Council Approves Bid Waiver for Pension Study

The Segal Group has been working with the town and already "has its feet wet," town officials said.


In six months, town officials should have some options on the table as to how to go about fixing the depleted pension fund that threatens the fiscal health of the town.

The Legislative Council Monday approved a bid waiver for the Segal Company to produce a report including recommendations as to how to proceed with dealing with the fund, which is about $300 million short of where it should be. 

Segal is the firm selected in 2010 to do work on the town's medical self-insurance fund, and some of that work included the pension fund, Chief Administrative Officer Curt Balzano Leng said.

"They have gotten their feet wet with the pension fund," he told the council, adding that there will be no repeat of service from what the firm did two years ago.

The consultants are expected to report back to town officials in about six months with at least four possible scenarios. One of those scenarios is likely to be the use of Pension Obligation Bonds to fill part of the funding hole, but that won't be enough to totally fix the problem.

Other scenarios are likely to include union concessions and fundamental changes to the plan itself to help assure its survival.

"Many of us are concerned not only about the outstanding pension obligation but also having the opportunity to participate actively in whatever decision is made," Councilwoman Kath Schomaker said. "Many of us believe that we have been lax in that, which is part of this dilemma."

Council member Harry Gagliardi said he's concerned that the contract with Segal will come in just below $100,000 -- the threshold at which the requirement for council consent is reached -- so it won't have to come before the council for approval. But then, later, it will be back before the council with a request for more money, he said.

"I'd like to know the price up front" he said.

"We have no intention to squeeze in a $99,000 contract and continue to come back for more," Leng said.

He's also concerned about what he has already heard from Segal, Gagliardi said.

"They have already told us that the only way to fund this is to fund it from day one, which we haven't done," he said. To make up for that would require contributions of about $25 million a year, he said, which could amount to a tax increase of six to eight mills.

"This pension fund needs to be done and go away before the town goes bankrupt," he said.

For the next fiscal year, the budget calls for a $9 million contribution to the pension fund, Leng said. To up that to $25 million would mean an additional five to six mills, he said.

"That is obviously unacceptable," Leng said.

It's not a matter of the town's consultants having screwed up in the past, Leng said.

"They have been saying what we should put in every year," he said, "and the town just hasn't done it."

Pension Obligation Bonds are not a done deal, Leng said, but "are likely to be part of the end game solution."

The report will not be done before the administration begins union contract negotiations, Leng said, but the information will be passed on as it comes in.

"We don't want to wait six months" to start the negotiations, he said, and in general, everyone is aware that it's going to take concessions to get the problem fixed.

Some council members questioned the need for the outside consulting firm when the town has financial professionals on staff.

Segal specializes in pension funding, Leng said, and Mayor Scott Jackson has indicated he wants the best minds working on the problem.

"The mayor said if you're going in for brain surgery, you don't want the cheapest but you want the best," Leng said. 

But Councilwoman Betty Wetmore said the town shouldn't have to spend the estimated $90,000 it's expected to cost for Segal's report.

"I"m concerned about spending $100,000," she said. "We have a great finance department and people working in the administration."

Councilman David Hennigan suggested a dialogue with retirees who are already receiving a pension. Leng said there have been limited talks with that group but the main focus has been on current employees.

"The way I look at it, to solve the problem of the pension fund as to be a united effort," Councilman Tom Rousseau said. "I won't vote for pension obligation bonds without concessions [from the unions] included -- otherwise we are just buying time for a disaster five years down the line."

The unions have already indicated a willingness to cooperate, Leng said.

"All units have expressed a willingness to discuss the medical and pension funds," he said. "They know as well as we do that the town cannot sustain the medical costs and solve the pension problem in one year."

With the bid waiver approved, the council should see a contract by the next meeting cycle at the end of the month, Leng said.

Thomas Alegi June 06, 2012 at 03:28 PM
How much spending has the L/C cut in the past 4 years compared to the average taxpayer? You have people in town that are cutting spending every day to balance their check book and make ends meet, has the L/C done the same? NO! They just keep on spending our tax money. This pension issue is just away for the mayor and the L/C to focus the attention of Hamden residents away from their poor leadership regarding financial matters and put the blame of Hamden’s financial ills on the pension. If these fools holding office would stop spending tax money like it was water for the past 20 years would there be a pension issue? No!
George Levinson June 06, 2012 at 03:47 PM
Arguing about how we got into this situation is not productive. We are where we are and that needs to be resolved. The actuary's "present value" requirement for full funding is about $300 million and the fund is about $250 million short of that number. The $100,000 study will be worthless unless the actuaries determine $100-150 million worth of concessions that the unions are willing to accept. Only then would pension bonding for the balance be acceptable.
Charles Baltayan June 06, 2012 at 04:05 PM
How many government officials does it take to screw in a light bulb? It must be more than one as the Mayor and LC has, for years, known the problem and now the only viable solution is to stop the bleeding and dissolve the plan. Yet, they back door another consultant and will likely make the underhanded changes to the plan to bankrupt the town and continue to rape the taxpayer. Hamden Politics at its absolute worst.... pray for yourselves and your children.
Professive Mom June 06, 2012 at 05:48 PM
if we pay enough for advice, we will have no choice but to have to follow it which, we all know, will be pension bonding plus, then it looks like the nasty medicine doesn't come from the jar ... George Levinson said - 'The $100,000 study will be worthless unless the actuaries determine $100-150 million worth of concessions that the unions are willing to accept.' that may not be the task of the consultant but it does sounds like we have at least one council member making sure we get a spoonful of sugar to help the medicine go down and promising to bond the pension only with concessions. do I hear a second, a third, .. an eighth? Mr. Hennigan? Ms. Shomaker? Mr. Derosa? Mr. Colaiacova? Ms. Wetmore? Mr. Cesare? - who else wants to be in the 'in crowd' - carbon dating not required ;-)
Thomas Alegi June 06, 2012 at 11:55 PM
The mayor and the L/C have to be held responsible for their actions, debating is one way of clearing the smoke and mirrors surrounding Hamden’s financial ills. Also there is no recall vote in Hamden’s Charter, nor can residents of Hamden vote on the town budget or any financial matter directly, so the only thing residents of Hamden can do is debate. Debating how we got into this pension mess is productive, without knowing how we got here, we can’t stop it from happening again, nor can we hold the people responsible for getting us in this pension mess.


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