If the administration can’t make headway in curbing the cost of pensions and health care costs for retirees through negotiations, then City Council President Steve Merolla said he’s ready to step in and do it by ordinance.
Merolla offered the legislative means of addressing unsustainable retiree expenses following Monday’s council meeting and its anticipated public discussion of a five-year financial projection report.
In an interview Tuesday, Ward 5 Councilman Ed Ladouceur said he hadn’t had the time to review the report prepared by accountants Marcum LLP, but “we all know the elephant in the room.” He named that as pension and healthcare costs for retirees.
Ladouceur said he is contemplating legislation to address those concerns. He called the issue “complicated” and did not define how he would legislatively seek to reduce costs.
As committee meetings extended beyond 10 p.m., Merolla postponed discussion of the Marcum report to the Sept. 4 meeting.
That was a good thing, as many of the audience who had expected the meeting to start at 7 p.m. had left. Additionally, the 36-page PowerPoint presentation had only been sent to council members electronically at 4:15 that afternoon.
Even with such short notice, council members and those in the audience with copies found projections disturbing and, if anything, rosier than what the city faces.
“I don’t think anybody who looks at the numbers doesn’t see red flags,” Merolla said.
The Marcum report said what the city faces can be compared to a household with an annual income of $75,000 and secured debt of $15,000 owing $240,000 on their credit card. The report puts the retired employees’ healthcare budget at $9.27 million this year.
“If we don’t make decisions, someone [a court appointed receiver] will make them for us,” Merolla said.
Specifically, Merolla said the city couldn’t sustain paying retiree health care benefits without a co-pay and with prescription caps.
“You can’t retire and not pay co-pay,” he said. “It’s not sustainable.”
Merolla pointed out that he has been sounding the alarm for years.
“I was Chicken Little and the sky was falling,” he said. He added that the status quo “ostrich policy of the head in the sand can’t continue.”
Former councilman and School Committee Chairman Robert Cushman, who was prepared Monday night to present his own forecast of city finances, found the Marcum report lacking in its assumptions. He said it appears the report failed to consider that firefighters have been without a contract for nearly two years and once an agreement is reached projections won’t be accurate. He also feels the projection doesn’t account for the costs of addressing the city’s aging infrastructure – roads, sewers and water – nor the need to update technology.
“To say nothing is going to change is totally unrealistic,” he said.
Cushman called the Marcum report a “snapshot in time” that makes the problem appear less than what it is.
Cushman’s report, summarized in five pages of graphs, depicts retiree employee expenses – which were 19 percent of the budget in 2004 – as now being 29 percent of the budget. On the Fire Department alone, active employees are costing the city $18.6 million while pension expenses are an additional $19.4 million.
One of the most striking graphs is the comparison of city and school retiree healthcare costs. The 2018 city costs were $8.7 million compared to school costs of $695,000. Cushman’s projection for 2020 takes it to $10.4 million for the city versus $550,000 for schools.
Asked about legislative action to enact changes in pension benefits – as was done in 2011 when the council approved the Tier II pension system for municipal employees hired on July 1, 2012, and thereafter – Mayor Joseph Solomon said Tuesday that contract negotiations continue and that under legislation he spearheaded, any agreement reached by the parties will be presented to the council for its action.
“I’m not looking for grandstanding, I’m looking for results,” he said when asked if legislation, rather than negotiations, could be used.
“I’d be very surprised if the mayor is not aboard with ordinances if he can’t negotiate,” Merolla said.
Solomon downplayed what some council members are portraying as a rift between the former council allies. Solomon said he would take Merolla’s calls whenever they are made.
“I don’t get personal,” Solomon said.
Nonetheless, it was clear from Monday’s meeting that Merolla is not being kept abreast of administrative thinking on bonding repaving programs.
Solomon said he read through the Marcum presentation.
“We’re all aware of what areas have to be addressed,” he said. Later he added, “It’s not the Bible you can follow.”