This week’s Tab featured an odd juxtaposition of conflicting messages.
There was a story about Moody’s Investor Services giving Newton a AAA rating (the highest). Moody’s praised the “city’s strong fiscal management”.
There was also an opinion column by Joshua Norman full of criticism of the city’s finances. Norman summed up with “Newton’s financial position continues to erode, despite the rosy rhetoric coming from Newton City Hall”.
I’m no financial guy so I’ll leave it to the rest of you to decide who has it right. Discuss …
Moody’s exists to help entities lend money. Lenders want secure, profitable transactions.
The single element that overshadows mediocre-to-poor financial management and city debt levels is a high net worth of residents representing a strong ability to pay off bonds. Newton has solid demographics and good housing prices, which outweigh its lackluster management. Think of it like this: Your son or daughter is an unreliable sort, so you co-sign the bank loan or lease. Do you think the bank or landlord cares whether or not your son or daughter timely pays his/her obligation? The hooks are in you, just like with Newton and its taxpayers.
I’m a big believer in the concept that even a broken clock is correct twice a day. But the Newton Taxpayers should realize that Josh Norman is a very bad spokesman for their organization.
Norman spends way too much time, here and elsewhere, engaging in the politics of division: name-calling and pigeon-holing our citizen activists based on who or which referendums they may have endorsed in years past rather than building a coalition and developing a persuasive case for fiscal responsibility.
Like it or not, to enact true change in fiscal policy, the NTA needs to sway a portion of the same “political insider group” (as Norman likes to call them) that he mocks. I’d guess that most of those same folks read no further than Norman’s byline. I know I did.
And that’s a problem the NTA needs to address if it truly want to have its message heard.
Aw, Greg, that’s not what Paul Roberts from WNTN said, or Richard Cleary in this week’s edition of the TAB, or Jackie Morrissey & Brenda Loew from NewTV.
I find it ironic that you accuse me of attacking people considering that when you ran the TAB, you used that paper to attack the NTA’s members and principles while promoting the Newton Political Establishment’s candidates and causes.
I don’t believe that the people of Newton are as stridently left-wing as its political establishment. Most people don’t even vote, the only people that really vote are a well-organized and aggressive minority.
As for building coalitions, I’ve recognized that the NTA will never win the votes of ideologue left-wingers such as yourself and it would be foolish to even try. On the other hand, there are tens of thousands of Democrats, Unenrolled voters and even Republicans who simply want good government and are disenfranchised because they’ve lost control of their city to militant ideologues. I believe that those are the people who are likely to cross over and support an organization that offers them real alternative to the ultra-left-wing insanity that produces ideas such as accumulating $1.12 Billion in debt and unfunded retirement benefit liabilities, spending $8.5 Million annually on 600 non-resident students or banning plastic grocery bags.
Re: Josh Norman’s comment above: I rest my case.
I find it unbecoming of Greg to engage in personal attack, instead of adding facts to this discussion.
I am not a fan of Joshua’s tone, but at least respect his interesting in sharing his analysis.
Jerry – as the blog moderator, is it possible to suppress Greg’s noise?
@Sam S: I will admit that there are times when I’ve let Josh Norman get under my skin and my comments have become more personal than they should. Heck, a few times, Jerry has even called me on it.
I don’t believe this is one of those cases.
I’m saying that if the Newton Taxpayers wants to convince the voting public and our elected leaders that we are headed down the wrong path, they’ve chosen the wrong spokesman because he favors politics of division rather than coalition building. That’s not name calling, that’s calling it like it is.
Joshua Norman is a fabulous person to make these financial contributions to Newton residents. No where can I find such important information about Newton’s fiscal state.
One thing is for sure and that is that the mayor and board of Aldermen are digging in every ditch for a chance to raise local taxes.
Thanks Joshua, your hard work is appreciated and crucial for tax payers who need to know the truth.
Greg, I made two mistakes in my last post:
1. Dignifying your narishkeit with a response.
2. Forgetting to include Tom Mountain, Lisa Barstow, Brian Camenker, Bill Heck and Colleen Minaker in my first paragraph.
http://newton.wickedlocal.com/article/20150122/OPINION/150128434/?Start=2
As for building coalitions, I don’t suppose it would help if I told you that a few progressive, reform-oriented liberal Democrats made it a point to read, share and compliment my December article on non-resident students.
