of their justification for over right spending here's if we didn't have this what we would lose here is what we would do if we got it it seems to me that if you do that process that allows you then to say at any point in time does it make sense to adjust the split not necessarily permanently but at least for this year because here's what we're giving up or here's what we're getting if we move that line it did always stick struck me as odd that that was the starting point and immutable assumption as part of the process so i just point that out as an observation as a resident of belmont watching this process unfold in prior years jenny you want to just my experience with that jack is that that's always been sort of a starting point but it hasn't been immutable but there have been some to look at you know what the actual needs are and there's been balancing and that is the process of making the budget you know it just it's it's a model that starts it but then there's discussion well it's interesting i haven't two and and others i can commit by february seventh i will have the q one report in electronic form of fiscal year seventeen which we haven't got  in the format that we would like i can i can cut and paste to insert the the data ok but we need the electronic starting point for that