Category Archives: Budget matters

CPA update

This summary update on the Community Preservation Act from the state Department of Revenue’s Division of Local Services’ e-newsletter:

CPA: Past, Present and Future
Zack Blake - Director of Technical Assistance

Nearly two years ago, Governor Patrick signed into law a number of changes to the Community Preservation Act (CPA). These amendments expanded the acceptable uses for CPA funds and offered communities more flexibility in how these funds are raised. Reflecting back, we thought we would reintroduce readers to CPA by briefly highlighting some of those changes and ways in which communities are taking advantage of them. We also delve into recent collection trends at the state level that impact the distribution of matching funds.

Enacted in 2000 as MGL c. 44B, the CPA enables adopting cities and towns to raise additional revenue beyond the tax levy for community preservation purposes that include providing community affordable housing, protecting open space, preserving historic resources and developing outdoor recreational opportunities.

Under the CPA an adopting city or town elects to implement up to a three percent surcharge on its real estate tax bills. The revenue is deposited into a special revenue fund along with an annual distribution of matching funds from a state trust derived from a surcharge on Registry of Deed recordings. At a minimum, the city or town must spend or reserve ten percent of its annual CPA revenue towards each of the community preservation purposes of open space, historic resources and community housing. Revenue can also be appropriated to a discretionary budgeted reserve, providing the flexibility to fund any CPA purpose until the end of the fiscal year.

Once the CPA is adopted, the community must establish a Community Preservation Committee (CPC). Whether elected or appointed, CPC members are selected from the community’s conservation, historical, planning, park and housing authority boards. The city or town can also choose up to four additional at-large members for a maximum total of nine. Overall, the committee’s role in administering the program locally involves studying the community’s needs, possibilities and resources as they relate to community preservation; accepting and reviewing project proposals; and making recommendations to the legislative body for spending, citing the reasoning behind each choice. Both an affirmative recommendation of the CPC and a legislative body appropriation vote are required to expend CPA funds on a project.

Throughout the last 14 years, CPA has been amended eight times. Early changes largely clarified various aspects of the law or added minor modifications. More recently, however, Chapter 139 of the Acts of 2012, Sections 69-83, contained several significant changes, including an expansion of the allowable CPA spending purposes and the creation of a new option for local CPA funding.

Before the 2012 amendment, communities could use CPA funding to rehabilitate recreational lands only if the recreational land was acquired or created with CPA funding. Today, however, because of the 2012 amendment, communities have the ability to appropriate funds towards previously prohibited recreational-related projects. In expanding the program, these new CPA funding purposes allow cities and towns to rehab existing outdoor recreational spaces and invest in capital improvements to make them more functional for the intended recreational use, including the replacement of playground equipment. Changes in the law also now credit spending on recreational projects towards meeting the annual ten percent open space spending (or reservation) requirements.

In exploring ways in which these changes are expanding CPA spending, we found funds being appropriated to purchase ADA accessible playground equipment, construct a new skate park, resurface outdoor basketball courts, install lighting for a multipurpose athletic field, rebuild a dock landing and create community gardens.

The second significant change in the law offers communities an alternative funding method to supplement the surcharge on real estate tax bills. A community may now adopt CPA, pursuant to MGL c. 44B, s. 3(b1/2), which allows it to approve at least a one percent surcharge on the levy and to appropriate additional revenues up to two percent of the levy from other general fund sources, such as meal and room occupancy taxes. The total surcharge and additional revenue cannot exceed three percent. To date, Somerville and Salem have adopted the CPA through Section 3(b1/2), sometimes referred to as the “blended” method. Quincy and Littleton recently amended its original CPA acceptance by adopting Section 3(b1/2) so that it can appropriate other local revenue into the Community Preservation Fund. Communities that have already adopted CPA, but wish to appropriate other general fund revenues to CPA as described above, must amend their CPA acceptance under MGL c. 44B, s. 16(a) and seek voter approval at a town-wide referendum.

Lastly, a new provision in the law added an optional surcharge exemption for commercial and industrial properties on the first $100k of property value to mirror the existing exclusion for residential property. To add this exemption, an existing CPA community must follow the CPA amendment process, MGL c. 44B, s. 16(a). The law also now requires that preservation restrictions be recorded as separate instruments regarding property acquired with CPA funds to better protect CPA long-term interests, MGL c. 44B, s. 12.