It doesn’t matter if I tell you that some of the aforementioned people I listed in my posts were former rivals of mine last year at some point but have embraced my reform-oriented message of fiscal stewardship of taxpayer assets. You’re going to keep on continuing to underestimate my efforts to bring people together based on common interests, while maintaining the integrity of my core values and principles. Considering your enthusiastic support of Mayor Warren, I guess that’s a good thing, because that will make it easier for us to defeat future overrides in the next three to five years.
I would like to hear more views on the juxtaposition of these two pieces. Do others agree with Mr. Heck, that Moody’s AAA rating is because they assume we can just raise taxes to cover whatever shortfall we face? Because that does not seem to match with political realities.
Emily, I would like it clarified that individual residents are financially responsible if the city is unable to pay its debt in a timely manner. With my current knowledge, I do not agree it is similar to the example of co-signing for a child’s loan. In that case, a parent is acknowledging and accepting a willingness to pay the debt if the child is unable to pay for whatever reason.
I did not vote for the NNHS project. Someone explain how I am responsible for the adverse affect it has caused to the city’s financial situation. I also do not participate in union negotiations so why would I be responsible individually for the benefits problem created from poor negotiating by multiple city administrations. When Detroit filed Chapter 11, the city residents were not told to pony up.
Greg, based on the unsolicited “advice” I’ve received from you, it appears that you would like me to compromise everything I believe and maybe you’ll accept me. Sorry, but I don’t play politics over principles. I’m not going to compromise 100% of what I believe in for a 2% victory.
The NTA is a principled organization led by principled people. We believe that government (and its allies) shouldn’t lie to its citizens.
I want to clean up the city and the state from big government run amok. I’m one of the few people that can say that & mean it because I have taken on the political establishment of both parties.
It is a little tiresome to see these columns in the TAB week after week. I keep checking to see if Rupert Murdoch has taken over the local paper. Newton is a great city with capable leadership. There are challenges, yes, but no one has run amok.
@Emily – It is true. Directly from their ratings document “STRENGTHS
-Sizeable, wealthy and diverse tax base with favorable location and institutional presence
-Sound financial policies and conservative budgeting approach
CHALLENGES
-Relatively narrow fund balance levels
-Limited ability to raise property taxes under Proposition 2 ½
-High liabilities for pension and OPEB”
@Patrick: Well the City as a whole is responsible for debts we have incurred, and they have to be paid somehow. Alderman Ruthanne Fuller pulled together a team to lay out the status of our significant retiree health care liabilities, you can review it here.
Emily – I do not agree with Bill Hecks comment about Moody’s ratings of Newton’s finances. We have had a AAA rating in all my years in Newton and have passed 2 overrides in the 33 years since the passage of Proposition 2 1/2. The reality of the situation trumps the opinion of any one individual. An opinion is simply that – an opinion.
Emily,
One of the things I’ve always been told is that Newton receives the AAA due to the citizens ability to pass an override…which is consistent with everything being said.
https://www.moodys.com/researchandratings/methodology/003006001/rating-methodologies/methodology/003006001/4294966628/4294966848/-1/0/-/0/-/-/en/global/rr
Two – count ’em two – overrides in 33 years. That’s not what people think or have been told. That’s reality and isn’t in the same league as the number of overrides passed in communities to which we like to compare ourselves.
Emily, thank you for the link to the document. I could not find an answer to my question. Let me try again hoping somebody with legal and/or financial experience in the public sector is reading this blog, and will offer an answer.
Josh Norman writes that “Newton has accumulated $1.12 billion of debt and other unfunded obligations, which represents a de facto lien by the city government on each taxpaying household for $35,325.”
I understand the city can try to increase taxes, fees and other charges to raise additional revenue to pay the debt. Failing to do this through the legislative process, can the city unilaterally demand each household to pay up to $35,325 (current calculation) if the debt comes due?
@Patrick: No.
Having a good credit rating is like having a good credit score. It says nothing about whether or not your are wasting money and making bad decisions. All that it says that the lender is likely to be paid.
