Here’s a press release from Mayor Warren’s office.
NEWTON – Mayor Setti D. Warren has announced that a third party actuary has confirmed the Administration’s funding strategy which will enable the City of Newton to eliminate the City’s Unfunded Pension Liability by the year 2029 and the OPEB (Other Post-Employment Benefits) Liability by the year 2042. The Actuarial Valuation of the City’s OPEB Liabilities for the fiscal year ending June 30, 2015 has been completed and confirms the Administration’s plan is financially sound and sustainable. The valuation by Financial Risk Analysts, LLC, is in keeping with the national standards of practice of the actuarial profession and is in accordance with Governmental Accounting Standards Board Statement 45, (GASB-45).
“From day one of my Administration, we have been laser-focused on developing a strategy for the long-term financial sustainability for the City of Newton,” said Mayor Warren. “Immediately, we set the building blocks for putting the City’s financial house in order: instituting zero-based and outcomes-based budgeting, using data to drive decision-making, establishing a ‘rainy day fund’, and shaving nine years off the funding schedule of the City’s pension liability. And now, the final step toward successful financial stewardship will allow full-funding of the OPEB liability by 2042 using conservative financial assumptions and setting aside a specific amount of money each year.”
Key to this strategy will be the City’s commitment to fully funding its Pension Liability by the year 2029. Last year with the full support of the Warren Administration the Newton Retirement Board voted to implement a funding schedule which will fully fund the Retirement Fund by the year 2029. This funding schedule will require an annual increase of 8.75%.
In 2010, the Warren Administration established an OPEB Liability Trust Fund which was further codified to be an irrevocable, dedicated trust fund as a vehicle to make advance contributions for retiree health care benefits. The Fiscal Year 2016 Budget includes an OPEB appropriation of approximately $1.4 million representing 3.25% of the salaries of more than 760 employees, hired after July 1, 2012. The percentage will continue to increase and as more new employees are hired this funding method will cause this appropriation to grow exponentially. For the next 14 years, this policy will be employed for all municipal workers hired after July 1, 2012, and the policy will continue of “pay as you go” for employees and retirees hired prior to July 1, 2012.
However, all of this will change in the year 2029. With the projected full-funding of the Newton Contributory Retirement Fund, the City will then be able to focus on repurposing pension liability appropriations to the OPEB Trust Fund, creating a viable, sustainable financial model by which to fully fund the City’s retiree costs.
In 2015, the City of Newton once again received an “Aaa – stable” rating from Moody’s Investor Services, (the highest possible rating.) The official statement issued by Moody’s said, in part, “The stable outlook reflects our expectation of a continued improvement to the city’s financial position, conservative forecasting, including five-year operating and capital plans, and adherence to comprehensive financial policies.”
“We are in the process of creating a livable, sustainable city for the 21st century. We have developed a vision and set a course of action that will enable us to meet the needs of the present without compromising the ability of future generations to meet their needs. Much of this could not have been possible without the support of the Honorable Board of Aldermen and the faith and trust that our citizens have put in us,” said Mayor Warren.