I'd like to welcome everybody to the Finance Committee meeting for the 25th of April, 2013. And this is not just Finance Committee meeting, but also we have members and I think a quorum from many other boards and committees, including the Select Board, School Committee, the Regional School Committee, the Library Trustees. And if there are quorums of those meetings present, I want to note for the record that we have, all of those have been posted as meetings since it is a discussion of matters that might come up for debate before other boards and committees at a later time. So these have all been publicly posted meetings. I would also like to recognize that we have John Tricky, who is chair of the Pelham Finance Committee present. And the reason that John is here is that the same actuary who did the study for Amherst and the Amherst Pelham Regional School District also did a report for the town of Pelham. And so this is really an opportunity for our speaker to talk to us for a few minutes about OPEB and the work that he did and his report recommendations. But mostly what we're going to do after that is open it up for questions. This is being broadcast by Amherst Media. And so I do need to ask people if you're asking questions to please use microphones. It's not just for the room, but for the ability of Amherst Media to pick it up. So with that I would like to just immediately introduce our speaker Larry Stone and his consulting firm has completed the reports that have been sent to the various groupings that I've previously named. And let's turn it over to you Larry. Thank you very much. My goal here is to mainly really answer questions of that anybody has for those. But I thought that maybe it would a little introduction to the world of other post-employment benefits would be worthwhile. A number of years ago, GASB, which is a board which controls governmental accounting, issued GASB statements 43 and 45 and they deal with how these type of benefits are reflected on the financial statements of cities and towns and other public entities. When they talk about other post-employment benefits, they're talking about the other is really referring to other than retirement. So this is really mainly medical insurance is really the main one. But there are the possibility of others. You can surely have some places have dental. There's often a basic life insurance policy too for retirees often in fairly small benefit. But mainly the medical, but you could have others. You could have vision. You could have prepaid legal. There's any number of things that might be provided to retirees, which would create a liability in town. The concern was that you have this big liability and it wasn't really being reflected on your books. If you compared the financial statement of one town to another one, one provided health insurance to their retirees and the other one didn't, they would actually look very similar. So there wasn't a reflection of this large deferred liability. So that's really the goal of these statements was to start reflecting these accrued benefits and this has been a whole procedure throughout GASB for all sorts of other accounting in public to basically make this more transparent and reflect the actual long-term liabilities. So there are a couple of challenges in terms of valuing these type of benefits. One is you don't really know what, the main, probably the biggest one is that you really don't know how medical costs are going to change. So these numbers are really, in a sense, soft in that it's really hard to project from one year to the next, whether medical insurance, medical costs are going to go up 0% or they're going to go up 20. You've experienced both of those and even sometimes pieces of it go down. So it's very, very difficult and so we don't pretend to say that this is a prediction. It's not a prediction. It's really just a reasonable representation of what could happen in the future. We don't really have any expectation that this will actually occur the way we say it will. As a matter of fact, it can't because we make assumptions things like where a piece of a person dies in a year. That usually doesn't happen. So you can't really get it. But what we're trying to do is create what really looks like a budget which sort of says, okay, if you were trying to systematically reflect this type of cost, how would you do it? So there's two pieces for it. There's the current retirees and then there's the active employees. Now I like to think of the active employees as future retirees. This is to distinguish from the fact that when they're active employees, they're getting health insurance. We're not valuing that cost. We're just valuing their cost when they're post-employment. So after they retire. So that's why I like to refer to them as future retirees. But you can understand that the difference between somebody who's 30 years old, then they're going to retire, let's say, at age 65 and they're going to start receiving this benefit until they're maybe even 100 years old is very hard to predict. Particularly when there's a difference, let's say we were just talking about between 0% increases a year and 20% increases a year and think about that compounding over an 80-year period of time. The numbers are wildly different. So that's sort of a caveat. But so you understand what this is. This isn't saying like this is the liability. This is a reasonable representation of the liability. Okay, now how does GASB want you to reflect this? Basically you create something called an ARC, the annual required contribution. And what that is is composed of two pieces. One is it's the amount that your people are earning to every year. So now if you have somebody in a somewhat simplified example, you have a 30-year person who's going to have a 30-year career, it's 1 30th of the benefit. That's the value and that's what we would call it a normal cost, a service cost. And so if you paid that every year and then everything happened just the way we thought it, that would accumulate with earnings and would be you'd have exactly the amount of money if you start from day one on that and everything worked out exactly the way we said, you know, that little piece of that person died. So of course it can't happen but if it did, then you would have exactly the right amount to pay for that benefit when they retire because you're paying that each year. Now the other piece is the accrued liability. That's where the retirees come in too. That's based on all service that has happened already. Well, for retiree all their services already happen. So they're fully in the accrued liability. There's no service cost, normal cost for them because they're not earning more service. It's just that, you know, they're just in the accrued liability. So how many people have I lost so far? No, because this is, if you haven't heard these concepts it can be very painful and difficult to work on. But now let's also take a look at that same person who had that 30-year career, is going to have this 30-year career and let's say they've worked 20 years of it already. So their accrued liability is 20-30th of the benefit they're going to receive. That's based on the service they've done today. And that's really would be the accumulation of all those past 20 years worth of normal costs that had happened as they were working. So what you do is that you take that normal cost, so you're keeping current, and then you look at your unfunded accrued liability. How much money do you have set aside to pay for these benefits offset the liability? And right now, pretty much it's zero for all intents and purposes. So your accrued liability would be the same as the unfunded accrued liability would be the same as that. So now you pay that off systematically, like with a bond or a loan. You pay it over, let's say a 20 or a 30-year period of time. So if you do that every year and eventually and everything works out, you will then have that be you will become fully funded. And all this new stuff you're paying off because you're also paying the normal cost. So the arc is the normal cost, so this year's cost, plus a systematic payment like a loan payment on the unfunded accrued liability. So that's really what we're calculating. That's really the main cost. And what you think of it as what you should be contributing. Now it's not really. This is just an accounting standard. They can't tell you to fund or not fund. That's a decision that you make. This is just how it's reflected on your books. So then they go through and they say, well, how much are you contributing of that arc? Well, you might be thinking you're contributing how much right now? Zero, right? But that's not right. You are contributing because you're paying for the retirees. They're getting a benefit, right? They're getting their health insurance. So who's paying for that? You're paying for that. So you take the cost of that and you subtract it from the arc and that's how much you need to reflect on your books each year. So eventually, systematically, you're getting all of that cost onto your books over that 20, 30-year period of time. And that's really, and that accumulation of what the difference between what you paid should have paid and what you did pay is called the NOO, the net OPEB obligation. And so they didn't say you have to put this on your books right away. You just have to, it's a process where it's going to be reflected on and it's going to be accumulating onto your books. And there's a couple of important points that I haven't made yet, but I'll sort of talk about that. If you look at what, for those who have the Amherst report, you can see on page 3 that the unfunded accrued liability is really $94 million. So that's, if you had been doing this from day one and everything had worked out, you would have $94 million in the pot to offset that, but you don't. So you just have the $94 million worth of liability. But now I'm reminding you, that's not a real liability. That's just a representation of what the liability is. It could be that or it could not be that. That's using what we call a three, using a 3.5% interest rate when we deduct what future events or sort of think of it in another way, like if you had assets, how much you would earn, you'd earn 3.5%. That's not very much in the long term. People have been, that's, there's some peculiar, not peculiar, but some ways that GASB has said you have to pick that interest rate and I'll talk about that. But just to give you a sense of why that's not the liability number, if you use the 7.75% interest rate, which is another possibility, a higher interest rate, meaning that you could earn more money in the long term, the liability would only be $48 million. When I say only, I mean, compared to the $93 million. So which one's right? $48? $93? It sort of depends. You have to, you have to think about what those mean. So you can't just blindly take these things. So what GASB, oh, let me just sort of continue one, and the normal cost, but we'll just do it under the 3.5% one scenario, that one year cost is like $5 million. So you would have to put that $5 million in, and then you would have to make a payment on that $93 million, $94 million each year, and that would give you the arc. In this case, in the first year, it's $8.2 million. That would be, and this is for the retirees plus the future retirees. Okay. Now, why do I show two interest rates? There are two interest rates, because GASB says if you are not funding this, so meaning that you're not putting in anything, any assets that will accumulate that the only thing you're putting in is what we call the pay-as-you-go number, just the amount for the current retirees. Then you use a low number, something which is representative of the long term rate of return for town assets. So we have, we picked 3.5%. And sometimes we've used higher. You could go, I've seen lower. So, but that gives you a sense of what it is. Now, 7.75, that is, if you were fully funding it, you were putting in that arc, that whole arc, every year, and you have a commitment to continue doing that. It's not just one time that you have a commitment to putting that in every year until you're fully