I would like to say, “Thank you, Mr. Norman.” Greg you may disagree with Josh’s tone. I really don’t care about tone. Let’s focus on the message. Are any of his numbers wrong? Someone in Newton needs to identify spending problems. All organizations need to think about using money wisely. Newton is no different. Despite this, too many of us attack those who are critical. When was the last time someone on the Board of Alderpeople (is that the new term?) proposed to cut something? I can’t remember. Has the Newton Tab ever had an editorial proposing a cut, or pointing out wasteful spending? Maybe this happened when Newton South was being built. Since then, I can’t remember. We need more voices like Josh. A one-sided conversation won’t help us.
@Patrick – Look back just 5-10 years ago. The city had committed money to NNHS building, but residents refused to increase the tax base (ie. pay up the lien). The money had to come from the operating budget. Remember, libraries got shut, school teachers were let go….
We dont need too much imagination around the “LIEN”, we just need to recall our collective history and project it from there.
@Joshua – I am interested in running the models myself. Could you please give me a jumpstart by putting all your data on a google folder and sharing with the community?
Much thanks,
S
Emily, thank you. I understand that answer. Josh’s use of the term “de facto” concerned me. Josh seems to know his numbers; however his words sometimes are not correct.
Sam, I remember the NNHS fiasco quite well. To me there is a difference between budget re-allocation / cutting and issuing liens on my private property.
Jeffrey, I mostly agree with your last comment. I do care about tone if we are to keep this blog civil. I do not recall anyone correcting Josh’s numbers, and the implications of those trending numbers is what we should be addressing as you state.
Jane,
It is based on the (ability) to pass an override….NOT how many actual overrides we’ve had in the past 33 years.
I have been a member of NTA for awhile. I have been able to peruse some of Josh Norman’s data although not in great detail. The problem as I see it is simple. Newton spending has grown at an average annual rate of about 4% per year every year since 2000. [It is also expected to increase above this level for the next 5 years.] Most of the Newton spending is the cost of labor. For comparison , the Federal Reserve bank inflation rate over the same time period is about 2.4% per year. This rate is a good measure of the value of money. Therefore, Newton has used much of its tax revenue for either making additional hires and/or paying its employees raises 67% above and beyond normal inflation adjustments. Since the majority of the Newton budget is labor costs, there is little left for capital expenditures, paying down the debt , etc. Ergo, the debt had to grow and will continue to grow till these issues are addressed. Of course , we would like our city employees to be well paid. However, there are limits, and we have exceeded those limits.
In commenting on why Newton received Moody’s AAA rating, Heck presents the need to “overshadow Newton’s mediocre-to-poor financial management” as a problem to be solved and provides “a high net worth of residents … pay off bonds” as the solution.
Instead of discussing how we will accomplish this feat, it would be best to start with a different premise, like Moody did.
“The stable outlook reflects Newton’s stable financial position, conservative long-range projections, sound financial policies, and the strength of the city and regional economy.”
Joshua Norman reminds me of Old Testament prophets who were unpopular because they spoke the truth. Joshua, thank you! Newton overspends! To Jeffrey Pontiff’s point: Yes! Few in Newton ever propose spending cuts.
To Rich Slater’s point about Newton spending growth: “Exactly!” We exceed spending limits, especially in terms of public employee retirement benefits.
To Greg Reibman’s point about Joshua’s “divisivensss”: I attended every weekly meeting of the anti-override group Moving Newton Forward. Never did the Mayor, a member of his administration, an alderman, a member of the school committee, or Mr. Reibman join us. It was as if the City divided opponents to the override into a group that did not matter. Yes, we could attend City-sponsored meetings, but they were tightly controlled to favor pro-override voices.
As current President of Newton Taxpayers Association, let me assure one and all that we focus exclusively on facts and results. Greg’s approach to this forum is the diametric opposite of what we believe in and what we practice; we enter a room leading with our intellects. You need to mind your manners Greg.
These fiscal issues can be complex. I have the benefit of having studied Urban Planning at Boston University and of having run a small private investment fund, so please allow me to make my modest attempt at focusing the issues.
First of all, Moody’s (like all financial ratings firms) is a double-edged sword. They carefully study data, however their conclusions are created in the context of other cities and towns in the U.S. This is damning with faint praise.
