2012-11-SPTM-rpt - Laserfiche WebLink

Browse Search

APPROPRIATION COMMITTEE REPORT TO THE NOVEMBER 2012 STM Fund could be used as a reserve, e.g., to fund present retiree health costs during a particularly challenging fiscal year. On the other hand, monies invested in the PEIL Fund are no longer unavailable for other uses. In any fiscal year, one may ask whether funding the PEIL should take priority over other budget items. The other items could include liabilities such as the anticipated costs of maintaining or replacing roads and buildings in a timely manner, or even, in those future years in which the budget is particularly tight, operating expenses for education, public safety, public works, etc. If the OPEB liability were fully funded at some point in the future, the Town would still need to make annual appropriations for future retiree health benefits. As with the Pension Fund, those assessments would be significantly lower after achieving fully funded status. Proposed Appropriation The proposal under this article is to make a supplemental appropriation of $500,000 to the PEIL Fund, and to thereby increase the total amount put into the Fund during FY2013 to $1,000,000. The Town Manager and Board of Selectmen initially proposed increasing the amount put into the Fund for FY2013 during discussions of the use of health care savings at the end of the 2012 Annual Town Meeting, but no firm decisions were made at the time. After the conclusion of the Annual Town Meeting, a working group consisting of the Town Manager, the Assistant Town Manager for Finance, and members of the Board of Selectmen and Appropriation Committee met on a number of occasions to discuss policies related to management of the OPEB liabilities. The group discussed OPEB issues with a knowledgeable actuary. Later, a member of the working group performed approximate calculations based on a range of assumptions of growth rates of health care costs, investment returns, and annual deposits into the PEIL Fund to illustrate model scenarios. The results of the calculations were examined by the working group to develop some intuition about the number of years it would take to reach the full funding level as a function of the average annual contribution to the Fund, and how the Town's costs would be lowered after full funding is achieved. The working group tentatively concluded that it favors funding the liability via an approach that may include: 1) a floor, or base annual level of contributions to the PEIL Fund; and 2) additional funding if there are sufficient unallocated funds in a particular year; where the goal is to fully cover the Town's unfunded OPEB liability in the PEIL Fund at some point in the future. Yet to be determined is the optimal time period to achieve full funding, though 25 to 35 years was discussed as a possible target. At this time, the Town has a large amount of unallocated FY2013 funds, and no proposals regarding urgent or high priority FY2013 budget needs have emerged since the spring. With Free Cash projected to be certified this fall at the record level of about $12,000,000 and additional savings expected from the move to GIC health insurance plans, it appears that funds will be available in FY2014 to address capital infrastructure as well as operating costs. Therefore, the Committee concludes that the proposed appropriation of an additional $500,000 into the PEIL Fund is prudent and appropriate. The Committee recommends approval of this request (8 -0). Article 5: Estabrook School Access Improvements Funds Requested Funding Source Committee Recommendation $1,500,000 Free Cash Approve (8 -0) This article requests an appropriation of $1,500,000, for making improvements along Robinson Road and to the intersection of Robinson Road with Grove Street. The proposed work would also improve emergency vehicle access to the Estabrook School site.