EagleTribune.com, North Andover, MA

September 11, 2013

Fiorentini, board debate pension hike proposal

Council to debate measure one more time before voting

By Shawn Regan
sregan@eagletribune.com

---- — HAVERHILL — Mayor James Fiorentini and members of the Haverhill Retirement Board debated to a standstill at last night’s City Council meeting over the board’s proposal to increase pension payments to city retirees.

The board, on a split 3-2 vote, recently passed a measure that would increase for retirees the maximum base amount on which annual 3 percent cost-of-living pay increases would apply for pension payments. The board wants to increase the base amount, which is currently $12,000, by $1,000 per year for each of the next three years, capping at $15,000 in 2016.

City Council must approve the increase before it can go into effect.

Fiorentini said the proposal would cost the city $170,000 next year, almost $500,000 in the third year and $12 million by 2033. He said it would also increase the retirement system’s unfunded liability, which is already $163 million, by another $5 million.

The city pays its pension liability through the annual budget, and the mayor said increasing those payments could jeopardize the city’s bond rating, which determines how much interest it pays on loans.

“This proposal seems innocuous, but it isn’t,” said Fiorentini, who vetoed a similar measure two years ago after it was passed by the council. “We simply can’t afford it at this time. ...This raise might help our current retirees, but it could hurt our future retirees, also known as our city employees.”

Retirement Board member Lewis Poore, a retired Haverhill firefighter, said the mayor’s presentation was guesswork based on new actuarial figures the city obtained a few hours before last night’s meeting.

“The mayor’s numbers aren’t real,” Poore told councilors.

Due to the newness of the information presented and the dispute over its impact on the proposal, councilors agreed to send the proposal to a study committee before voting. Councilors said they will hold a meeting later this month to hear from both sides and the public.

Poore also disputed Fiorentini’s opinion that the retirement board would not hit its projection that it will generate 8 percent returns on its investments over the next 20 years. Poore said the board has experienced a 10.15 percent return on investments over the prior 20 years and 8.3 percent over the last decade.

One of the main reasons the board is advocating for the increased payments to pensioners, Poore said, is that the city recently made changes to retirees’ health insurance that has lead to increased premiums and out-of-pocket expenses for pensioners.

“Four hundred retirees are getting 70 percent increases in their health care next year,” Poore said. “That’s why we brought this forward.”

Information provided by the retirement board shows the median pension for city retirees is $16,600.

Fiorentini said the city pays about $15 million into the retirement system each year and that the subsidy is projected to increase to $32 million by 2033.

“Pensions are a huge cost for us,” the mayor told councilors. “Our liability is going to go up no matter what you do. But if you approve this, it’s going to be even worse.”

There are 1,067 retirees in the Haverhill system and 894 current city workers paying into it. Haverhill is one of only two communities in Massachusetts with more retirees that workers, mainly because of retirees from the former city-owned Hale Hospital that closed in 2001.

Councilor Mayor Ellen Daly O’Brien, a nurse who worked at the hospital, said many of her friends and former colleagues contacted her and asked her to support the pension increase.

“These retirees are mostly women who don’t get social security and rely on their retirement to live,” she said. “I know many of them and I know how hard they worked for the city and how dedicated they were. I want to advocate for them, but it’s a difficult decision based on the figures the mayor has presented.”

Councilor John Michitson said the council wants to be fair to retirees, but must be mindful of the city’s financial problems and budget needs.

“Our unfunded liability is a tough nut to crack,” Michitson said. “Even without this increase, there’s no guarantee we can crack it.”

Michitson told the mayor he wants to see more data on city finances and a five-year budget projection before he votes on the retirement board’s proposal.