Letter: Westport debt a ticking time bomb even before new school

Posted 1/20/18

To the editor:

I find myself amazed that we as citizens are considering incurring at least another $60 million in indebtedness to construct a new school when there is absolutely no conversation …

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Letter: Westport debt a ticking time bomb even before new school

Posted

To the editor:

I find myself amazed that we as citizens are considering incurring at least another $60 million in indebtedness to construct a new school when there is absolutely no conversation about the existing, and rapidly deteriorating with each passing year, financial condition of our town. For this fact I hold our Finance Committee responsible and derelict in their duty to foster accurate and transparent conversation among the general populace about our town’s true present and long-term financial soundness and health.

How can I say this when the town recently received an Aa3 rating from Moody’s Investor Service for the issuance of bonds to finance our new police station? And after all, in one recently published citizen’s letter there is at least some belief that our town’s indebtedness is only$8 million on a budget of $38,000,000, a seemingly very healthy situation.

However, here are the unvarnished facts, taken from existing public town records and other published reports. They reveal that our total town indebtedness, for which obligations we as taxpayers are on the hook, is grossly understated (regardless of whether such debt is euphemistically termed “included” or “excluded”).

In a Massachusetts Department of Public Revenue report for Fiscal Year 2017 ended June 30th, Westport’s total long and short term indebtedness (issued, or authorized and unissued, and including the police station for $8,000,000 of new borrowing) totaled $20,299,000.

The Prospectus for the Town of Westport General Obligation Police Station Bonds, dated November 8, 2017, is for a total of $9,349,000, an increase of $1,349,000 since 2017 Fiscal Year end.

From the Town of Westport Post-Retirement Benefits Report, dated June 30, 2016, prepared by Sherman Associates, the unfunded actuarial liability for Other Post-Retirement Employee Benefits (OPEB)---medical and healthcare retirement benefits promised by the Town to its school, police, fire, and other town employees---is stated as between $29,721,203, assuming Full Pre-Funding and an annual 7.5% return, and $50,391,402, assuming Pay-As-You-Go and a 4.0% return.

From the Town Auditor Report dated June 30, 2016, the Town’s portion of its unfunded pension liability was listed as $20,687, 771, using an assumed investment return of 7.75%

From this same report, a 1% decline in the estimated return shows an increase in this liability to $27,050,278. Therefore, at a more realistic 4% estimated annual return this unfunded pension liability would exceed $50,000,000.

In a report prepared and published by an independent ad hoc citizens group, dated January 13, 2015, entitled “Westport Financial Future,” and shortly thereafter presented to the Town Selectmen, they concluded that:

… “Expenses are growing faster than revenues, this results in pressure on maintaining current service levels.”
… “Funds are not available for a number of critical needs.”
… “Each year the town will be less likely to meet its financial obligations.”
… “Over a longer period, unfunded liabilities (i.e. all medical and healthcare, and pension retirement benefits) will represent an overwhelming challenge to the Town finances.”

An article also written in 2015 by Richard Phillips, a member of this ad hoc committee, and entitled “Westport’s Ticking Time Bomb,” stated that, “The Town has promised employees retirement benefits that far exceed the monies available to pay them.”

By his estimate at that time he concluded that these unfunded taxpayer retirement obligations amounted to a total of $6,500 per person, or $26,500 for a family of four. These numbers have only grown since then.

The response of our Finance Committee and our Selectmen to all of the above facts — nothing meaningful that I as a citizen have yet heard. However, apparently there is a thought that has been expressed among some Finance Committee members that these unfunded healthcare and pension liabilities are not a problem, since if they do become overwhelming for the Town the State of Massachusetts will step in to take care of them. If that is the case, I certainly would like to have that understanding confirmed and out in the sunlight. And I am sure that State officials and other Massachusetts taxpayers will want to know this Town position as well.

My conclusions: Even before considering the possibility of borrowing an additional $60 million to fund a new school, our town is already actually indebted, taxpayers are on the hook for promises to pay — not $20,000,000, but rather approximately $120,000,000, when considering our unfunded pension and healthcare liabilities, and using more realistic annual investment rate of return assumptions.

This indebtedness is growing rapidly each year due to the large annual increase in these unfunded obligations.

We as a Town are indeed already on a trajectory of serious long-term financial trouble in which our expenses are outstripping our revenues, and in which the unfunded retirement liability portion represents an overwhelming challenge to the Town finances.

Adding an additional proposed $60 million of borrowing will have the town indebted in the amount of $180 million, and rapidly heading towards $200 million and beyond, on a town budget of $38 million.

I cannot imagine this outcome, other than as a financial “train-wreck” which is already unfolding, and whose end result can only be a sharp reduction in Town services and expenses---including in the school system----a huge tax increase, or some combination of both.

When considering these facts, I ask you: what are your conclusions?

Bill Reed

Westport

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