NEWTON IS NOT ALONE IN SPENDING COMPULSIVELY AND BUILDING CORRESPONDING DEBT. This does not assure me.
Second, financial ratings firms work for the sellers of debt (the U.S. government, states, cities and towns) and NOT for the poor slobs who buy the debt (as Bill Heck correctly points out).
The 2008 financial crash provides compelling proof that THE RATINGS FIRMS (IN THAT CASE RATING REAL ESTATE DEBT) PROVIDE VERY POOR PROTECTIONS TO THE PUBLIC WITH RESPECT TO UNDERSTANDING AND RESPONSIBLY MANAGING DEBT.
Third, wise decisions are seldom made through avoidance. Calling the money we have appropriated from city employees to fund Newton spending something other than debt is simply avoidance. By law we were supposed to fully fund these pension and benefits commitments and we have instead spent it. No one questions that the money needs to be repaid, including the Mayor. IT QUACKS LIKE A DUCK AND SO IT IS A DUCK. Likewise, no one has questioned that the debt exceeds $1.1 billion, as Josh Norman has thoughtfully and carefully documented.
These facts lead me to conclude that:
• Newton lies on a path of excessive spending, like most U.S. cities and towns. This represents neither excellence nor fiscal responsibility.
• Newton debt (or obligations or liabilities; substitute the word that you accept) exceeds $1.1 billion and continues to grow.
• Whatever Moody’s says (take a look at how long Moody’s offered “comfort” to Detroit’s bondholders; it is frightening), comfort in this case is avoidance and we remain on a path of excess.
• A high quality city government adopts a different spending and debt path than Newton has adopted. I want to live in an excellent city; it will be what we make it.
@David Spier:
Thanks for joining the conversation and thanks for proving my point, which is that focusing on the issues, without the name calling about who’s an ultra liberal, a good guy in his book or not or who endorsed who, what someone did years ago, can be far more effective way to get people to consider your perspective.
@David Spier – Very clear, very direct, very well said – thank you.
As Vice President and Research Director of the Newton Taxpayers Association, I find it very concerning to see that Newton’s outstanding debt and retirement benefit obligations increased by nearly $100 Million in Mayor Warren’s first term.
When Mayor Warren took office, he said he inherited a city on a “brink of a financial crisis” (his words, not mine). Four years later, Newton’s outstanding and retirement benefit obligations increased by nearly $100 Million, nearly all of it is due to increased compensation spending such as increased pension and OPEB obligations.
I don’t think fiscal issues are that complex though. We all have to set priorities when it comes to dealing with our money, and unlike the government, we can’t always ask our bosses to pay more money every time we have a major expense. We all have to balance our checkbooks, live within our means, and maintain a healthy dose of common sense in planning our finances. We need to expect the same thing from our government, especially our local government.
For those interested in learning more, this article describes details about the Massachusetts pension system that oversees a large part of the Newton pension system.
Recognizing that this piece is long, I suggest searching for two items of interest:
• the section “The Unfunded Liability” that introduces PRIT, the Commonwealth’s organization charged with
establishing fully funded pensions (we typically are below 60% of full funding) in Massachusetts; and
• tellingly the publisher, non-profit MassBudget, introduces unfunded pension liabilities as: “Similar to a loan one
would take out for a home, the unfunded liability is paid incrementally on a schedule extending out over several
decades.” It surely sounds like debt, quack quack. The problem is, our debt is increasing with time instead of
decreasing. That is one lousy mortgage.
My apologies. I neglected to include the link to the article I reference:
http://www.massbudget.org/report_window.php?loc=Pension_3_11.html
This link is very important to understanding our challenge.
The GASB is comprised of a broad coalition of professionals seeking to establish standards for reporting of benefits costs and liabilities (OPEB).
Note in this brief section that one goal is to have these enormous liabilities included in generally accepted financial statements so that cities are judged by folks like Moody’s based upon full financial disclosure.
You see, our AAA rating is results in part from the complete failure to disclose the hundreds of millions of dollars in unfunded benefits (OPEB) costs. This enormous issue is addressed only in a note, not by the rating itself. Does this allow anyone to gain comfort from Moody’s rating? It should not.
http://www.gasb.org/opeb#section_3
David Speier, where have you been all these years.