Future Outlook

As of May 2014, 155 communities have accepted CPA with over a billion dollars appropriated to more than 6,000 projects. It is also worth noting that CPA funds have allowed communities to leverage funds from other outside sources that might not otherwise have been available.

This year also marks a point where a larger number of communities are scheduled to vote on whether to adopt CPA than in the past. Several communities are even seeking to increase their levy surcharge, with at least one looking to reduce it. This renewed interest may be the result of the $25 million infusion of surplus state revenue from the Legislature last year along with the potential for more this year. Another motive could be the recent changes in the law expanding the recreational-related purposes cities and towns can fund.

Ria Knapp, Communications Director for the Community Preservation Coalition, says the combination of these two factors sparked the interest of communities that otherwise might not have considered CPA in the past. She adds that “many communities are embracing the new provision in the CPA legislation allowing the rehabilitation of existing parks, playgrounds, and athletic fields,” with “over $40 million in such projects approved recently, and many more proposals being voted on during this spring’s municipal budget process.”

Despite amendments to the law and renewed interest, local advocates are concerned that this year’s state match could be significantly less. Current Registry of Deed collection trends reported by the Department of Revenue are lagging collections of the previous three years. Concern in the real estate market over high home prices and low inventory levels could also continue to hamper buying over the coming months, creating further uncertainty. The rising number of new communities participating in the program also further dilutes the initial distribution of state matching funds.

CPA Trust Fund Collections as of May 2014
In FY2014, 148 participating communities were eligible for a state match that totaled $54.9 million. Funded through Registry of Deed revenue collections and a one-time infusion of $25 million in state budget surplus, these combined sources allowed for a first round state match of 52.2 percent. Without the additional $25 million appropriation added to the trust fund, cities and towns in the program would have received a first round match of less than 31 percent based on total state funding of $32.7 million.

Although the recent drop in collections at the state level is cause for concern, CPA advocates are applauding the Legislature’s inclusion and the Governor’s signing of the FY2015 budget, which transfers $25 million in state budget surplus to the CPA Trust Fund. Because this additional funding is coming from the state budget surplus, the amount will not be known until the state closes its books on October 31st.


MMA on state budget

The Massachusetts Municipal Association issued the alert below today with its summary analysis of the salient provisions of the state budget that the Governor signed this morning.  The major take away for towns is that their monies are up over $50m. from the Governor’s starting budget in January, and up over last year.

Friday, July 11, 2014


Approves Legislature’s Appropriations on Key Municipal and Education Aid Accounts

At 9:45 this morning, ten days after receiving the $36.5 billion fiscal 2015 state budget from the Legislature, Governor Patrick signed the budget into law, approving approximately $50 million more in overall funding for municipal and school aid accounts than the budget he originally filed in January.

The fiscal 2015 budget increases funding for several key municipal and education aid accounts, including a $25.5 million increase in Unrestricted General Government Aid (UGGA) and a $99.5 million increase in Chapter 70 funding – these are the same funding levels that were announced in the Legislature’s March local aid resolution.

The final budget plan supports full funding for the Special Education Circuit-Breaker Program, using the Legislature’s calculation to arrive at the full funding number of $260.4 million, a $5 million increase over fiscal 2014.  

The budget signed by the Governor includes the Legislature’s recommendation to increase regional school transportation reimbursements by $18.7 million, a 36% boost over the current year, raising the appropriation to $70.25 million.  This is a major victory that will bring the state to 90% of full funding, the highest level in a generation.  The budget also includes $2.24 million for transportation reimbursements for out-of-district vocational students.  This is down slightly from the fiscal 2014 budget, but is a significant improvement over the Administration’s initial budget, which would have eliminated the program.

The final fiscal 2015 budget signed this morning maintains funding for the payments-in-lieu-of-taxes (PILOT) program at the current $26.77 million level, which is $500K higher than the Administration’s original proposal.  

The Governor approved $8.25 million for the Shannon anti-gang grant program, a $1.25 million increase to a program that provides essential funding to help cities and towns respond to and suppress gang-related activities.
The Governor approved funding for the Safe and Supportive Youth Initiative at $4.6 million in fiscal 2015. The program seeks to reduce youth violence through wraparound services for those most likely to be victims or perpetrators of gun violence.

