The Essex Regional Retirement Board posted a 33 percent loss last year, the worst of the 107 retirement systems in Massachusetts.

The board made news last month for allowing dispatchers to retire at age 60 and for pushing legislation to let DPW workers retire at age 55. It's also come under fire for its lobbying and travel expenses. Now its dramatic losses will have further implications for the taxpayers who help fund the system.

"We were very disappointed in the 2008 returns," Chief Operating Officer Lilli Gilligan wrote in an e-mail.

Much of the losses were racked up after the board invested last summer in mortgage-backed securities — the very instrument largely blamed for bringing down the U.S. economy.

Retirement boards across the state posted double-digit losses last year amid the economic meltdown. None, however, saw worse returns than the Essex Regional Retirement Board, which lost 33.05 percent.

By contrast, the state fund lost 29.6 percent in 2008.

Long-term, the trend is similar. The state's 10-year return rate is 4.66 percent, while the Essex board's is 2.19 percent.

All of this is prompting town administrators from some of the 19 towns in the Essex system — which includes Boxford, Hamilton, Ipswich, Manchester-by-the-Sea and Wenham — to meet privately this week to discuss their future involvement with the board.

"The topic in general is our mounting frustration with the retirement board," Manchester Town Administrator Wayne Melville said.

Melville said he favors turning the board's funds over to the state system. He also faulted Executive Director Timothy Bassett for not being more forthcoming about the severity of the system's losses during the board's annual meeting earlier this year.

"He said that everyone lost money and so did the Essex Regional Retirement Board, and that was it," Melville said. "... My frustration is that he wouldn't disclose it."

Melville said he didn't know about the 33 percent loss until a reporter contacted him Friday afternoon.

Taxpayers will have to help make up the difference when the losses are reflected in next year's assessment to local towns.

"Everybody knows what's going to happen when this hits the books in 2010," Melville said. "It's going to be staggering."

Gilligan blamed its core bond manager, OFI Institutional Asset Management.

In theory, the Essex board should have been better protected than the state against a market crash because it allocated 20 percent of its total assets in more conservative bond funds (compared to the 10 percent the state invests), according to Gilligan.

OFI was supposed to invest the board's money in very stable products, such as U.S. Treasuries, Gilligan said.

That apparently did not happen.

"They made a very poor choice last summer when they sold their U.S. Treasuries and invested in mortgage-backed securities," Gilligan wrote in an e-mail.

Mortgage-backed securities — a bundling of individual mortgages that are then repackaged and sold on secondary markets — were a major factor in the economic meltdown when borrowers could no longer pay off their mortgages. The investments then lost value.

Since then, the board has fired OFI, but the damage was already done, Gilligan said.

"If we had not invested with OFI Institutional Asset Management, then our returns in 2008 would have been similar to the (state) returns," Gilligan wrote.

She said the board will call the city of Northampton — which had the best returns of 2008 — to find out which strategies it used.

Melville, however, said it's too late.

"This isn't going to get fixed," he said, "until the general voters and taxpayers in Massachusetts are saying, 'We're fed up and we've had enough.'"