funded. That would be what kind of earnings that you would get if you have a pool of money and you're investing it, similar to a pension plan. You're investing in inequities, you're investing it in things like fixed income, you're investing it in hedge funds, you're investing it in real estate, there's many other asset classes that you can do. So if you look at like a long term rate of return for most pension plans around, it's really, it's between 8% and 9%. People think, oh, they'll never get this. But they really, there's been a lot of evidence that, yes, you will get that. And yes, maybe times have changed, some, but they haven't changed to the point where sometimes you'll hear people talk about, oh, they're only going to get 4%. It's always based, what it is, is that it's really hard to have a long term view of this. You have to be old like me. So where I remember in the early 80s, and where, when there was 14% interest, long term bonds paying more than that, government bonds paying more than 30 year bonds paying, I wish I had some. That would be incredible. So you have to sort of think about it, you know, wearing a historically low, very actually even a strange period of time, right now, where you lend money to the government, a 10 year bond, and you lend it at a negative real interest rate for 10 years. It's lower than inflation. That's not a normal, that's not normal. People don't in general have that policy. So we're not in a normal environment, investment environment. So the 7.75 was supposed to be representative of a hype, if you were to invest, and you were to put it into a relatively more aggressive portfolio, something that would have something like 70, 75% equities and hedge funds, and those type of things, which is sort of pretty typical now of a retirement system. Now, you might not do it. I don't know what your investment policy is, neither do you, because there is no money to invest. It's all hypothetical. But given that if you were fully funding it, this number now goes, as I said, goes from 94 to 48. And the arc also goes from 8.2 million down to 4.5 million. So it's a very significant decrease. And one of the things that would be, you should realize that that OPEB cost the, during 2013, is someplace around what you're currently paying is about 2.6 million. So to fully fund this, it would be that you would have to put in some place from the 4.5 to the 2.6, you'd have to put in a cash contribution above what you're currently paying of about 1.6 million. So still a very big number, but not as inconceivable as this when you read that $93 million number. You know, if everyone thinks about things like that, people would never buy a house, right?  But you do. You do it partially and systematically and by doing that, and that's the same way you have to treat these type of benefits. So now, I did address the NOO a bit. And for an example, that would be on, you can see that on page 21 for those who have copies of the report. For fiscal 2013, this is the, if you remember, is the amount that you didn't pay from the ARC. But you have to remember, this is under the unfunded scenario. So it's using this very, very low interest rate, which makes the numbers very big, much bigger than if you were funding it. Under that concept, you have $23 million has been accumulated, which shows up on your books as sort of a liability under your, it actually ends up showing up on your balance sheet of the finance. It doesn't really show up in the expense, it shows up really in the balance sheet. So, and then that accumulates. And one of the things about these is bonding, you know, rating agencies, they're going to, they're starting to look at these and look at them more carefully. And they're going to use these to calculate your bond ratings too. So that's one of the reasons why there's more and more interest in people paying, starting to fund this. However, I will want you to say this is sort of some issues of intergenerational equity here, that what happened is the past generation who was getting the service for the people, they weren't paying for it. If you think about it, if you had a plan and you had well just active employees, you would have to put in zero, there would be no cost for it because no one's retired. And remember we're only talking about retiree benefits. So they go through, they get all this service 20, 30 years, they're happy, they haven't paid anything and then all of a sudden it starts showing up. So now they have to start paying it. That generation has to pay it, even though they're not getting the service.  So when you start funding, you're actually the generation which does both. That you start paying for your own, that's the normal cost, plus the piece of the accrued liability that's represented from the future retirees, the current active people for the past service, you start paying for those, plus you start paying for the continue to pay for the people who are already retired, who you didn't get the service from, your taxpayers. So there's some challenges here and to look at it. But you can also look at it. The current level of taxpayers, certain things that were built in the town, the roads, and all sorts of things, that came from those prior people too, those prior retirees. And the current generation of taxpayers is getting the advantage of some of those services already. They're still there. It's a little more durable. So it's maybe a little fairer than it might initially seem to be the generation to grab it. You should be paying for your own, plus you're still getting some of the advantage from those retirees. That's really the bulk of my sort of explanation of the OPEBS. These are pretty big numbers and they're, as I said, it just, if you changed by one percent how, one every year, how fast medical inflation goes up. So where we assume that it was five percent, it actually goes up six, in reality, this arc would go up about 25, 30 percent. It's very, very sensitive to these future things. And that's because there's a lot of compounding of these costs. So actually we're assuming five seems like five percent increases in medical costs. But now you're, when you discount things, if you're, you know, from the future, you're discounting at only three and a half percent. So the present value of something that costs a dollar now, next year, it's going to cost a dollar five, right? That's the five percent increase. But then when we discount it back to the present day, for those who are familiar with present value, we're only discounting by three and a half cents. So that means that something that costs a dollar now, it's, you know, it's a dollar, that present value, that's a dollar. And then something, that same thing, next year, has a present value now of one point, of one dollar and one and a half cents. So it's actually more expensive things that are happening into the future than if it happens now. That is a really sort of Alice in Wonderland sort of type of thing. So if you think about that over a couple of years, if you take that medical, that hundred dollar x-ray, it's going to go up, it's going to cost a thousand dollars eventually.  Well the present value of that hundred of that hundred dollar x-ray, which is going to happen 20 years from now, might very well be $200. It's a little strange. So that's part of the thing that contributes, particularly when the with the very low interest rate, why those numbers are so big. Now these might not occur. We might not get that five percent, or you look at them, then you say that three and a half percent is really too low. So I hope this gives you a sense of this. It's, so now what do you do with this information? The idea of it, it's just an accounting standard. You put it on your books. That's what it's for. But now if you want to start funding it, then there are some challenges. Where do you find the money to do it and how do you do that? And that's some of the questions which we can talk about and I'll be, I'll try to answer as well as I can. But why don't I turn it over to you and sort of say, I've thrown out a lot of information and first, is there any questions? Thank you very much for that. A few questions. One is, this is obvious, I think, but does a fully funded state mean that somewhere in the future you've got an asset on your balance sheet equal to the liability? Yes. Okay.  And then there's still more liability, sorry. Right, right. The ARC payment, is that calculated to get you to that state in X years and if so, what's X? Well, there was a calculation in there and that is, I think we used a, yeah, we reset it to 30 years with an increasing amortization. So it actually is sort of pushing some of the kick in the can a little bit down the road there. But it's meant to be sort of 30 years which would be sort of level as a percentage of payroll. That's really the goal. Then I see, I'll get the regional report here, but the pay-as-you-go number for region is about 1.8 million, I think that's for last year. Is there somewhere in the report that says what you, I know it's a guess, but what you think the pay-as-you-go would be 30 years from now? There's an estimate, but I wouldn't say 30 years because those numbers are just no good because, which we say in the report, because we're not counting new, we're not putting in new entrants. And so 30 years from now you have people who haven't even hired yet who are going to be getting benefits. So we're not trying. So we don't really, you know, so we just use it from the current people. So all these things, you have to periodically do it every two years. So, you know, looking down 30 years from now isn't really all that useful exercise. But yes, there is, wherever the funding schedule is, that's on 33, age 33 on the regional report, I think. Assuming my table of contents was right. Yeah, you can see that would be what looks like on the right-hand column on that. So let's just go, instead of 30 years, let's go down to something like 2026 or 2025, 2026, 25, and you're talking about 2.7 million. Okay, great. And after that, you know, your new entrance would be coming in, who we haven't included, and then would be retiring. So yeah, this, and but even, even this is, this is pretty muddy, you know, it sort of depends on what actually happens. Now, one of the things I will say is that what's going to happen to the future, you know, we're talking way into the future. Well, these benefits can change. Unlike what most people consider for retirement benefits, there is no real guarantee of these benefits. As a matter of fact, you change them all the time.   