In recent years, the state’s match for the Community Preservation Act has been significantly underfunded.  The fiscal 2014 budget adopted last year included a provision to use end-of-the-year surplus revenues from fiscal 2013 to boost reimbursements by $25 million, breathing new life into the state’s CPA match.  Because of lagging deeds excise collections, this money was added to the CPA program to double the state match, from 26% to about 50%.  A similar step is required again this year, otherwise cities and towns that have adopted the CPA will see a much lower state match in fiscal 2015.

The Governor approved section 242 of the fiscal 2015 state budget, to transfer one-half of the “consolidated net surplus” left over from fiscal 2014, up to $25 million, into the Community Preservation Trust Fund.  This is a very positive development.  However, the state’s final fiscal 2014 surplus level will not be determined until September or October, because it will still take several months before the state’s CPA match is determined.

The Governor signed section 260 of the fiscal 2015 budget to establish equity in calculating net school spending under Chapter 70 by allowing, at local option, all communities to count health insurance costs for retired school employees in fiscal years 2016 and beyond, phased in over 4 years, and allowing DESE to waive penalties in the meantime.  This important MMA-supported provision is needed because the current rule excludes these costs from net school spending in some districts, but allows the costs to count in others.  Communities that have been prohibited from counting retiree health costs in net school spending have been forced to reduce spending municipal services or raise property taxes to make up the difference.

The Legislature’s final budget (in sections 124 and 278) included an MMA-backed provision to re-establish the Foundation Budget Review Commission in order to examine the adequacy of Chapter 70 funding, and the Governor signed these provisions this morning.  The foundation budget school spending standard that guides Chapter 70 funding was first enacted as part of the landmark 1993 education reform law and has largely remained unchanged since that time.  In addition to the need to adjust the foundation budget to reflect the many substantial changes that have occurred in public education over the past 20 years, the current foundation budget structure clearly understates many key education expenses, and does not fully reflect the cost of operating modern school systems, as evidenced by the fact that cities and towns spend $2.1 billion more to run their schools than the amount called for in the foundation budget, and a majority of districts are slated to only receive less-than-adequate minimum aid increases in the future.  This language will provide a much-needed review of the foundation budget framework, and includes municipal representation in the process.   
The final fiscal 2015 state budget plan underfunds the charter school reimbursement program and the McKinney-Vento homeless student transportation mandate.  The charter school reimbursement program will be fully funded in fiscal 2014, thanks to the recent $27.6 million supplemental budget that the Legislature passed several weeks ago.  However, the fiscal 2015 budget would provide only $80 million, which will create a $33 million shortfall that must be addressed in the very near future.  In addition, the final budget provides only $7.4 million for the McKinney-Vento requirement to transport homeless students back to their most recent school district, which is $7.5 million below the amount needed to fully fund this state mandate.  The MMA will continue to prioritize these programs and call for full funding this year in all supplemental budget proposals.

As expected, the Governor approved sections 76 and 77 of the fiscal 2015 budget to extend the existing 3-year freeze on changing retiree health insurance contribution percentages by an additional 2 years, until July 1, 2016, for those communities that made plan design changes or joined the GIC under the 2011 municipal health reform law.  

Before today, any city or town that used sections 22 or 23 of Chapter 32B (the 2011 municipal health insurance reform law) to implement plan design changes or join the GIC was prohibited from changing retiree health insurance contribution percentages until July 1, 2014.  Sections 76 and 77 of the fiscal 2015 budget would unilaterally extend that freeze for two more years, until July 1, 2016, for any municipality that adopted or is planning on adopting provisions of the 2011 municipal health insurance reform.  Under this change, any community that has used or plans on using Chapter 32B to make plan design updates or join the GIC would be prohibited from changing retiree contribution percentages for two more years unless the municipality voted to change the contribution rate prior to May 1, 2014.  The provisions signed by the Governor would delay the ability of up to 70 communities to take action on retiree contribution percentages.

The Governor approved increases in the thresholds for the use of competitive sealed bidding in the municipal procurement of good and services from $25,000 to $35,000 (in sections 61-66).  Below this threshold, cities and towns are required to solicit three written or oral quotes, or use sound business practices for the smallest procurements of less than $10,000.  It is important to make regular adjustments to the specific dollar amounts listed in state statute to keep pace with inflation, and help cities and towns save time and money for small procurements.

