Chatham Selectmen Seek Funding Mechanisms for Retiree Benefits

Chatham Selectmen Cory Metters and Jeffrey Dykens

CHATHAM – Selectmen in Chatham are discussing possible ideas to increase revenue to cover the town’s post-employment benefit liability obligation, or OPEB, which is currently more than $16 million.

The benefits include health and dental insurance for retired municipal employees. The town is obligated to fund 50 percent of the contribution. It does not include pensions, which employees contributed to themselves.

Currently the town sets aside $150,000 a year towards the liability. At that rate it would take over 100 years to meet its total unfunded liability.

Selectmen are seeking to have OPEB fully funded in 10 or 15 years.

One idea would be to extend the land bank surcharge which is set to expire in 2020 and reducing the tax from 3 percent down to 1.5 percent or less. The fund would be dedicated to OPEB.

“I think it is very sensible way to go about this,” said Jeffrey Dykens, a Chatham Selectman.

“From a taxpayers perspective it is relatively tax free. As much as we’d all like a 3 percent reduction this would be, if it was at 1.5 percent, a 1.5 percent reduction,” he said.

Town Finance Director Alix Heilala said the surcharge, if set at 1 or 1.5 percent, could generate almost $ 6 million in about 10 years.

A second option would be to institute a 0.5 percent real estate transfer tax, which would draw the ire of the real estate industry.

Heilala suggested not taxing the first $425,000 of each sale or property being transferred between family members.

“I think it’s creative and I think it is one worthy of further pursuit,” Dykens said.

Selectmen Corey Metters also supports the land bank reallocation and is warming up to the real estate transfer tax.

“I’d like to get some general public comments on that,” Metters said. “I’m sure there are a lot more details that we didn’t think of.”

Both proposals, which are likely to cause backlash from the community, would require approval by Town Meeting voters and the legislature.

“If we are going to get there and we are really going to build up a corpus or principal in a trust fund then we need to put a few bucks in there,” Dykens said. “And $150,000 a year from the overlay surplus just isn’t going to get us there fast enough, I don’t think, for what we’d like to do.”

The town adopted the OPEB trust fund in 2012 by a vote at Town Meeting. The trust segregated the funds as a dedicated funding source. The balance of the fund as of December 31, 2017 was just over $800,000.

“We’re in a good position that we have so many options that we could tackle this in a reasonably short time,” Metters said. “Ten years or less for such a huge obligation, I think, could be amazing if we could get this done.”


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