So you're making changes all the time on these benefits. So there are, so it's not the same. So there has been a recent proposal by the governor and other people which would address somewhat this and, and it would include changing it for a significant group of your current employees, those, of those future retirees. There would be a grandfathering and then, but then people who aren't that close to retirement would be, would be, have the rules sort of changed for them, sort of rug pulled out a little bit. And in the case in that where, I'm trying to remember correctly, do you remember, maybe you can help me, how much do you pay as a percentage? It's $84.75 depending on the plan. Okay, so you pay a relatively high percentage. What would happen would be that if you had retired, let's say with 10 years of service, you would only get maybe for 50 percent of that benefit. And then if you, as you get further up in, as your career, if you have a longer career, then you will get more of that. So maybe working your way up towards the, an 80 percent type of things. So that's significant, but not as significant as you might think, because even though you might be paying, thinking 80 percent, you're paying 80 percent of the premium. The real cost of that plan is actually quite a bit more, because the premium for retirees is much less typically than the value of the benefit. And that's because you have plans here where you have people who are mixed. You have a plan, you might have a 20-year-old in, and you have an 80-year-old in. Now, you're both paying the same premium. Which one do you think is going to spend more money? Well, the reality is it's the 80-year-old by a ton. And if we have some statistics in here, and particularly in another presentation we did, just to give you an indication of how it changes. From a 50-year-old to a 70-year-old, the 70-year-old is 200 percent of what the 50-year-old, the expected costs are. So you can see a 20-year-old and an 80-year-old, even though they're paying the same premium, and you're there, or the employees theoretically paying 20 percent, or this change plan would be paying 50 percent, they're paying 50 percent of the premium, but the cost is maybe three, four times what the premium is. And finally, you said if you put some amount into a fund, Gatsby lets you use the favorable interest rate, so you can book less of the liability on your balance sheet. Are they clear about how much you have to fund? Yes, you have to fund basically the YARC until you're funded. And there are some issues about that, particularly if you don't do it from day one to some issues. If you were putting in a partial ARC, then you would have some discount rate that would be between the three-and-a-half and the seven-and-a-half, and it's sort of a melded rate depending on how close you're getting to that ARC. Right, and it's sort of an interesting thing because it's actually circular, because the ARC is dependent on the interest rate, and the interest rate is dependent on how much of the ARC you're putting in. So there are some methods that we use to sort of get around that, but the answer is that's called partial funding, what Sandy is referring to. And like I said, there's no requirement to fund, it's a choice, it's a policy choice. If you want to maintain these benefits, or that's one of the reasons there are some intergenerational equity reasons, you should be in a lot of concepts. A lot of people feel that people who get service should pay for the service. So that's one of the other concepts that are in there. There's some philosophical and policy type of concepts that you need to decide when you're doing this, not just whether or not you can afford it, that's part of it, I'm sure. Talk a little bit about our municipal colleagues and what they're doing in terms of funding their OPEB. It's a kind of a bleak landscape out there in terms of folks actually actually either funding up to their ARC, even putting trust funds aside, and just we're feeling pretty proud. We have a trust fund, we have $500,000 in that trust fund, it's a start, but just talk about how we look relative to others, and I guess a follow-on question is if, you know, we're often held hostage by this concept of the rating agencies, standard and pours, is going to come down on our head, if they drop our bond rating by a notch, it's peanuts relative to any funding of our OPEB, so that doesn't seem like a big fear, especially when you look across the landscape and you see that hardly any of our brethren are doing much. So just talk a little bit about the dynamics. But one of the things that I said, it also depends on the plan that you have too when you're comparing yourself, because one of the things that this now allows them to do is that if you have a richer plan, then you don't look as good as maybe somebody else. So even if you were both not funding and you have the richer plan or that you have the poorer plan, or when I say richer poor, I mean in terms of the level of benefits, richer being higher, higher benefits. So that will can affect your age, your cost, your bond ratings, and if nothing else, you have to remember eventually you have to pay for this. This is just what we're really doing is just budgeting. We're just showing you what is a reasonable budget, and the idea being that we don't really know, but you have to still pay attention to it because just because you're budgeting for snow removal and it didn't snow last year, it doesn't mean that you don't budget for it this year. So if you're going to have snow, you need to pay for it sometime or the other. It's a question of when you choose to pay for it, but you still have to pay for it, no matter the way you're using three and a half percent or seven and a half, seven and three quarters percent, you still have to pay for the cost, the benefits of the benefits, whatever you're giving to people. So this is, there's no magic beans here that, so you have to think about how you can, what you can do about that. Well a lot of municipalities are starting to develop funds and a lot of them are starting to put in a hundred thousand dollars, five hundred thousand dollars. I've worked with, I've been working with Arlington for like 20 years on this issue and we've had quite a while and they have something like four or five million dollars in their fund, but that's really, you know, as I referred to it as it's better than a poke in the eye with a sharp stick, but it's still not the level that you sort of really want if you're really truly funding it. So what can you do? You know, it's going to, you know, when people start funding retirement, they, people also thought we're never going to be able to get this funded and eventually these will get funded and that's one of the things I know I've talked with Sandy is hopefully as Hampshire County retirement system becomes more fully funded and where people are recovering now from 2008 which has been a tremendous, and actually 2000 and what was it, 2000, 2000, 2002, which were also bad years. It's been a difficult decade, but now it's been pretty good. I went to, you know, people, I went to a meeting this, they paid five, they made five percent in the first quarter. That's pretty good, a pension plan I went to today. So people, eventually those plans are going to get well funded and then you're going to be able to take some of that money because you're going to only have to be paying the normal cost. It's a very similar concept in retirement because you have enough money to cover the unfunded. The unfunded will be zero. Then you can shift some of that money towards funding this. That's sort of the hope and the goal and we were taught, but we were talking about that in Arlington. We thought that was going to happen 20 years ago and it really hasn't unfortunately, but it will. But one of the things about this is that I don't really feel there's any real need to fully fund this. The reality is because these numbers aren't close enough to what the real numbers are because I don't know what the real numbers are and it's too sensitive to some very difficult market forces which you're not going to be able to calculate. So you're going to want to get, if you're funding it, if you decide to fund for it, you're going to want to probably get to, this is a philosophical issue, but you're going to want to get to funding a bigger percentage of this, but you probably don't want to go and say, okay, we're really going to fund 100% of this because you don't really know. But you will soften the blow each year of having to put in 20, eventually, instead of having to put in 40 million dollars to pay your retirees, some of that money will be coming out of the trust and you'll be able to use it to soften the blow. So it'll be 20 million instead of the 40 million. That's sort of the goal of it. But a lot of places are starting to do this. I mean it is definitely a thing and any and many systems that or entities that have revenue sources, such as a mass port, mass housing, finance, they're starting to fund, actually I don't think MWRA has started funding yet, but many places and you're starting to see various enterprise units starting to fund too because they have some sort of revenue source and they want to build it into the rates. When you think about it, the people even more than who gets the service, the people who get the electricity or whatever the enterprise unit is providing, they should be paying for those, they should be paying for those, the benefits that are being paid in accrued. So you're starting to see those, all those type of things. So the answer is, so now you can do other things. You can lower the benefit, you can shift the benefit, you can shift it to the employees, the retirees, you can shift it to other governments, that's another way people do this, like they do things like Medicare Part D carveouts, which is where you basically, everybody instead of going into MedEx, for example, they go into, for their, they go Medicare Part D for their prescription drugs, and instead of having Blue Cross Blue Shield, for example, providing their drugs, you're getting it through some other plan and the government is paying for some of that. There's lots of different ways you can do it, you can shift some cost. Can we shift it to Australia? I like Australia. So yeah, so there's not much, you know, the cost is the cost and so you can either figure out ways to more efficiently or for less cost, provide the same benefit, ride lower benefits, shift the cost to somebody else, or you can fund and then try to invest well and take that investment earnings and use that to do that, but you have to make a decision, you know, which is a better use of your funds? You know, do you need that fire engine or do you need this? But I can tell you, I work for a client in Rhode Island and I don't know if you had read about their pensions in Rhode Island, it's just a disaster and I got told by the former police chief that I should go to jail because for 25, I've been the actuary for 25% of the life of that plan and it's an incredible mess. Well, you should have told somebody. Well, first I did tell somebody, I told my clients and then who should I have told the police? It was the police plan, but if I had told that same police chief that we don't want you to hire any police officers, we don't want you to buy any cruisers and if I told the fire chief that he can't buy that pumper, etc, and we're going to take all that money and we're going to put it away for use 30 years from now, you know, I wouldn't have, I would have gotten a scream, so it is very philosophical. You have to decide which one is better for you and also the fact is, are you going to get the use of that money and are you going to earn, be able to earn the 7.5%. Also, the trouble is that when you do accumulate a big pot of money, like when you fund, you get all this extra volatility that comes out because you have $100 million in a fund. Now, if you have a year like 2008, all of a sudden you lost $30 million, that's a big percentage of your budget. I'm sorry, am I going too far? No, it's good. You had mentioned the number before, which was a pay-go number for projecting into the future and I didn't know if that was hypothetical or real, but I think that the question that always comes up is we don't do that, we don't set anything aside and we just continue on pay as you go forever. Are there numbers that show what our future finance committees and select boards and school committees are going to be confronting as a pay-go number in 30 years from now? Well, not 30 years because I really, that you have to do a little more than we did for this study in that because we would have to get the new entrance coming in and make a whole bunch of assumptions and we haven't done that. But in the first 30 years when you're paying, doing a funding schedule, in general you're paying more than the pay as you go because you're covering the cost of the current retirees, which is the pay as you go pretty much, and you're covering the cost of your current, your future retirees, your active people. So while you're funding, yes there's a lot of pain compared to just even doing the pay as you go, but then eventually you get to a point, or you could be doing a partial funding either way, but hopefully you can get good investment returns and that can soften some of these numbers. But the answer is that when you start funding, you actually, there is some pain to that because you're now the one standing up and saying, we're the ones who are taking control of this. And I guess the reason we would choose to incur the pain if we did was because we're trying to protect those future town boards from much greater pain. And so that's why I was asking the question, do we know how