BoS goals (draft)

The selectmen annually designate their goals, and to that end about a month ago the three selectmen each individually penned his goals for our board for the next year.  Richard DeSorgher then took the three versions and combined them into this composite.

Draft Board of Selectmen Goals for 2014-2105

I. Communications

  1. Promote and encourage a collegial and supportive atmosphere for all volunteer committees and boards, ensure that their voices are heard and their work recognized. Promote and encourage supportive atmospheres with the Board of Selectmen and our Town Administrator, Superintendent of Schools and all department heads and employees
  2. Implement a push system to get residents town government information
  3. Improve the town’s web site


II. Planning

  1. Develop a town master plan, and review and/or expand what was called for in the Vision and Action Plan for the Downtown, adopted in 2006 by the Downtown Study Committee
  2. Work with the Town Administrator and Assistant Town Administrator to look at the future make-up of the management staff of the town
  3. get a five-year plan from department heads and committees
  4. Implement an affordable housing plan
  5. Get by-laws concerning future development of the former Medfield State Hospital
  6. Adopt Green Community Act
  7. Install solar PV sites, issue RFP’s to buy solar power and look at ways to develop power purchase agreements for PV power
  8. Work with the Solid Waste Committee to explore ways to increase recycling rates


III. Medfield State Hospital

  1. Continue to provide direction and leadership as the town and the re-development committee move forward with the clean-up and redevelopment of the former Medfield State Hospital.


IV.  Finances

  1. create a business office for the town
  2. Support the annual budget process and implement a three-year financial forecast
  3. Implement property tax relief for senior citizens
  4. Explore financial saving potential and pro and cons of ways to increase additional revenue including adopting the Community Preservation Act, selling town water and encouraging the Economic Development Committee to work towards bringing clean industry, business and housing (Old Medfield Square example)to the town, including development of Lot #3/Hinkley Lot off Ice House Road.
  5. Complete union contract negotiations before contracts expire and analyze all overtime expenditures.


V. Downtown

  1. Work to develop a robust, business-friendly and pedestrian-friendly downtown
  2. Meet with and review all boards overseeing downtown development and analyze and combine if necessary similar committees.
  3. Explore with the Planning Board the formation of a Design and Review Committee.
  4. Work with the Chief of Police on traffic and parking issues concerning
    1. Traffic and lights along RT 109 and RT 27 (RT 27 at both RT 109 and at South Street)
    2. Sidewalk expansion
    3. Upham Road
    4. Potential future parking sites


VI. Support for the new public safety building, through, hearings and town meeting action until final completion

Cheshire, CT pensions move to 401k

This is an article from -

Arbitration Decision Delays Cheshire Pension Move to 401k


What Happened?
The Cheshire Town Council in Connecticut recently ruled on a pension dispute that created a divide between local unions and officials. The tension arising from the decision is representative of conflicts seen nationwide as cities try to reform failing pension systems.

The Town Council’s arbitration panel ruled in favor of the city’s local patrolman union concerning a defined pension benefits debate. The decision prohibits Cheshire officials from ending enrollment of new police officers in the department’s defined benefit pension plan until the end of the year. The maximum pension benefit as a percentage of final average compensation for members was also increased to 72 percent up from 68 percent.

The decision angered local officials who felt it stopped the local government from doing what is necessary to curb increasing pension liabilities that directly impact taxpayer dollars.

The town council originally tried to end enrollment in the defined benefits pension plan of new police hires in July 2013. The ruling moved the enforcement date back to January 1, 2014. From July of 2013 and January 2014, the Cheshire police department brought on eight new officers, half of which will be covered under the old defined benefits plan. The police union was the last union in Cheshire to remain on the old defined benefits plan after all public employee unions were moved to a municipal employees’ 401(k)-type investment account a few years ago. Prolonged negotiations between police union and council members delayed the transition, which forced the arbitration panel to step in.

Fresh Blood
Because pension problems and reform efforts nationwide are resulting in negotiations and disputes similar to those in Cheshire, many governments are bringing in new investment professionals to make better decisions and support a more sustainable pension system in the future.

New York City’s $150 billion pension system recently hired a new chief investment officer to offer guidance to 58 pension trustees. The role of the chief investment officer is becoming increasingly complex as pension reforms are altering how benefits will be delivered to public employees in retirement, The New York Times reported.

