Pension Transfers Nixed, Again

For the second time in two weeks, the Hamden Legislative Council voted down a $2.1 million package of transfers from funding allocated for the town’s pension fund.

The transfers failed 6 – 6, many of the no votes the same as at the last meeting, the yeses grumbling and holding their noses as they voted in favor of a transfer most said they did not like.

“I’m reluctantly going to vote for this even though I don’t want to because we have to pay our bills,” said At-Large Rep. Betty Wetmore, who added that she was ​“very unhappy about it.”

The package would have used $2,096,370 originally budgeted for the pension to pay for other expenses that have gone over budget: $150,000 for professional/technical services, $100,000 for natural gas, $101,000 for water, $150,000 for electricity, $183,500 for street lighting, $225,000 for police overtime, $25,000 for police extra duty, $515,500 for public works tipping fees, $250,000 for the state’s CMERS pension plan, $150,000 for town attorney’s office expenses, and $396,370 for workers’ compensation.

The council did pass the $150,000 transfer for attorney’s office expenses.

“This line is going to be a problem if we don’t fund it,” said District 9 Rep. Brad Macdowall. ​“These are not bills that can just have shutoff notices for six months.”

The other transfers, however, will have to wait further. For months now, the town has been receiving shutoff notices from several utilities because it has not paid its bills.

Deputy Finance Director Rick Galarza said that the town is not in any danger of having services shut off because he has negotiated extensions.

“It’s government. They know they’re going to get paid,” he said of the utilities.

Director of Public Works Craig Cesare said his department will be fine until June. At that point, he said, the lack of funds will become a problem. The next council meeting is scheduled for June 3.

Multiple Tries Failed

Mayor Curt Leng’s administration originally submitted a $2.1 million transfer package in March. When council members asked for more information on the package, and whether it would be the last of the fiscal year, it did not go anywhere. With funds beginning to dwindle in utility accounts and the fire department, the administration submitted a stopgap transfer package of $300,000 in mid-April. Only the fire department transfer passed. 

The administration then tried again with a $2.5 million package on May 6. Again, only a transfer for the fire department passed.

On Monday, the package passed the Finance Committee, which it did not when it came before the council on May 6. At-Large Rep. Lauren Garrett voted yes in committee so that the package could come before the whole council, at which point she voted no, helping to fail it.

“I appreciate the Council’s Finance Committee approval of the transfer and am hopeful that when the full council is at the table, the transfer gets approved and we can continue the business of the people, like we should be,” wrote Leng in a statement.

Three council members were absent on Monday — John DeRosa, Berita Rowe-Lewis, and Michael Colaiacovo.

The six council members who voted against the transfers — Cory O’Brien, Lauren Garrett, Justin Farmer, Brad Macdowall, Harry Gagliardi, and Athena Gary — have been very outspoken in the last few months about their opposition to transfers that will require underfunding the pension. 

O’Brien said that he has said since the beginning of the fiscal year that he would not support transfers from funds allocated for the pension. He said he hoped the administration would implement cost saving measures to prevent budget overages, and that if need be, it would find other ways of covering them if they occurred.

Pension Background

After decades of underfunding its pension, Hamden finally took out a $125 million pension obligation bond in 2014 to cover its pension expenses. The bond required that the town ramp up its pension payments until it reached the actuarially required contribution (ARC), the amount the state says the town needs to pay into the fund each year to be on track to full funding.

The town was supposed to reach 80 percent of its ARC payment in the 2017 – 2018 fiscal year. But when the state shorted the town around $5 million in municipal aid, it changed the statute to allow Hamden to pay only 55 percent, pushing back the ramp up period. The town paid $12,650,000.

In the 2018 – 2019 fiscal year, the council passed a budget that funded the pension at 100 percent of ARC, even though the state required only 70 percent. So far, the town has met the state’s requirement, paying around $16 million of the $22.6 million budgeted.

“I understand why the Council would like to put more than is required into the Pension Fund, so would I, but this isn’t the year to do it,” wrote Leng. ​“Just like a household might want to make an extra mortgage payment in order to pay off their mortgage faster (a great financial practice if you can afford it), if it means that you can’t pay your heating bill that year then you make adjustments and make sure you cover all your essential payments properly before putting down that extra payment.”

For many of the council members who voted against the transfer, however, the difference between 70 percent funding and 100 percent funding is not ​“extra.” When they passed the budget, Majority Leader Cory O’Brien, District 5 Rep. Justin Farmer, and others have said they were committing to paying 100 percent of ARC.

Farmer said it is frustrating that the council had voted to raise taxes in order to fund the pension, and now must go back on that commitment.

O’Brien has repeatedly said that underfunding the pension is a form of borrowing money, because it just pushes off payments that will have to come in the future.

“It’s just further indebting the town,” he said on Monday.

Hamden is now on the state’s CMERS pension plan, so the town’s plan no longer has new hires added to it, but the town has a long way to go before it has fully funded the old plan. According to a report compiled by Segal Consulting, in July 2018, the town had, in total, around $458 million in pension liabilities, with almost $165 million, or around 36 percent, funded. The addition of this year’s $16 million brings the fund to around 39 percent funded.

In the 2019 – 2020 fiscal year, the ARC payment is around $22.6 million again. The mayor, and the council, have budgeted $19 million in the upcoming budget, which meets, but does not exceed, the state-required 85 percent. That means that in the next fiscal year, the town will not have the option to transfer from funds allocated for the pension.

One projection that Leng’s administration gave the council in 2018 showed that by 2039, ARC will reach $34 million before it starts to decrease.

Galarza said the administration would resubmit the transfer package. He said that as the fiscal year comes to a close, there might be other accounts he can pull from, but that he would not be able to come up with $2 million anywhere other than the pension.

“They want to really pay that pension payment, and I get it, but we have other things besides that pension bill,” he said. ​“It’s tough, you know, both sides have valid points. I understand where one’s coming from. I understand where the other’s coming from… I think everyone’s trying to do the right thing.”

Nonetheless, Galarza said he is hopeful. ​“I think at the end of the day this is going to work itself out.”