much greater that pain is? Does it go up on a percentage basis that's greater than inflation? How much greater than inflation then? Well, I can give you an example. The pay as you go number, like 30 years from now is like 4.7 million and that's actually definitely too low that it's probably because it doesn't have those new entrants as I was saying in it. So I would probably guess that it would be, and this is just wild, not even back to the envelope, probably six million dollars. And you're going from, I hate looking at the numbers all the way at the end because they're just so meaningless because they're just too wild. There's just too much projection. I really can't, I'm sorry, I can't answer that. But the answer is that, but the overall, yes, you do eventually you come out and that you are in a much better position. You know, think about it, you have this hundreds of million, hundred million dollar pot of money, which can be going, is being used to offset this liability. So that's a great thing and that will be using it and they will be thanking you, just like the pension people are. Like I have lots of clients who are, they have 20 million dollars worth of pension and they're only currently paying 10 million dollars towards that because they have a pot of money which is going towards that and the investment earnings is paying for some of that. Melissa? Thank you. Andy's looking at me nervously because he knows how I feel about funding OPEP. So given that, I'm actually going to ask you to go a little broader philosophically than we've even gone so far just because you've done this so many other places. So you're having lots of conversations in other places, whereas we haven't had a lot of thrilling OPEP. But no, Amherst is a great place to have a conversation. So one of the things that's a little hard for us to see, for some of us to see is how our healthcare industry, insurance industry could possibly be like it is now 20 years from now because it's so incredibly broken. Right. I agree with that. Given that, what do people think, not that you're old enough to know, but what do people think was going on with this 20 years ago? Okay. Well, I mean, I'm trying to get a, you know, a bigger question. I have a good answer for you. When we project this and we were projecting it and you were having periods of time where you were, it was 10, 15 percent increases every year. And I remember I made a projection and I said, okay, it's going to go 10, 15 percent, then it's going to go 14 percent, 13 percent, 12, and it's going to keep on ratcheting down until it's going to get to someplace which was going to be like 6 percent.  That doesn't make sense. How can you be doing that? This is all broken. But then I said to him, think about it. Eventually, if you keep getting 15 percent increases, 10 percent increases, this will no longer be the town of Amherst, this will be the town of Mass General. And they will own everything in the whole Commonwealth. This has to change. We don't know how it's going to change. And yes, and so we build that into our assumption. Our ultimate medical trend, we grade down typically until it looks like something which is representative of inflation plus, inflation plus GDP growth. The idea being is that it becomes, that eventually there's going to be reached some equilibrium of this medical cost as a percentage of GDP. And it has already gone in like a 10-year period. It went from like 12 percent of GDP to over around 18 percent of GDP in a little over 10 years. So when does that stop? You know, I've heard some projections at 24 percent. But you know, what do I know? Like I said, this was just to be a what we try to do is just make some sort of representation of this. So we do build that into this. But there's other points that could happen. This could be, you know, we could get into a single payer system, nationalized healthcare. Maybe you won't be providing retiree healthcare. That's a possibility too. And you're going to have this irrevocable trust. But it won't be just you. It will be you and everybody else. So the purpose of this trust will go away and you'll probably be able to break the trust. I can't give you a legal opinion, but I'm sure that there's going to be some way that that money isn't just going to have to keep on sitting into a trust that is no reason for. If every, you know, if it's reason for, it goes away. So but what happens if it doesn't, that doesn't happen. So I'm not for funding or against funding. It's something you have to decide before in terms of what you do. If you want to maintain this benefit and you want to eventually get to the point where you're really paying for your own cost, which is really something which does make sense. There's a real there's some really, I find that personally very appealing that you pay for what you get. And so the right amount and that's the trouble is that wasn't done in the past. So how do you fix that? You can keep on ignoring it or you can be the one that takes it or you can do some place in between. There's lots of different philosophies to do it. But my thought is that if you at least start partially funding this, I don't think it's harmful and then try to progress. But the real thing that you have to do is look at the benefits. Look for it, just like you're doing for your healthy, your active employees, their benefits, not just for when they retire, but their current benefits, you have to keep on looking at ways to get that, to provide that in an efficient manner. Same thing will goes for the retirees and you can go through and that will help this. You can look at cost sharing. That's the possibility. You can cost shift to some of the retirees shop to the feds. Then you can start funding this and then you try to build on it because you can't, no one, I only have one client that actually didn't go and put in more than the arc. They put in three times their arc the first year. But they were sort of getting ready for it and they had all these trust funds that didn't exist. There was no reason for any more and so they had accumulated all this money and their rate, they have a revenue source other than taxes. So they can do it, but most people can't do that. So they go through and they sort of say, okay, we're going to put in $500,000. Then we're going to put it, then next year you have to put in 700. And then the year after that you have to put in 800 or 900. You have to keep on building.  And that's really the only way and municipal budgeting, I don't need to tell of FinCom of all people, is that it's really not the actual number that's the problem. It's where you are relative to where you were last year. It's where the bar is. So if you never set the bar, you never pay for it. If you never pay anything. So that's my argument, I guess, for at least partial funding. Two questions. So one is very short and one is a little longer. Short one is, GASB requires this as an accounting for government entities. Is there an equivalent for corporate plans? Yes. That was my short answer. Okay. And the second question is, you seem to say that we do not have a Medicare component to drug benefits in post retirement? I'm just saying as an example of Medicare carve out, but I don't think you do. But there is the, you might do, there's other ways to do it. There's this 28% subsidy that you get if you don't have your people in Medicare, Part D, and you're providing them post retirement medical and that goes into either a general revenue source. It would go back to the town or in your case, if you're in a group plan, they probably have, they're somehow getting that money and they're using it to lower the premiums. You don't need to go through it now, but it's just, I'm just, it's, there are some ways that doesn't just get lost. So we do provide a drug benefit to our retirees and we do get reimbursement under Medicare, Part D, from the federal government. 28%. The 28%. Subsidy. Right. And that's general revenue source. And one of the things I like to think of is, for me, is like, if you're funding, it would be, that would be a good place to start if you're trying to fund because you, that money. And in fact, at this town meeting, we're taking last year's check from Medicare and distributing it to the Amherst OPEB trust fund into the town of Pelham and to the regional school district so they can put that money into their own OPEB trust fund. So we are taking advantage of the fact that the federal government is giving us a subsidy to provide this drug benefit and using that as a funding source for OPEB. Wow. I'm your straight man. I had no idea that you were doing that. But that's one of the things which I do recommend because if you can't get that money, you're never going to be able to fund because that's money which is really, you can see the direct connection for it. Thank you. Just to make it clear for everybody who's here, it's Article 12. It's one of the budget amendments that will be offered for the town meeting for the FY13 budget. And the numbers that we have there and it's under, I believe, Motion C. No, wait a minute. Yeah, it's Motion C, right? And it's $78,270. It's the total amount and we're going to be proposing to put $57,055 into the Amherst OPEB Trust Fund because we can't make decisions for other entities we're proposing to just transfer those, the other money, $3,618 to the town of Pelham and $17,597 to the Amherst Pelham regional school district and it's really up to each entity to decide what to do of those three only Amherst is included in the motion to specifically put it into an OPEB Trust. Yes, Kip. Thank you very much for your presentation. Thank you very much for putting the book together. It makes for a very absorbing reading and I'm still trying to tackle that. If you believe that, I guess I can have a few other stories to share with you. For me as a member of the school committee what really resonates are the opportunity costs underlying this decision and in very, very tight budget times trying to wrap my head around the idea of being due to diligent and responsible and recognizing both our current and future liabilities and also our commitment to future generations both children as well as members of the school committee. I'm trying to come to an understanding of how I might frame for our constituencies a commitment to placing X number of dollars in some cases quite a bit aside for legitimate liability but also doing so by taking money away hence the opportunity cost from current programs that are part of our school. And I think what makes me even more nervous about that decision and the enormous responsibility that goes with it is somewhat similar to what Alyssa was I think concerned with and that is the medical the healthcare industry my concerns are with the financial institution industry and I'm not convinced that 2008 was an anomaly and so my concern is if we're putting money aside in this trust what are your thoughts what are the guidelines that we might consider to ensure the highest level of protection of those funds so that if we're putting money away today for the future that a duplication of 2008 doesn't occur and say 2020 and wipes out a good portion of those funds. My thoughts about that is that it's a personal philosophy that you have to do in terms of your level of risk and that's what you look at but for those people who are taking their money and putting it into very secure investments I think they're going to be sadly personally this is just my personal but you know I'm not investment consultant so I can't answer you that but you know for those if you know like when you're paying a 10-year bond which is paying you know less than 2% that doesn't make sense to me so I think that you know equity type of instruments are really going to be the only way to go and one of the plans is possibly to put it into a print into the print fund which is really the state pension fund and you can join that under certain circuit the general fund there's some places that you can't but it basically you can get the some very professional management now that might you know that does not say there won't be another 2008 but for all those people who since 2000 you