The investment advisor will work with trustees of five funds, each operating as unique entities with their own board and voting structure. Previous efforts to consolidate the five pension boards for more efficient operations failed to reach fruition. Luckily, the city has passed several measures to increase investment performance and stability, and the new investment advisor will continue to push for more reforms.

In Detroit, proposed cuts to pension benefits are facing weekly protests. The state-appointed emergency manager is calling for:

  • 4.5 percent cut in pensions
  • Elimination of the 2 percent yearly cost-of-living adjustment for the next 10 years for nonuniformed retirees
  • Recovering interest payments from the pension fund on annuities of retirees
  • Full payment for police and firefighters

The proposed cuts will be voted on by Detroit public retirees.

Pension Troubles
EfficientGov has monitored the debates between governments and public employee unions as necessary reforms are negotiated at the local levels.

My goals for selectmen

The three selectmen each drew up his goals for our board for the upcoming year.  These were mine,originally drawn up in mid-May and updated with he addition of #5 two weeks ago:

Goals: Selectmen
Osler L. Peterson
June 13, 2014

I.  Communication
1.    Implement a push system to get residents town government information
2.    Improve the town’s web site.

II.  Medfield State Hospital
3.    Lead  the re-development process

III.  Planning
4.    Develop a town master plan
5.    Arrange for a consultant to do a town government wide review and analysis of current functioning and to make suggestions for changes
6.    Get five year plans from department heads and committees
7.    Implement an affordable housing plan
8.    Get by-laws concerning future development at the former Medfield State Hospital.
9.    Adopt Green Community Act
10.    Install solar PV sites and issue RFP’s to buy solar power
11.    increase recycling rates

IV.  Finances
12.    Create a business office for the town
13.    Implement a three-year financial forecast
14.    Implement property tax relief for senior citizens
15.    Examine opportunities for additional revenue streams, such as:
a.    Housing can be the “business” of Medfield (e.g. – Old Medfield Square)
b.    Power purchase agreements for PV power
c.    Selling Medfield bottled water
16.    Complete union contract negotiations before contracts expire
17.    Analyze overtime

Medfield budget online

I signed up for a webinar in two weeks on putting the town’s budget online.  This outfit would cost the town $7,000/year to do it.  Then everything is easily available  and everyone gets access.

OpenGov | 650.422.3642
Mountain View | Boulder @OpenGovInc
June 18, 2014 (3:50pm)

1.    Cost is based on size of town’s annual budget =
a.    Under $100m cost $7,000/year
b.    Below $50m is $4900/year

This was the email from OpenGov -


Thank you for your time today, good speaking with you. Here is some additional information on OpenGov for your consideration. Enjoy the webinar, and I’ll follow up after for your feedback.

Over 100 local governments are using OpenGov to instantly access their financial information in beautiful, interactive charts and tables.

OpenGov is an affordable, web-based service that provides instant access to your financial and budget information with beautiful, interactive charts and tables.

Please have a look at New Haven’s new OpenGov site:

New Haven CT:

Local governments across the country use OpenGov for:

Financial Reporting – Communicate financial information more quickly and effectively. Instantly view and export charts and tables customized to your Chart of Accounts. 

Business Intelligence – Visualize trends and gain new insights that you can’t get from a spreadsheet or PDF. Bring your financial data to life!

Transparency – Give citizens self-service access to interactive financials and proposed budgets for a more informed, productive dialog.

OpenGov is easy to set up – there’s no installation and no integration.

Owen Silver


The Division of Local Services’ e-newsletter today has an excellent article on how Needham is dealing with its Other Post Employment Benefits (OPEB) liability.  OPEB is mainly future health insurance costs for town employees, in their retirement.  Medfield’s OPEB liability has been estimated by our actuaries at about $40 m.  The town started to fund the liability in the past two years, but still at a level way below the estimated $1.5 m. per year that Medfield’s OPEB liability grows each year, so we are continuing to fall behind and our OPEB liability continues to get larger.  The state has a study committee looking into solutions, but none that have been mentioned get around the need to pay what has already been incurred.

