The news wasn't good for the standing room only crowd packed into the Thornton Wilder Auditorium Thursday night, gathered to hear the options the town is facing to deal with its woefully underfunded pension fund.
The town contracted with the Segal Company to investigate what it can do to shore up the fund that has historically not received the annual contributions needed to keep pace with payouts to retirees. The meeting was the first of what is expected to be a series of meetings to be held before a decision is made as to what steps will be taken.
"Friends, there are no secrets here -- you, the members of the Legislative Council knew more than a year ago when you put your names on the ballot that you would have to grapple with the most significant financial issue this town has faced," said Mayor Scott Jackson
"Maintaining the current course is unsustainable and will lead to financial ruin before the end of the decade," he said. "We are approaching our own fiscal cliff."
Eric Atwater, Consulting Actuary at Segal, said that the fund should total more than $400 million but currently only totals $56 million. To deal with that gap, the town has several choices, he said, including doing nothing, which could lead to state intervention.
Legislative Council president Judi Kozak questioned Atwater about what happened in Waterbury when the state took control of that city. That situation was different in that its problems went beyond just the pension fund, he said, but to deal with it, taxes were increased considerably over a two-year period to bring it back to solvency.
That, Kozak said, is not, in her opinion, an option for Hamden.
Hamden's unfunded liability is about $360 million, Atwater said. Over the last two years alone, the fund was underfunded by about $30 million, he said, and in the past 20 years it was underfunded by $150 million.
Aside from doing nothing, the town has three options, Atwater said -- reduce benefits only, immediately inject cash into the fund through pension obligation bonds or a combination of the two.
Were the town to do nothing, the pension fund would be insolvent in five years, Atwater said. Payments to retirees would then have to be made from the operating budget, and would start at $30 million a year and increase up to $60 million a year, he said.
Reducing benefits, such as reducing or eliminating cost of living increases, would affect only current employees and not retirees, Atwater said, and even doing that, it is not possible to reduce them enough to overcome the fund deficit. The town would still have to contribute about $25 million a year in payments, he said.
When considering pension obligation bonds, they used a figure of $115 million, Atwater said, but since beginning the investigation, changes in state regulations now make the town eligible for between $125 million and $130 million.
But even at those amounts, the town still has to be committed to allocating a sufficient amount each year into the fund, he said, or else risk a state takeover.
"Maintaining a funding discipline is the most important thing you can do -- it has to be a priority," he said. "Otherwise you will have some very difficult decisions to make."
While he did not make a recommendation as to which path the town should take -- that decision must lie with the council, he said -- Atwater laid out the advantages to using a combination of cuts in services, cuts in expenses and debt increase through pension obligation bonds.
"You have to make decisions as to what path you want to go down," he told the council.
After the presentation, the public was given a chance to comment on what was proposed.
"I understand the town renegotiating contracts because they have union representation to do it," said Blue Trail resident Bob Maturo, a retired Hamden police officer and president of the Hamden Guardian Services Retiree Association, which formed in September because of concerns over the pension fund.
"But for retirees, that's not option," he said. "We don’t have an organization to sit down with us."
The retirees are entitled to the benefits spelled out in the contracts they retired under, Maturo said, or the town may have legal problems.
"I'm just a homeowner," said resident Joann Pulisciano, "but I’m very concerned when I hear about city of Waterbury. The minute you hear talk about increasing the mill rate, it's going to decrease property values
"I'm appalled that for all the people in room who work so hard everyday, if the obligation the town made to fund pension, whatever needs to be done should be done," she said. When they retire, "the expectation is to enjoy life and not to have to worry how pay light bill."
"A lot of the information presented this evening not new," said Frank Cooper, who retired from the Parks and Recreation Department after 22 years. "The town of Hamden knew for a significant time that the pension fund has been underfunded for whatever reason and we are at this point now reaching critical mass -- why have we not addressed this issue and now at the eleventh hour we are addressing this issue.
"No one likes to have gun pointed at heads -- it's not fair to anyone," he said. "Why did we not address this earlier when we all knew about it."
Wayne Gilbert, a former Hamden resident and regional director for the United Public Service Employees Union, said he negotiated most of the pension contracts the town employees work under.
"When those plans were negotiated, each expected to be paid in full," he said of the retirees,"and the same is true for current employees -- they made pact with this town, if worked 35, 40 hours a week they could expect certain benefits.
"It's a promise made by town and it’s not fair to them," he said. "This money should have been put in long ago -- people were telling you and others in your position to do that, and had you put in the $8 million a year 15 years ago we wouldn’t be here today."
Editor's Note: We incorrectly identified Bob Maturo as a retired firefighter. He is, in fact, a retired Hamden police officer. We have adjusted the article to make that correction.