know it pulled their money out after 2008 they're very sorry you have to ride it this is in my personal philosophy but one of the troubles with that is what I started to address is that you have this big pool of money this hundred million dollars this theoretical hundred million dollars well that's very can't there's a lot of volatility there and that is a problem but there are means you don't typically have to make up for it in one year you know it's this is think of this as I like the analogy I like the best is steering a super tanker you know you're not going sharp turns here and when you're looking at sharp turns and you look at it for every year a year is a sharp turn when you're talking about these type of liabilities these liabilities are developing over a 34 20 30 year period of time and they're paid out over another 20 30 year time frame so one year doesn't make it you know either way you know we we're having you know like last year we had really good returns 13 percent in a in a fairly you know typical in a fairly well diversified portfolio so that's great and but then you had this thing where it was you know 30 percent I mean that was terrible but it's actually come back since then and you know when people say that it was a lost generation it wasn't as lost as people think if you just look even at the S&P over a 10 year period of time it almost exactly the same number but it actually earned about 2 percent because most people don't quote that there's another version of it which gives you the returns with the dividends so I think that overall a well diversified portfolio is probably the best way to go but I can't that isn't my expertise that's my understanding I've been following this since I've been four years old that was just a couple of years ago and I would I would just add if I could that so we're looking at what to do with the money for Amherst and where to put it and as Larry said one of the possibilities and which is my strong recommendation that we do and I've been talking about this with our treasurer collector Claire McGinnison with John Nassanti is to put the money into the state basically there's a carve out of the state pension fund that set aside for OPEB funds and so what you get is the value of the professional management and a highly diverse pool that is in equities that is in you know small slices of hedge funds or maybe small slices of real estate some international timber but where they can diversify and manage and do the research at a much higher level than we could ever do ourselves internally or frankly then I think even some of these smaller private money managers can do and do it at much less cost so I don't know what the market's going to do but I think putting that money aside in a fund that has shown itself to be well managed is probably our best way to guard ourselves against future risk but you can't remove the risk and there's other risk too people could live longer medical course could spike this is you just doing things which make sense which are prudent and are reasonable but then not a guarantee may I have a follow I think with all due respect one of the things that I was struck by your presentation was where the several times you made references to Alice in Wonderland for example and fantastical kinds of situations and also saying that we really don't know what's going to happen and I think that's a concern of a number of us there's so many unknowns the the numbers are so uncertain that when I go back to my initial comment about you know playing off one the needs for today versus the needs for 10, 15, 20, 30, 40 years from now the needs currently for me loom much more important because of the incredible unknowns down the road of peace and yet I respect the responsibility and the obligation for the liability it's just that tension that I'm trying to come to grips with there's a few things one for example like if often we'll have as an actuary people will tell me well when am I going to die and I say I really can't tell you but if there I had a thousand of you I can probably tell you how many are going to die same thing here these are pretty reasonable choices that you're making and you just can't risk is not a bad thing risk is is also opportunity so the fact is that if you do you can actually see what will happen if you do nothing so that's sort of the tension that you're talking about so I do appreciate that but I do I've been working in the public sector for well over 20 years and I will say I've almost never had a client tell me that this is a good year a couple of more comments and questions really and it gets to Kipp's point a little bit I think that the balancing factor for me in some respects around this is not to oversimplify the sort of situation but the short term is the short way to think about this in some ways is that regardless of what the you know the 93 million sort of number versus the 48 million the main thing to recognize is that it's not zero nor is it going to be zero for one thing and so there's some reasonableness to using interest to help pay for some of that number which is part of what partially funding or fully funding does is allow interest to sort of cover some of that long-term cost the second thing that I would point out is that you know the and it ties into the current needs and that is that you know in a way then the nature of these benefits are covenant with the current employees about the future and if we get too aggressive with things like plan changes or we're too volatile with things like plan changes and that sort of thing it undermines the trust with those employees and therefore ultimately undermines how well they do what they do for us I think in some respects and those are all very very subtle things but they're equally to be balanced against these arguments in the context of the whole so I think that that's another piece to think about is that you know part of like with the pension reform that I mean the retirement benefit reform bill that's that's you know in the in the state house right now they're thinking about you know some of that grandfathering is about how much time do we give people to adjust their retirement planning you know I think for myself personally you know I've got a little while left but I don't have as much time as I had 10 years ago and the nature of what health care costs are now versus 10 years ago versus 20 years ago are significant so that the you know employees are starting to think about retirement you know health care benefits in their retirement years can I get it how much is it going to cost are they likely to change it on me and those kinds of things so those are factoring into people's decisions so that's also part of that that you know calculus that we're trying to figure out here about what to do and when to do it and that sort of thing but I think getting back to to you know the the immediate needs you know that they are important and and they're valuable but at the same time these long-term liabilities are still costs we're incurring now so we we have to keep in mind their immediate impact even though the costs are paid out a long time from now what I kind of don't like about this is that I only see it as a balance sheet thing and not ever really helping with future costs so use as an example let's say we committed to do half a million a year for 20 years and you end up with 10 million at the end of that period it's more than that because of the income but using that as an example then in year 20 you decide to start taking the investment and come out so take out half a million a year that's nice that helps but you're still committed to put in half a million a year so it's a net zero so you get out there to year 20 and you're still really paying and in your operating budget the the pay as you go payment so it's really only if you ever get to be fully funded are you arguing for full funding well if you could get to full funding then you would stop obviously funding it and you would only pull out the investment income but we're never going to get there so well I will say that was the same feeling for retirement when first started working on that now you know I do have clients the client I was with this morning they were you know they're almost 90 funded but then okay that that's true but then if you did get there and you could start taking the investment and come out that's a plus but what have you what has been the cost of having to put all that money in there what didn't you do because you had to put all that money in there so I mean it's it's obviously a balancing act but the thing is that if you're promising these benefits you have to pay for them sooner or later it's just a question of when and how you pay for it so that's what you have to decide you're still going to pay for them I just I think that's a really important point I mean every dollar you put in to your OPEP trust fund is opportunity cost it's not half a teacher paving a street and that's that's the toughest tradeoff I mean every time we sit here and suggest that we put money into the fund we're attempting to kind of look across the landscape and not ask Maria to you know come up with another $200,000 and a $600,000 shortfall from the elementary school budget and that's right there is the challenge the town is going to have to face and ultimately make a decision about and if it's an annual decision it's going to be very very difficult if it's one giant decision it's also going to be difficult the number I think I'm not sure you meant to say what you said earlier which was you wouldn't fund at the full arc and that no I was saying that you wouldn't fully you wouldn't you can still put it into the full arc but then you can stop before you actually reach a hundred percent funded I'm not saying you wouldn't when I say you wouldn't go to full funding I mean all the way up to a hundred percent funded right no because you would eventually stop because of that I didn't want you to leave everybody with the impression that $500,000 was enough because it's obviously not so I mean I see this in black and white I used to see it in gray I see either you go whole hog you make a policy you figure out what your number is maybe it's not $6 million this year but it's you know three and you go $3 million every year from here on in and that's the line out of in the budget everybody has to bite the bullet that you know our municipal budget moves down a section and then stays there or you decide you know what this system is broken it's going to have to be fixed somehow it's going to be reformed Allah the pension fund system by elongating the funding cycle changes in healthcare it doesn't seem like a gray area it seems bipolar either you go one way or the other and by the way the only investment manager who matters right now is Ben Bernanke well that's the trial yeah but it's for good reason yeah my question is on the the payment you mentioned the three million dollars and that's what you pay every year my question is in the prior audit there was a recommendation you started the three million but you increase it by the two and a half percent tax levy each year is that what you're recommending as we go through this I wasn't really making a recommendation whether you fund or not that is something which you have to decide in terms of what it is we do the presentation that we have on the full funding is that there is a variety of different ways to amortize the unfunded and this one does have an increase built into it of about three and a quarter percent sort of trying to match sort of pay active payroll which was we're assuming to go up at three and a quarter percent now it might not but no I wasn't predicting I wasn't saying to with the tax levy it's sort of how you get there is sort of what your job is and actually but I do believe actually partial funding is a solution that most of my clients are leaning towards I've had almost no towns talk about really fully funding right now anyway guess I'm struck by the bipolar kind of discussion of it and access one the what it seems most like for me is a mortgage and what you yes very few people have a non amortizing mortgage you know even if