Andover’s Revenue and Expenditure Task Force was established three years ago to review the town’s long-range financial planning. This year its primary focus has been to review the town manager’s proposal for reducing the largest financial hurdle we face — our unfunded pension liability.
I urge your readers to attend Town Meeting on June 5 and vote in favor of Article 7, the Pension Obligation Bond.
The task force chose this issue because of the size of our unfunded deficit ($172 million, or only 49% of the amount needed), the concern that our obligation to current and future retirees must soon be met, and the considerable savings the town would realize over the period of the proposed borrowing.
State law requires that Andover’s pension plan must be “in balance” by 2040 — now just 19 years away. Under the current funding schedule, the town’s annual pension contribution would have to increase from about $12 million per year to over $43 million per year to meet our target — an unsustainable goal that would undoubtedly put our public services at risk and generate significantly higher taxes in the future.
We need to fix this situation and we need to do it now.
The Pension Obligation Bond, part of the town manager’s Integrated Financing Plan, will also us to fully fund our pension obligation at a time when borrowing rates have never been more favorable.
We recognize that this strategy isn’t risk free; however, a new investment committee being established by the town will be extremely helpful in monitoring this investment, and the Retirement Board’s recently adopted reforms will reduce the future rate of growth.
At the end of the day, issuing this bond is the least expensive option for fully funding our required pension obligation without loss of services. The plan as developed by the town manager is conservative, responsible and has been fully vetted.
We can no longer “kick the can down the road” waiting for a more perfect solution. The task force feels strongly that this approach is a viable solution to address this structural deficit. I strongly urge your readers to join me in supporting Article 7.
Chairman, Revenue and Expenditure Task Force