This thread has been enormously enlightening (if depressing).
Emily:
This problem can be remedied; the direction forward is “relatively” clear to us in NTA. Only a failure to act can lead to serious depression.
I don’t believe Newton has a spending problem. I hate to think about what Newton would look like if we didn’t spend at current levels. The schools would take a huge hit, because that’s where we spend most of our money. If we were spending less on schools today, the impact would not only be felt in the quality of education, but it would adversely effect the value of our homes as well. So, a simple solution like “spending less” has its appeal, but it’s not necessarily a good business decision in terms of the value of our homes or the value of other city services for taxpayers.
What we have here are two problems. First, we have a revenue problem. The city barely takes in enough money to pay its bills, and it doesn’t have nearly enough revenue to pay its accrued debts. Second, we have a leadership problem. That’s not to say we don’t have some good leaders in Newton, because we do. But our local government has clearly lacked leaders with the expertise to solve our fiscal problems long term.
Here’s what I think we need to do in order to bring Newton into balance. First, generate more revenue. Not through increased taxes, but in the form of new revenue sources that the city can cultivate and tap in a businesslike manner. Second, explore innovative ideas that reduce costs. The cost of education is killing us. But I’m struck by the fact that we still provide education in much the same way as 100 years ago. It’s time to consider options to our brick and mortar model.
David Speier, I consider you a welcomed addition to this conversation. If you can articulate the numbers that Josh uncovers, I believe you will have an effective mechanism for clearly stating the NTA’s position.
Mike Strair, why does our school department have so many highly paid curriculum administrators dealing with the same common curriculum issues as other local communities? Why can’t the communities share educational resources?
Mike, Newton has a spending problem because it lacks the political willpower to address its fiscal sacred cows.
Even you have recognized the need for Newton to seek full reimbursement for its 600 out-of-district students attending Newton Public Schools, which cost Newton taxpayers $8.5 Million annually.
If Newton were to receive full reimbursement for its out-of-district students, it could fund all the renovation or replacement of the Ward, Williams, Lincoln-Eliot and Pierce school buildings, with enough money left over for full-day kindergarten and digital education (1-to-1 computing program).
http://blogs.wickedlocal.com/newton/2013/02/06/west-newton-residents-question-costs-of-metco-newton-north-at-override-meeting/comment-page-1/#comment-88747
@Patrick– One of the keys to reducing the overall cost of education, is reducing administrative costs. So I think we have to look at the things that drive those costs up. In my opinion, we could reduce administrative costs AND improve the quality of public school education in Newton by establishing more local control over curriculum.
@Joshua– For many years I’ve suggested that Newton is uniquely positioned to have the best public school system in the country. That’s more an acknowledgement of our tremendous resources, than it is a vote of confidence in the elected officials charged with running the school system. Unfortunately, we have a small group of people who have decided [without public input] to divert million$ from Newton taxpayers to Boston taxpayers. That they do so year after year without consequence, continues to astound me. To my mind though, the diverted funds don’t represent potential savings, that money represents $8M more per year that should be spent to improve Newton schools.
Remarkable. On most blog threads the tone deteriorates as the number of comments goes up. This one has improved.
Joshua Norman: you may think you are making some kind of point when you use language such as “ultra-left-wing insanity” (from above), but when you (and about 2 or 3 others who comment at Village14 and are fond of ad hominems) spew such labels, I tend to assume, right or wrong, that you are a “ultra-right-wing” fanatic and regardless of how sensible your fiscal views may or may not be, I also assume that you likely hold views on social issues that I find reprehensible and I mark you as someone to not trust. So thank you for losing “the tone” in your last couple of comments. If you choose to continue to sound more like your colleague David Spier, I will try to continue to listen.
Mike, I think we’re closer on this issue than you might think.
During the last override two years ago, I and the rest of my compatriots from Moving Newton Forward with Fiscal Responsibility demonstrated that full reimbursement of out-of-district students could be used to help improve the Newton Public Schools experience instead of resorting to higher taxes via overrides.
I thought I also showed how getting full-reimbursement for out-of-district students would help move educational excellence forward in Newton by fixing or replacing old buildings, as well as bringing in innovative educational programs like one-to-one computing and FDK. And if Newton was to finally get around to doing naming rights, that would bolster and reinforce those efforts.