you only live in a house for five years or 10 years or 15 years you prefer to have less owed than when you started and that seems to me pretty much where this is moving the second thing is I've spent a number of years working for a public pension fund and if you get two full funding effectively all of the costs of it in the pension fund area were paid for by the the earnings of the pension fund and so that that really does make a big difference over the long long run if you ever got to that point it also changes the dynamics between labor and management because if it doesn't cost you anything why not give me more you know that's a whole other issue that's actually a whole another discussion I just want to share with concern well first of all an appreciation we got this several weeks ago and I actually did read it and maybe understood about that much of it and I appreciate it's only this thick so that was that was one page and I appreciate Sandy's answering a couple of questions that I had the thing that that I'm turning over in my mind is are the three towns that I know of that considered the have have engaged in the other option Tom's River Detroit and Stockton clearly didn't pay enough into their fund Central Falls well there are others but those are the three and sort of the question that I don't expect I hear that there's not an answer for tonight is where are we in this between this black and white I think yeah there is black and white I'm not sure how black black is or white white is is it 48 million or 93 is it two and a half is it a half I you know I don't know I'm most concerned about sort of going in it in a trajectory that will lead us to Tom's River and I'm sort of hopeful that we can figure out and I don't know there are lots of smart people in this room how we can avoid that know how to follow up on that that'd be rhetorical yeah the I think that it's to draw it to some conclusion with a couple of maybe three observations of course one is that just to remind ourselves that we are on a path to fully funding the pensions that we support through the Hampshire County retirement system and we didn't have a similar meeting here we had a legislature essentially who told us we had to do it and kind of made it easier for us to participate in Hampshire County retirement system and set up a plan that is going to get us to full funding for our pensions and there is always the possibility that the legislature or some outside body may come in and force our hands on this and hopefully they will offer us some carrots if they offer if they threaten us with some sticks but we do have to know that and at least acknowledge it second thing in very different courses that there really are two entities that each of us have to deal with for Pelham it's the town and the region for us it's the town and the region because the region is a separate entity but it is an entity that gets funded from four different towns and so what your decision is going to be is an independent decision but does have an effect with us since the communication is very important for all of us and we need to have continue to have these discussions in a forum where all of us are present four town meetings or other search forums as far as Amherst is concerned in speaking just to Amherst um if you look at the spreadsheet that financial projections are presented on and you know it starts with the October meeting when finance director presents his initial projections for the next year you'll notice that there's a line of zero in this year's which was OPEB trust but the thought in putting a line item was at least to make us conscious of it and when it comes around to thinking about FY 15 it's kind of hard to do because we haven't had the town meeting yet where we're dealing with FY 14 but when we get around to that point well we're going to have to give some thought to and do some work so that we're ready to be there at the time is at the point where we're establishing preliminary budget guidelines for that year we need to give some consideration to whether there should be a set-aside amount in proposed that and so I think that when it comes down to how this is going to play out as to whether we're going to set up a policy and then as was recommended in your report which was set up a policy so that very specifically and then to stick with it I mean it all that's where it begins to play to come together and because we don't want to make huge shifts that is going to affect operating budgets and capital budgets without discussion we do need to have a mechanism between now and then to continue this discussion but I think that that is when it's going to come to play is that the finance committee is going to have to issue a preliminary guideline for FY 15 and we are going to have to be prepared to make a decision as to whether that number is going to be zero and we're going to look for just opportunistic things to do as is happening this year or if we're going to do something on a more concerted basis and recognize what that there are consequences to doing that which we've all been talking about tonight so I appreciate everyone coming and Gerald talking about those together because I think this is a decision while it's ultimately going to fall in the finance committee to issue preliminary guidelines it's not something that we can do and avoid we really need to be doing this in concert and discussion with all of you or at least all of you except John who gets passed on this because he's going to have the discussion over and tell them so with that if there are other questions or comments I certainly welcome them otherwise yes, Salissa if I could just add I mean those of us on the yeah I will speak for the select board and for my former role on school committee I don't think any of us that joined select board school committee joined with any intention of even understanding what benefits we offer to our teachers and our town employees in terms of 80-20 Blue Cross Blue Shield HMO whatever whether it's current employees or future employees that's just not on our list of things to be concerned about that's why we hire professionals to tell us what's the best thing to do for our employees so that we have that loyalty like Doug talked about so that we have good schools we have a good town et cetera very few of us have been very interested in that level of conversation but in order to make those guidelines for the finance committee I hope that you will help lead us into having that conversation before we just start a guideline because I feel like we're kind of missing that piece and that's been discussed tonight but I want to make sure we don't lose sight of that is that I don't fully understand what our different options are I mean this thing about the 28% is great and all that but to understand what other communities are doing the comparable kind of thing we always look at we don't want to stiff our employees we want loyal employees we're in collective bargaining right now we're going to be looking at FOI foot so there is definitely timing issues associated with all this like you said not only are we not in town meeting yet but there are a lot of different factors at play but it's it's a complicated conversation that I think we have to have so that as we talk to our constituents we have some reference points as to this is what we do this is what other communities do this is what the schools intend to do because we just don't really have that at this point I would say as a general rule we just have the assumption that we're doing the best we can given the circumstances we have I'll have why don't you add something and then I always can sort of follow up I did want to mention another town which I thought of which what they're doing is they're putting in something they put in like $800,000 and then they were putting in I think $650,000 and then each year going up by $250,000 each year is really their goal and so like when we did that interest rate we used actually a six and a half percent interest rate which gives you a sense of how much their funding of the much closer to fully funding than not fully funding so and that's a fairly well off community but more in the eastern part of Massachusetts so there are towns that are doing this I'm talking about our benefit structure not the amount that we're putting in I'm talking about what our retirees get versus what retirees in Belcher Town or Arlington or whatever get and if that's even possible to reconsider because we don't want to mess up our collective bargaining and we don't want to mess with our employees but the reality is we as a general rule on these elected bodies don't look at that in any detail we just assume we're doing what the comparable is yeah Sandy might want to add to this because my knowledge is limited but what we have and because we have this collective plan that covers employees of Amherst regional schools in Pelham is that there is an insurance advisory committee that is a fairly comprehensive committee that includes employer and employee representatives that has really quite successfully managed a health plan that is providing excellent benefits and at the same time it's managed as you know to control premiums to the point where I think we're going into a fourth year without a premium increase in the nearer where that's unusual but I'm not engaged in that process at all I just am aware that that board exists on the Sandy ones to add anything there's a lot to be said for good labor relations and having cooperative relationships with your employees in your unions is a very valuable thing for a community and Andy pointed out that we've and it's I don't take credit for this as people before me have done a lot of work with our unions and our employees to make incremental changes to our plan design to take out the inefficient parts or inefficient parts of the plans and we don't have an indemnity plan for our active employees anymore we have more managed care plans and so forth so that we have been able to do a good job of controlling those costs it's an ongoing conversation about what those benefits are and who pays for them and how you know so both in a percentage that is paid and the types of benefits that we offer so I I do think we need to keep looking at that I think to do it in a way that is done as cooperatively as the town has been able to do it in the past pays huge dividends because if you get into the situation where you're at loggerheads that's going to cost you more than than trying to make incremental changes cooperatively at least in my experience so with that I did say on the right you want to give me my question and I you know I don't pretend that I understand much of the report that I read but one question I had was the discount rates that you were talking about 3.5 and 7.75 how stable are those over the years? Like for example did you use the same discount rates last year? Would you use them same in the two? And how much do they change and what are they what are what are the drivers of those changes? Basically the investment the investment environment but that changes year to year right so you do change it but you know it is when we're making it it's we're looking at not just one year's worth of returns we're really looking at over a longer term so it's sort of you would have looked at let's say as the beginning of the year that maybe 7.75 would be a difficult target to get it's turning out that that would that would be okay but we were looking at it from like a you know 30 you know 20 year 15 20 year sort of perspective when we but even within that that does change we have used typically an 8% is probably the been the most common in the since I've in the 30 years I've been working on in this field but you know it has starting to edge down so it and it does depend as about the what the Fed does too. So what I think I want to do because I really appreciate all of your being here in the time that you've invested in the in learning more about OPEB so that you can help us and share in the discussion knowledge of Lee about how to address this issue going forward. The Amherst Finance Committee does have other business that will be conducting this evening. So what we're technically doing now from the finance committee side is taking a five minute recess and then we will continue on with just few agenda items having to do with the town meeting warrant coming up but we won't I want to again thank Larry for his participation and the great presentation. