Finance Committee recommends setting aside OPEB funds

by Karina Coombs

The Finance Committee (FinCom) agrees with Finance Director Larry Barton that Carlisle should begin saving toward future retiree expenses, or Other Post-Employment Benefits (OPEB), but is not yet sure how much to set aside. On October 21, the committee questioned Barton about OPEB and other future expenses and asked him to prepare a model of the town’s long-term finances. 

OPEB details

The OPEB trust is a retirement funding mechanism for town employees; it does not include pensions. While the town authorized the trust at the last Town Meeting, it was not established. According to Barton, on advice of Town Counsel, the Board of Selectmen intends to re-vote the trust at the 2014 Town Meeting and immediately establish it. Given this fact, Barton noted that it would be prudent to consider funding the trust beginning in FY15. “If you’re not going to fund the trust then why establish it?” he asked.

At its September 9 meeting, FinCom asked Barton to develop a funding model for OPEB, looking at an initial annual figure of $200,000. Barton returned to the committee with a model that showed $200,000 for FY15 and he proposed increasing that by an additional $100,000 each year until the annual funding reached $500,000. Barton also suggested not taking money out of this trust for current payments until they reached that goal of $500,000. He estimated current payments at $140,000. The most recent bi-annual actuarial study determined a total future OPEB liability of $7.9 million. 


While the committee acknowledged it was a good time to consider funding the trust, they were also cautious of things to come. Member Jerry Lerman asked if it was a prudent time to discuss committing additional funds when the town still faced a tax burden peak with the new Concord-Carlisle High School (CCHS) project. 

Barton explained that the current debt service from the construction of the Carlisle School would be coming down by almost $200,000, and the savings could be used to fund OPEB. But he also acknowledged that the entire tax burden for the CCHS project was unknown. 

“We are under no obligation to fund this,” said Barton. “[The] bond companies are not too concerned about this at this point.” He suggested putting away a few hundred thousand dollars and waiting to see what the actuarial study shows in 2016.

Lerman suggested they fund the trust with a smaller amount and adjust additional contributions around tax increases. “I’m concerned about the effect it could have on the tax bill,” he said. Chair Mike Bishop also asked if there was an easy way to adjust the figures. Barton explained that it depended on the how fast the town wanted to save for OPEB. He said, “I know our debt service interest is going to drop by a couple of hundred thousand. I’m trying to keep equilibrium on where our taxes are now. We can pay OPEB if we’re not paying debt service.”

Bishop asked Barton if there would be negative repercussions if they started funding the trust and then stopped. Barton explained that the funding could change, but it was possible that in the future, bond agencies might not look at fluctuations favorably. He cautioned, however, this would not necessarily mean a drop in rating. “Carlisle is in a unique position. Our finances are strong and we are perceived as well managed. If we say we’re going to do something and we don’t, they will ask why, but that doesn’t mean a drop in our rating.”

“I’m not sure what the rush is to do this,” said FinCom member David Model, who pointed out that taxes increased last year and residents have yet to see the bump with property tax bills not coming out until January. “We don’t really know what the tax payer reaction is,” he added. “I can guess,” said Bishop. Model explained that he was not necessarily against funding the trust, but did not want to do it blindly. 

Other future expenses

The committee also discussed future expenses the town could face: a new communication tower, possible development of the Highland Building, discussions about creating municipal facilities on the Goff property and direct investments in affordable housing. “I don’t have good insight for what long-term capital expenses are. I’m not sure who does,” said Barton, noting that things come up every couple of years.

FinCom asked Barton if he could create a long-term model to look at major costs such as health care, county retirement and operating budget and then add debt service and other potential funding requirements coming down the pike. Barton thought he could project out ten years, but cautioned that, “Any model is going to be wrong as soon as you draw it.” The group agreed that the trust should be funded, but want to be conservative with annual amounts.

Bishop said that he would relay the committee’s plans for funding OPEB at the Selectmen’s meeting October 22. Barton will work on creating a new funding model over the next few weeks and return to FinCom. ∆