Mike, I agree with Josh. The policy options you suggest in your final paragraph are wholly consistent with those that Newton Taxpayers Association advocate.
I think our only difference is language. We have no problem with Newton spending money to meet taxpayer needs. When we refer to Newton’s spending problem, that means to us:
• Newton’s impulse is to address every issue, real or perceived, by compulsively spending more money;
• When identifying new perceived needs for spending, valuable or not, Newton NEVER addresses the vital question: “If we want to spend this new money, what existing spending should it replace?” Admittedly that is a very tough question to ask, however it is the toughness that introduces the discipline needed to adopt the path of smart spending. Any fool can just keep spending more and more; that is the opposite of excellence and fiscal responsibility.
• Newton treats its employee costs in a bubble that is isolated from reality. When taxpayers face extreme employment and income level challenges, such as during this 2007-2015 period, employee costs remain largely unchanged. The health insurance plan notably exceeds private market norms and the pension plan removes 100% of risk from employees. It is a problem when employees live in a more protected world than their employers. Excellent operations, including public works, function best when the environment and results are tied between employer and employee. Employee costs have consistently risen faster than taxpayers’ income, an economic dynamic that is bound for failure. What we cannot afford will not sustain.
• We have made brash financial promises to our employees. Intended or not, we have misrepresented our ability to meet our commitments. That is unethical and no way for taxpayers to treat City employees. We need to be realistic and honest if we are to be an excellent city.
• METCO sends Newton special needs at twice the rate of Newton’s own students AND Boston’s own students. Anyone who understands statistics knows this rate is impossible by chance and must be intentional. While special needs students deserve full support, Boston is plainly taking advantage of METCO to transfer huge costs to Newton. This must change as it represents foolish, unmanaged spending.
Mike, we absolutely DO NOT advocate no government or no spending like some fringe groups. We simply want to spend what we spend SMARTER.
David, I would like to concur with the following observation.
In 2013, when Margaret Albright ran for School Committee, she emphasized the need to set priorities in the $200M+ (school) budget and to ensure that our public servants realize the priorities laid out in the budget. She highlighted that many school districts with less money than Newton generate stronger accomplishments than Newton because they know how to set priorities.
http://vimeo.com/76774345
I don’t believe that our elected officials and our public employees have the willpower or interest in setting budgetary and spending priorities. I believe that they concluded that it is easier to continue to spend more money annually and ask for periodic overrides rather than setting budgetary and spending priorities.
Mayor Warren talks the talk when it comes to “zero-based budgeting” but I don’t think he walks the walk, as spending and debt have increased during his tenure in office.
I don’t think Newton should be so quick to celebrate their “AAA Bond Rating”.
Moody’s gave Lawrence an A credit rating. I think Moody’s grades on a curve when it comes to municipal bond ratings.
http://valleypatriot.com/moodys-upgrades-lawrence-to-an-a3-rating-with-a-stable-outlook/
I think Bill Heck’s post said everything a fiscal watchdog needs to say about Moody’s giving Newton an AAA Credit Rating at that moment in time:
The single element that overshadows mediocre-to-poor financial management and city debt levels is a high net worth of residents representing a strong ability to pay off bonds. Newton has solid demographics and good housing prices, which outweigh its lackluster management. Think of it like this: Your son or daughter is an unreliable sort, so you co-sign the bank loan or lease. Do you think the bank or landlord cares whether or not your son or daughter timely pays his/her obligation? The hooks are in you, just like with Newton and its taxpayers.
Read more: Newton: Model of financial prudence or reckless spendthrift? | Village 14 City of Newton, Massachusetts http://village14.com/newton-ma/2015/01/newton-model-of-financial-prudence-or-reckless-spendthrift/#ixzz3ch32OJ00
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I just spoke with the analyst at Moody’s that rates and evaluates Newton’s bonds. He was a polite and civil person and we had a polite and civil conversation. Based on the tone and tenor of that conversation, I have to agree with Bill Heck’s observations and I will be write a full column on it.
In addition, considering that the City of Worcester (which is heavily dependent on state aid) has a AA3 Credit Rating, I don’t think that Newton’s credit rating of AAA from Moody’s is impressive.