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Yeah. Thank you. Thank you. Thank you. Thank you. Thank you. Just warmly. Just warmly. 10th calendar you know several months before we have to do the rest. All right I'm going to call us back to orders just giving Amherst media a moment to know that we're coming back together as you and I spoke through just second to go um so uh our recess is under and we're back to the agenda item three which is the FY 14 but development but and I don't know if we have anything further to do on the budget side of it Andy. No just just article voting on articles I think but in terms of budget that I do have a an updated list of the articles with assignments and so forth so it's one way to check on what we have voted on and who's speaking at how meeting on them so I'll pass that out and there was one I think that we need to take a vote on the week just because it's not does seem to be covered in minutes of prior meetings and that you just give mine in I don't think we voted on one and 13 I think are the two where we want to revoke tonight or vote tonight because it doesn't they don't seem to be reflected in minutes they're both fairly straightforward maybe we should just get to them right away even though then one is not a budget item but it's the reports of boards and committees and it's one that we normally take a position on in favor of large part because the finance committee is one of the speakers one of the and so I think we need a motion on that Doug I move that we recommend approval of article one I second okay so the motion on the article one has been made by Kay seconded by Bob any discussion on Doug I actually think you may need to move because you're not going to be in a microphone to be picked up with these omnidirectional microphones okay so if there's no discussion all in favor indicate barriers in hands okay so it's six to zero with one member absent and then 13 was the other one we realized we need to get a vote on and that's our standard retirement assessment and there was a presentation that was made we assigned it to Doug who is written adopts in the report and we just need a motion on that okay move we recommend article 13 retirement assessment article 13 Kay has made a motion and Janice has made a motion to second that we recommend article 13 any discussion all in favor indicate barriers in hands so it's six to zero and any other any financial news or any other things related to budget that we need to be thinking about right now I just say that the House did pass the budget its budget now goes to the Senate the there were some minor increases in local aid but they don't affect the Town of Amherst so the numbers that we got out of the House Ways and Means Committee that I reported to you earlier are the chapter 70 and the chapter and the the general local aid there is apparently some extra money for student transportation and so forth but then that would just go to the school committee so that's what I have to report okay so then the other agenda item that relates to the Town meeting or the other part of it is the non-financial and petition articles some we've already voted on and taken positions and no positions and some we have deferred on and the question is whether there's anything at this point that we can take up that we previously deferred I do have at least one suggestion I don't know if anyone else has other suggestions the one that I would suggest that we talk about because it's actually we did something of an incomplete nature on it which was article 45 I think we ended up with a discussion that is really bifurcated into several parts that if article 25 and K if I have a strong correct me but if article 25 which is the other social services passes that we do not recommend article 45 and we said that if article maybe you can state it if there was an amendment to our proposed to article 25 to specify the agencies that would receive the funding we were we would not recommend that but what we were left with was that if article 25 were to fail do we have a position on article 45 I think that was where we were left with some uncertain with a piece of uncertainty to defer it if 25 doesn't pass so you would just your thought was to just not even take it up until a night prior to a town meeting in between that's what I remember too I guess that's what I remember I think I mean that some ways make sense the only thing we don't know I suppose is whether there'll be a motion to take up article 45 out of order and it's not out of the question that that motion could be made and if it is then it might pass because town meeting will have thought a lot about social service funding it might be in the mood to just finish social service funding so I'm not sure that we really can assume that we'll have that opportunity and that would leave us either having no position because we haven't had time to take one we can have a contingent position I said what you you know we were talking about just a minute ago to take a contingent position if that passes well we had a if it passes we don't support 45 yeah but if it article 25 fails and then article 45 comes up is a financial I mean at that point we have already come out in support of on a one-time basis using money from free cash to support social service funding but it is a different proposal entirely different proposal and okay and if if I interpreted the petitioner's statement properly that is the $90,000 in that article is assuming that CDBG money will fund the homeless shelter that the $90,000 would go to these other agencies that's what I thought I understood her to mean I had the same understanding so it was essentially an additional $90,000 that's why I was kind of surprised that we deferred in the sense that it's it's kind of outside of our budget guidelines throws a wrench in the budget of $90,000 well if article 25 has failed and we've already said that we're willing to go into free cash to fund article 25 which was is an amount that we're authorizing but it's in the way it's framed for town meeting I don't think it's contingent on CDBG well if we get the full CDBG grant then we don't need to spend the $90,000 we won't spend we won't spend much or any of it if we get a full CDBG grant so it's there as a contingency if we only get the $450,000 CDBG grant that's how article 25 works so it whereas I think what Wei Ling's article this is what wants to do is just spend the money no matter what Janice and then Erag so can we who would you vote to recommend if we do 25 and it doesn't pass and then we get to 45 right after can we recommend spending $90,000 you know that same $90,000 because it sounds like it might also be people wanting a different process for picking agencies so we're not really opposed to the $90,000 expenditure but I don't know yeah maybe you could just limit that to $90,000 recommendation even for that article you know can I clarify because I'm sort of a I thought I understood in one way and I'm not really sure I'm understanding it so 25 was when John was there talking about the different scenarios of getting full funding getting or getting only $450,000 there was the scenario the $450,000 funding that there was an allocation of $90,000 for what was that for it was for one specific thing I think that went to the what was that Craig Stewards Craig Stewards okay and my sense was that he was concentrating on one for effectiveness though there was his choice instead of spreading it out he was concentrating those $90,000 on one particular project to have some positive impact on it my sense was so that was article 25 then article 45 is that is about those $90,000 that those should not be concentrated on one particular like issue like Craig Stewards but they should be more equitably distributed across different needs and so our position as I understand at that point well I was confused my personal position was that that's not really something that we want to touch at the finance committee because that's the allocation decision that the manager is making and found by us as long as the numbers match up but I think the finance committee took a position or did a issue about meeting later on to vote on that so so that is am I understanding it correctly and the 25 and 45 that's very helpful and I think that part's right but the part that I thought I heard was that buried within the assumptions of article 45 is that there's already another 90 in there from the CDBG block grant and and then there's this additional 90 which has been hypothetically proposed in article 25 was available to spread around okay all right yeah and the article itself states that this $90,000 is to go to these eight agencies and that Craig's doors the homeless shelter is not on that list so if the worst case scenario we don't get the CDG be money and defund and article 25 fails and article 45 passes then there's money for some agencies but not for the homeless shelter yeah so I think that the the intent of 45 is is actually going to shoot itself in the foot if the presumption is that the homeless shelter is already going to be done because they're going to steal money from the homeless shelter the CDBG money that's come through and they're going to give it to the other agencies but think that if there was an additional 90,000 yeah I mean the the goal was to fund more than the homeless shelter I think the goal is to fund the homeless shelter and four other agencies recommended by the community development block grant advisory committee if funds are available of which article are you 25 I wish I had that little hand out from John yeah I wish I did too and we may have to therefore once again defer this and I think that if we do the major thing we're going to have to talk about is the timing for meetings before town meetings that should be I have the answers oh here I'm going to slow on that I think I I think I understand it 600,000 800,000 we do say in our report that it deferred to town meeting because of that uncertainty after we taken our vote but we still won't know if the CDBG money was there not till after town meetings over right so I think that that's the important element that I just heard you say and that that an important element is that we won't know about CDBG until afterwards there's I think two elements here one is that it would it's an absolute request for $90,000 regardless of the amount of money that comes in from CDBG and if CDBG is partially funded to a level and Sandy's looking at the spreadsheet now but the principle is there that that there's a level at which CDBG funds would be large enough that even if town meeting were to allocate the $90,000 that it would not be spent which would then return it to free cash so there at least there in the way the 25 is structured there's a possibility that it won't be spent depending upon what happens with the grant whereas 45 is suggesting that $90,000 be spent regardless and the second is the process question because in the one the CDBG advisory committee had an open process advertised the availability for as for grant applications submissions of proposals held public meetings and made a recommendation to the town manager in the other there's a group that is just suggesting a list of agencies to be funded by town meeting and it's really I mean the statement was made that town meeting should make the decision but really the decision has been made in large part by the people who structured the petition so it's you know there are two elements to it one is the absolute versus contingent allocation of funding and the other is the process so I think that the question is done left with all of you is to whether you feel under the circumstances that you want to take a position on article 45 under the circumstance that we've the 25 has failed I move that under the circumstance that article 25 fails that we not