Best Practice: How is Needham Addressing OPEB?
Rick Kingsley – Municipal Data Management and Technical Assistance Bureau Chief

With many local officials struggling to understand and plan for looming liabilities related to Other Post-Employment Benefits (OPEB), we thought it would be beneficial to explore the approach that the Town of Needham has taken to address these future obligations. A community that fails to act on its OPEB liabilities runs the risk that future health insurance expenses will become so large that they eventually overwhelm other budget priorities and have a detrimental impact on municipal services.


For those that may not be familiar with this topic, other post-employment benefits refer to benefits other than pensions that employees receive after they retire. By far, the most significant of these is health insurance, but may also include life insurance, dental or other benefits paid after an employee’s retirement. In 2004, the Governmental Accounting Standards Board (GASB) issued directives concerning how these liabilities must be presented in a municipality’s financial statements going forward (Pronouncements 43 and 45).

Similar to an employee’s pension benefits, OPEB are earned during the employee’s active working career, but are not actually paid until after the employee retires. GASB directed that these future costs no longer be accounted for on a pay-as-you-go basis, but rather these liabilities must be recognized as they are earned or accrued. In other words, employees earn the right to receive health insurance and other benefits upon retirement incrementally over their active working career. Therefore, on an accrual basis, the annual cost of an employee’s health insurance includes both the municipal share of the actual premium paid on the employe’s behalf plus a portion of the projected post-retirement benefit earned in the current accounting period.

These projections are done by actuaries who look at several variables to estimate these future costs. These variables include a projected rate of inflation for future medical costs, assumptions about employee turnover, age at retirement, Medicare eligibility, election rates for various plans at retirement, and mortality. Factored in as well are the respective cost sharing agreements for splitting benefit costs between the municipality and retirees. To attribute these future costs to current accounting periods, it is necessary to calculate a present value of these future benefits using a discount rate. As we will discuss later, the discount rate has a tremendous impact on the calculation of OPEB liabilities.

The important estimates that emerge from an actuarial analysis include the total present value of future OPEB benefits and the required contribution that must be appropriated annually to address this liability over multiple years. The projected cost of future benefits discounted to a present value is referred to as the Actuarial Accrued Liability (AAL). This amount is then attributed to the current and prior fiscal years based on when these benefits were earned. The amount of the AAL is reduced in cases where there are OPEB reserves set aside. The Annual Required Contribution (ARC) is the portion of projected benefits earned in or attributable to the current fiscal year (normal cost), plus an additional amount necessary to amortize the unfunded actuarial accrued liability for prior years. The amortization period cannot be more than 30 years.

Needham’s Experience

Well before the formal issuance of GASB’s OPEB pronouncements, Needham was among the first municipalities in the state to recognize the need to take action regarding OPEB liabilities. In January of 2002, the Legislature approved the Town’s special act to establish a post retirement insurance liability trust fund. The act was modeled after similar legislation that had been approved earlier for Bedford.

An initial appropriation of $380,000 was achieved through savings that arose in the contributory pension appropriation and a favorable actuarial analysis of the retirement system. An additional $380,000 was appropriated to the trust fund in each subsequent year from FY2002 through FY2007. In FY2005, when the town converted its health insurance coverage to the West Suburban Health Group, it saved more than $1 million. Half of the savings ($500,000) were also appropriated to the trust fund.

By 2007, with a modest amount set aside in the trust, the Town reviewed its pay-as -you-go retiree health insurance appropriation in relation to its Annual Required Contribution. It found that with the retiree health insurance appropriation, plus the annual set aside of $380,000, that the town was only about $120,000 away from appropriating its full ARC. The important message here is that retiree health costs can be paid as part of the annual appropriation of the ARC with the difference between the ARC and retiree health costs reserved in the trust for future liabilities.

Through a second special act approved by the Legislature in 2008, the Town amended the investment standard for assets in the trust from investments that are legal for savings banks to the more flexible prudent investor standard. This change opened the door to more lucrative investment opportunities and put the fund on equal footing with the investments allowed for a pension fund. It also made it far more likely that the town could achieve its targeted rate of return on these investments of eight percent.

As noted earlier, the discount rate used to calculate the present value of future OPEB costs plays a significant role in the size of the liability. For communities contributing their full ARC, GASB allows a discount rate of eight percent based on the estimated long-term yield on plan investments needed to pay future benefits. For plans that are pay-as-you-go and not funded at all, a discount rate of four percent or less is required, reflective of the much lower rate of return on general assets. For partially funded plans, a blended discount rate can be used.

