HomeMy WebLinkAbout2019-07-31 Finance Committee Minutes Town of Reading
3 x Meeting Minutes RECEIVED
�a TOWN CLERK
READING, MA.
Board - committee - commission - Council: RA-
Finance Committee 214 SEP 12 PH 2: 04
Date: 2019-07-31 Time: 7:30 PM
Building: Reading Town Hall Location: Conference Room
Address: 16 Lowell Street Session: Open Session
Purpose: General Business Version: Final
Attendees: Members - Present:
Chair Eric Burkhart, Dan Dewar, Edward Ross, Sean Jacobs, Shawn Brandt,
Andrew Mclaughlan, Paula Perry, Karen Herrick, Marc Moll
Members - Not Present:
Others Present:
Town Accountant, Sharon Angstrom; Town Treasurer, Endri Kume
Minutes Respectfully Submitted By: Jacquelyn LaVerde
Topics of Discussion:
Chair Eric Burkhart called the meeting to order at 7:31pm.
Reorganization
Mr. Burkhart welcomed nominations for Chair.
On a nomination by Ms. Perry, seconded by Ms. Herrick, the Finance Committee
voted to elect Eric Burkhart as Chair by a vote of 8-0-0.
Mr. Burkhart welcomed nominations for Vice Chair.
On a nomination by Mr. Brandt, seconded by Ms. Herrick, the Finance Committee
voted to elect Paula Perry to Vice Chair by a vote of 8-0-0.
Liaisons
The Committee discussed and assigned members as liaisons to Town departments, boards,
and committees. Marc Moll arrived at 7:43pm.
Eric Burkhart: Audit Committee and Select Board
Shawn Brandt: Select Board and Public Services
Dan Dewar: Administrative Services and Permanent Building Committee
Karen Herrick: Public Safety, Finance, and RMLD
Sean Jacobs: RMLD and Library/Trustees
Andrew: Schools/School Committee, Permanent Building Committee, and RMLD
Marc Moll: Select Board and Public Works
Paula Perry: Schools/School Committee, Public Services, and Facilities
Ed Ross: Schools/School Committee and Audit Committee
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OPEB and Pension Overvi w
Town Accountant, Sharon Angstrom, was present to provide an overview of Pension and
Other Post-Employment Benefits (OPEB) liabilities. Pensions in the past were pay-as-you-
go and employees paid very low percentages, as low as 5%, to cover pensions. Over time,
this accumulated a lot of liability and the state then mandated that municipalities must fully
fund the liabilities by 2040. Actuarial evaluations are done every two years. Reading is
ahead of schedule and is projected to be fully funded by 2029. Currently, employees are
required to contribute 9% of their salaries, plus 2% over $30,000, which means employees
should fully fund their own retirements going forward, with few exceptions, such as
disability retirements. Employees with jobs considered to be more hazardous, such as
Police, Fire, and RMLD, may cover most, but not all of their pensions because they are
allowed to retire at 55, instead of 60.
The pension retirement investment trust is used by the state to fund pensions. The state
has access to investments that yield a high rate of return that others do not have access to
due to the amount of money needed to contribute. The annual report from the Public
Employees Retirement Administration Commission (PERAC) provides annual reports, which
show the funded ratios and investment returns.
Mr. Moil asked if these assets have to be with the state and expressed concern about the
seeking of returns. Ms. Angstrom explained that they do not have to be managed by the
state, but it is a good option for municipalities because It is a large portfolio managed by
people who do this for a living. The Town is trying to manage its own investments over
time and is using FIA as a consultant. The Town does not want to be too risky with its
investments as other towns are not as vested as Reading. Interaction with FIA over the
year has past y s been mostly planning stages,in tannin 9 s, and they just recently pulled money out to
invest. Once the pension liability is fully funded, there will be a sharp drop in assessment
and the plan is to redirect those funds toward OPEB liabilities.
Mr. Ross asked if there would be an advantage to extending the timeline and if there might
be other ways to allocate funds and meet the liability in 2031. Ms. Angstrom explained that
it is a tough process, and once a certain dollar amount is contributed, that dollar amount
can never decrease. The Town is trying to get the liability fully funded so it can shift to
OPEB funding. Though the actuary can explore different scenarios.
The current cost of living adjustment (COLA) for retirees is 3% up to $12,000, which has
not changed since 1988. At the November Town Meeting, the Retirement Board will
propose to increase the amount to $14,000, as other communities have done. That will
increase the total liability by approximately $1.8 million.
The state does not yet mandate that municipalities fund OPEB (i.e. retirees' health
insurance), but it is expected to become mandated at some point in the future. Reading's
total OPEB liability is just over $68 million, and is currently 6.8% funded. The pension
liability does not include teachers' retirements, as they receive their pensions from the
state. However, teacher retirees do receive their health insurance benefits from the Town.
Chapter 30 section 20 was accepted at Town Meeting to set up a trust, and once the Select
Board approves the trust document, OPEB funds can be invested and get better returns.
Free Cash and Fiscal Sustainability
Ms. Angstrom noted that the Town has made steady strides In growing free cash over the
last ten years. Regeneration of free cash can be done by either collecting more revenues
than projected, or spending less on expenses than budgeted. FY19 started out with just
over$11 million in certified free cash. Free cash for the end of FY19 is projected to be
approximately $13.844 million.
Mr. Brandt noted that the projected free cash balance is more than double what the Finance
Committee policy calls for. Residents feel that free cash is high. Factors of regeneration in
recent years include higher excise taxes, unspent override funds, and a natural lag in
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staffing. He suggested taking a chunk of money from free cash and creating a fiscal
sustainability fund. When establishing the budget in recent years, it was mentioned that
programs that would have medium to long-term benefits are tabled to balance the current
year's budget, for example: full-day kindergarten, which may help students thrive later;
additional counseling support, which may decrease dependency on special education later;
or hiring a grant writer, someone who specializes in applying for grant funds. A fiscal
sustainability fund would give such programs the funding to get started, and could be re-
evaluated to determine whether the funds should be renewed. The focus would be to spend
the money on programs now that will save money in the future. The Committee discussed
the idea and were in favor of exploring it further with input from the Town Manager and
Superintendent of Schools. Further discussion will continue at the next meeting.
Mr. Moll left the meeting at 9:35pm.
Town Meeting Instructional Motion
There was an instructional motion from Town Meeting requesting that FINCOM review
unused debt and develop a policy on how to handle it. Ms. Angstrom stated that she
reached out to other communities asking whether they had such a policy, but Stoughton
was the only other community to respond that they had one. Reading only has two
outstanding debt authorizations: one for MWRA for $460,000, which will be rescinded at the
November Town Meeting; and one for the Birch Meadow lighting project for $900,000. The
lighting project was put out to bid, but the cost exceeded the amount authorized. Due to
poor timing and a potential override, the project was tabled. The amount was not rescinded
because rescinding it would mean that the project is never going to happen, but the Town
still plans to replace the lights eventually. Because the Committee did not have the exact
instructional motion available, they opted to continue the discussion at their next meeting.
Minutes
On a motion by Mr. Brandt, seconded by Mr. Ross, the Finance Committee
approved the minutes of July 1, 2019 by a vote of 8-0-0.
On a motion by Ms. Herrick, seconded by Mr. Brandt, the Finance Committee voted
to adjourn at 9:54pm by a vote of 8-0-0.
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