recommend article 45 second there's been a motion it's been made and seconded I'll let you speak to the motion I think when we finally muddle through the issues here Andy you summarized the best it's an absolute obligation to spend an additional $90,000 or to spend $90,000 whereas article 25 we can approve or we have approved because it is a contingent obligation and that difference makes the difference absolute versus contingent yes James I think also what you said about the process of picking the recipients that also would be a reason is there any further discussion on this motion bring them on I'm going to ask for vote all in favor of the motion please indicate raising hands so it's six to zero with one member absent okay are there any others that you think we can discuss tonight I'm not sure that there are but I don't know if we took a vote on two just to send back to you on the transfer of unpaid bills the position and the committee report says defer to a town meeting which we always do because we wait to see if there are bills but I don't know if we actually took that vote if you want to we didn't okay you mean to defer yes at this point what's the likelihood you think we did well we don't really need to take a vote on yeah we don't have to take a vote on deferring so we're just going to wait until the day because that's that'll be a quick one there'll either be bills or not be bills we either pay them or won't pay them and in that case then no I don't think there's anything else yes okay we have some articles here that don't have speakers assigned to them right um let's hold that for a second and then come back to it because let's finish the town meeting position question and then get to and then what we'll do is set a time for meeting on the first night of town meeting and then come back and assign speakers because I think that that you're absolutely right that we need to because speakers are also people who are going to help us to make sure that something gets written when we do the supplemental report and for a lot of these you can do some writing immediately because at least the basic structure of it you can put in do we know by the way if there are any planning board reports that have been issued now for Wednesday probably yes yes in fact if you look in the packet that I just gave you you should have them okay so um but obviously we can't do that tonight the one thing that I just did wanted to say is that the two big petition articles that relate to money is the North Amherst Cushman W. D. Cole's article 43 and the Echo Hill petition article 42 and those are complex matters that involve multiple layers of analysis I think we really need some help from hopefully David Zomac but I know that David is still trying to work with the petitioners on those so that it wasn't he wasn't really ready to come this evening I did send him a series of questions that were my questions regarding the this particular pair of articles because they frame questions that I thought that we would need to deal with in order to handle an effective presentation things like how the eminent domain process is going to play out for these particular items if there is an eminent domain taking what do we know about the values and and are we if town we town meeting authorizes this in the terms of the articles that are presented does that require an action of the select board or only permit an action of the select board and those are just samples so what I'm going to do because we really there's no way we can address this without the that kind of information I'm going to try either tomorrow over the weekend I will definitely send you a copy of the email that I sent to John Santy, David Zomek and to Sandy and then I will if you have additional questions that you think need to be addressed and we're hoping that David will come be able to be prepared to speak to us on the night of the first session of town meeting which is of course May 6 so we really need to be prepared for a meeting that night and I think that it could be a meeting that is going to be a fairly substantial meeting because while unpaid bills might be disposed of in about 10 seconds I'm not sure that some of the rest of these are going to be disposed of that quickly so what is possible for people I mean usually we try and say an hour or 45 minutes but it seems to me that this one we might want some more time and see if we can just be done with it Janice Are we meeting next Thursday? I haven't been planning on it I mean it's not impossible I'm not saying not saying we can't be next Thursday I just don't think we planned on it Is anybody not available that Thursday? Next Thursday I'm not but I am available that Monday I could meet early Let me just get a show of hands between if a choice was either meet at 5.30 on Monday and then have a real long night of it or have a meeting for an extra night on Thursday if we can get everything together who would prefer the first option I stated of a longer day on Monday and meet at 5.30 so it's 4 Janice, I'm taking your I could go either way but I guess my preference would be not to have another night Are you going to be in town even? I am in town but I'm going to a wedding the next day so I would rather not meet Thursday In the end I would have had to say that it would depend upon only if David could come and I must say that if David says that he's going to have to ask us to defer the discussion until May 8 then I will not schedule the meeting as that early I will schedule it probably at 6.15 because then we would be having breaking it into two separate meetings really so I'm only going to schedule it that early if Mr. Zamek okay so that's the plan for that Can you take Lechu take us back to the question you were raising about the unassigned speaker yes actually I was assigned public works and I'm not on the list yes I noticed that and I think Doug wrote the transportation fund I did so he could do that article 7 but of course that's a no position so we could just say we don't have a position does anybody else no that's all right article 29 the residential rental property bylaw and article 30 converted dwelling right but these are ones we've taken positions on and the one where we might actually I mean 29 and 30 we could just say we recommend for some other reason or other so this is just for speaking into how many yes there's already been written out these aren't our motions so that's just the state position of the committee and to whatever is additional so are you looking for volunteers yes okay fine I'm happy to do pick up one or two more it wouldn't be a long speech yeah because it's basically what it's basically covered in the report we try not to just repeat what's in the report but it gives you the theme that we were on I think it's sort of just stating that we supported it we recommend it and why we recommend it yeah and all the information is already in this book now yes point yes and in your notes in minutes in the minutes as well yeah so you're taking the residential properties okay that's a pretty good political one sure yeah and may I leave after that after I say that actually the difficulty with that I see with residential property and I should bring this up is that we could have amendments and we don't really have positions on amendments and I think that when you're talking about political volatility the basic article actually doesn't have much political volatility there's a lot of support for it within town meeting to do something and I think that we've been pretty much told by the neighborhood group that there are certain elements that they would amend and that they have I think clearly stated at this point that it's likely to be attempted by amendment during the meeting itself during the consideration of that article and one of them has to do with fees and whether they're going to be satisfied to leave it to the discretion of the select board or going to want to specify the fees so I think we should at least be conscious of that so that we know if we're going to have a position that that we're offered is an amendment another one I'm trying to think with I can remember what the other two were but I think I don't know that I have my notes from last but that was on exempting owner occupied yeah exempting owner occupied that's right and then those I think parking was made in the third parking plan okay that one is article 29 it's going to be several at least I would guess two sessions before we get to that and at which point we may have a pretty good idea of what amendments are going to be proposed so we could meet before that town meeting and take a position on them but meanwhile it'd be nice to have somebody ready to speak at least to the original article well Anna Raga's volunteered to do that and I think that's good am I doing article 29? 29 why I'm trying to find our finance committee vote out here I'm not seeing it it's at the end okay so I'm in the zoning article on converted dwellings we took a yes position on it's 68 67 68 on your 66 okay so our statement is on 68 okay we have slaughter Doug has volunteered for article 30 in which we have a position and we have an article 37 which is the PBTA and I think we've taken a position on that we need somebody to speak to that one 37 PBTA I'm willing to do it but I'm trying not to get okay so Janice is on that and the rest of them we want to does anybody want to volunteer to take on any of the additional articles that are not yet okay that's 43 so if you're not able to cover something is that what you're saying that you may be gone back you up okay so that's the coals and so it's Saul and backing up Sharma and should I put myself down for 42 unless somebody wants to please speak up I'm happy to do 42 once I understand that I don't really and I guess Dave will explain that to us also okay and I'll put myself down as a backup to you on that one so we have you down for the primary on both of them um I think the rest of them 45 45 yes we just finished the position on it I'll take it on since I'll have done I think I've done 25 or 20 whatever the other one is 25 so may I just just so that I know that I don't slip on any of this I'm doing 16 b you just assigned me only one right now and what I'm just backing up wow right yeah okay you got 16 June I got that too and then the then the Wednesday 29 and then back up on 43 and four um so then the other ones that we'll have to be thinking about is um any zoning one so we take positions on and I can't predict that we're going to take positions I don't want to go through assignments necessarily at this point if we take yeah go ahead Bob are you doing conservation and development on this sheet has it no no no no on a missile that was a mistake it's a typo it's a typo open you wouldn't notice okay so I think is that it okay as I think that's it okay um anything else on non-financial position articles for town meeting then uh any reports from leisons from board's committees I don't think that there are any any minutes of previous meetings at this point there are none I just want to hand this out which is the overlay declaration so this is relevant through the um budget amendment where we're using some of this money to fund a deficit in the 2009 overlay deficit 12 e thank you but uh so this is just a copy of the sheet that went to um came from the assessors they voted this these overlay amounts totals $320,000 we'll use 40 of that for um that deficit in 12 e and then the rest will just become free cash next year is this sheet from 1944 why it just looks so old school oh I think it's because it's been scanned a couple of times or something um we we took positions on article 12 did we not yes I yes I don't know why it doesn't say that here that's our doesn't our report say that we did okay so uh while you're checking on that I think that we've taken care of the next meeting in an agenda of next meeting questions so as soon as uh we've um checked on the article 12 questions to make sure we voted we voted in there they're reported yeah so I don't think there's any other business I think we can be adjourned at 9 20 move we adjourn we are adjourned at 9 20 gamers media thank you very much