To illustrate the importance of this discount/investment rate in these actuarial calculations, Needham’s unfunded actuarial accrued liability as of July 1, 2007 was $76.4 million using a four percent discount rate and it dropped to $43.6 million with the use of an eight percent discount rate.

Investing with PRIT

With the adoption of the prudent investor standard, Needham began analyzing its options for investments and investment advisory services. For many years, the Town’s pension assets had been invested with state pension assets in the Pension Reserves Investment Trust (PRIT). Through this long-standing relationship, Town officials were aware that the PRIT fund had an average annual rate of return of more than 9.6 percent since its inception in 1985.  At the time, however, there was no legal mechanism to combine the Town’s OPEB funds with its pension assets or otherwise invest these funds with PRIT, so the Town was forced to invest its OPEB trust on its own.

With the approval of Outside Sections 50 and 57 of the FY2012 state budget (Chapter 68 of the Acts of 2011), cities, towns, districts, counties and municipal lighting plants were authorized to invest their OPEB trusts with PRIT. To do so, entities must accept MGL c.32B, s.20 to establish a trust fund and seek approval from the Board of Trustees of the state’s Health Care Security Trust (HCST) to invest in the State Retiree Benefits Trust Fund (SRBTF, MGL c.32A, s.24). The SRBTF is invested in the PRIT Fund’s General Allocation Account (GAA), also known as the PRIT Core Fund. This fund contains about $58 billion in state and local pension assets, as well as the state’s OPEB assets. For communities like Needham with existing OPEB trusts authorized by special act, similar permission to invest in PRIT was contained in an amendment to MGL c.32A, s.24.

To receive approval from the HCST Board to invest in PRIT requires that a municipality submit several documents as part of the application process. This documentation includes evidence of adoption of MGL c.32B, s.20 or special legislation, acknowledgement of investment risk and an investment agreement and a designation of a custodian. The custodian can be either the municipal treasurer or the HCST. If the treasurer is to be the custodian, the SRBTF should be identified as an authorized investment vehicle for the treasurer. Lastly, the Board requires indication of the commitment to fund these liabilities. The Board has set a minimum initial investment requirement of $250,000 and a non-binding goal for qualified governmental entities to reach $1,000,000 over three years.

Earlier this fiscal year, Needham liquidated its OPEB investments and transferred the resulting cash balance to PRIT. The town now has about $15 million in assets invested with PRIT, or roughly 20 percent of the total municipal OPEB assets invested with PRIT.  Needham officials identified several factors that influenced their decision:

  • The Town’s longstanding, successful relationship with PRIT to invest the Town’s pension assets provided a comfort level with moving OPEB funds to PRIT.
  • Investing with PRIT eliminated the need for Needham to procure investment management services through the MGL c.30B procurement process.
  • The PRIT fund is one of the best performing state pension funds in the country and serves as an excellent vehicle for attaining the town’s targeted rate of return on OPEB investments.
  • Professional investment management is provided at a lower cost due to economies of scale than the Town of Needham would have realized by going out on its own for the services.
  • A highly diversified portfolio that makes use of investment vehicles not available to smaller investors (e.g., private equity, direct hedge funds, timber, and private real estate).
  • PRIT understands the investments that are legal in MA where an outside investment advisor might not be aware of various prohibited investments.


Needham’s experience provides several important takeaways for other cities and towns that might not be as far along with OPEB. Although GASB has not mandated a funding requirement for OPEB liabilities, it is important for municipalities to start saving for these costs as soon as possible. Through the adoption of MGL c.32B, s.20, a community can establish an OPEB trust, use the prudent investor rule for trust assets and invest these funds with PRIT. Even if your community is not in the position to contribute the full ARC each year, modest and manageable contributions are better than nothing. Strategies to set aside one-time revenues, appropriation balances or other windfalls and appropriate them to the trust as available or identifying an appropriate recurring revenue stream can make a significant difference.

Once funding sources have been identified, it is important that these assets are invested with a long-term outlook similar to pension assets. A simple, low cost way to meet these long-term funding needs is to apply for authorization to invest these funds in the state?s PRIT fund. The tremendous diversification of investments, the annual performance of this fund over time for pension assets and the similarities between the long-term investment horizons for pension and OPEB liabilities make the PRIT fund an excellent vehicle for the investment of OPEB trusts. For additional information about PRIT, please contact Senior Client Services Officer Paul Todisco at 617-946-8423 or

Needham Town Manager Kate Fitzpatrick, Assistant Town Manager/Finance Director David Davison and Treasurer/Collector Evelyn Poness contributed to this article.

MSBA pays 40% of Wheelock boiler

The Superintendent, his management team, and the School Committee got the Mass School Building Authority (MSBA) to pay for 40% of the needed new boiler at Wheelock School.  Congratulations and thank you to them!  This was the email this afternoon from Jeff -


Dear Pete,

I wanted to let you know that I have just returned from the Mass School Building Authority (MSBA) board meeting in Boston and they voted to approve our boiler replacement project for the Wheelock School. This project will replace the 45 year old boilers currently in use at the Wheelock School.  As you may remember, I went before the Board of Selectmen in February to ask for your support to apply for this grant program. The School Committee also voted to support this project on January 27,2014. This is an exciting opportunity for us as the MSBA will reimburse the Town of Medfield 40% of the project cost; saving the citizens of Medfield thousands of dollars in capital costs. MSBA will be sending along a project timeline that will outline key dates for the project, including when funds need to be allocated. In addition, the School Committee and I did not submit an application for a new Dale St. School during this round of grants as we believed it would negatively impact the other building project priorities in town. Lastly, I think its important for the Selectmen and you to know that Mike Sullivan was a great help during the Statement of Interest (SOI) process and gave the application his full support.
On behalf of the School Committee, the students and staff of Medfield, I want to thank the entire Board of Selectmen for their continued support.

Jeffrey J. Marsden, Ed.D

Medfield Public Schools

Follow me on Twitter @JeffreyJMarsden

State aid

This chart shows how Medfield’s state aid figures have progressed over last year, and then with respect to first the Governor’s proposed budget, then the House budget, and now the Senate’s budget.  The Governor had us down $1,000 compared to last year, while the House has us up $34,000 and the Senate up $40,000.

FY2015 Local Aid Estimates
FY2014 Cherry Sheet Estimate
FY2015 Governor’s Budget Proposal
FY2015 House Budget Proposal
FY2015 Senate Budget Proposal
FY2015 Conference Committee
Chapter 70
School Transportation
Charter Tuition Reimbursement
Smart Growth School Reimbursement
Offset Receipts:
School Lunch
School Choice Receiving Tuition
Sub-total, All Education Items:
General Government:
Unrestricted Gen Gov’t Aid
Local Sh of Racing Taxes
Regional Public Libraries
Urban Revitalization
Veterans Benefits
State Owned Land
Exemp: VBS and Elderly
Offset Receipts:
Public Libraries
Sub-Total, All General Government
Total Estimated Receipts


This from John Nunnari, Medfield’s eyes on the state legislature -

COALITION SEES OPENING FOR SCHOOL FUNDING REVIEW PANEL: The House this year agreed in its budget to establish a commission to examine the allocation of education aid from the state, which supplements local property tax revenues to provide the basis of K-12 education financing.  The decision has raised the hopes of local officials who claim a review of the state’s Chapter 70 formula is long overdue since its current roots date back to the 1993 education reform law and much has changed since then.   “The equity of the formula and the ability of a non-expert to understand it have often been called into question,” the Suburban Coalition, a statewide group of local elected officials that advocates on education issues, wrote in an email circulated Tuesday morning.    Coalition vice president Dorothy Presser said the Senate has several times voted to establish a Foundation Budget Review Commission but the House has never agreed to it, until this year.   Ahead of Wednesday’s launch of Senate budget deliberations, coalition officials are urging senators to support a commission amendment sponsored by Education Committee Co-chair Sen. Sonia Chang-Diaz of Jamaica Plain.  “A formula that accurately reflects the cost of education and that is equitable and understandable would be a great step forward for our communities,” Presser wrote in her email.    The Chang-Diaz amendment has 21 cosponsors so its passage appears assured.  Under her plan, the Education Committee co-chairs would co-chair the commission, which would also include top state education officials and others, and the panel would be charged with making recommendations and a final report by June 15, 2015


John Nunnari, Assoc AIA
Executive Director, AIA MA