Faced with the need to pump as much as $8 million annually into a fund for health care for retired city workers, officials are eyeing three potential options.
One is to continue a ‘pay as you go’ tradition that is currently costing taxpayers about $1.8 million annually, though that number could rise tenfold within a decade.
Another is to renegotiate the post-employment benefits that municipal workers receive to lower the cost, perhaps by reducing the 10-year period that worker remain eligible for full health care coverage.
Finally, a new city committee is eyeing the possibility of tapping into overfunded pension accounts in order to use some of the excess to pay the tab – a move that would immediately lower property taxes by nearly half a mill.
City Councilor Ken Cockayne, who pushed for the committee’s creation, said that shifting the money is “the one drastic step” City Hall could take to help ease the burden on taxpayers.
After hearing the options laid out in detail by city Comptroller Glenn Klocko this week, the new GASB 45 Committee, named for an accounting rule, plans to study the information carefully before taking any action.
“We should probably take some time and go through this,” said T.J. Barnes, a member of the new panel.
Mayor Art Ward said the committee will make its recommendations to the Joint Board, which consists of city councilors and Board of Finance members. It will have the last word, the mayor said.
Klocko said the city needs $71.7 million to cover the anticipated future costs of the post-employment benefits other than pensions. He called the figure “the problem child we’re dealing with.”
It has a trust fund established to cover that tab, but “the problem is we don’t have any funding” for it, Klocko said. The trust fund is empty.
Klocko said that bond rating agencies want to see that Bristol has a plan for dealing with the issue, not necessarily a complete solution to the problem.
Continuing the ‘pay as you go’ practice, the comptroller said, “is going to get very difficult” because rising costs will eventually make it almost impossible for taxpayers to cover the yearly tab.
In Norwalk, which adopted a plan recently, officials plan on putting $2 million a year in tax revenues into a trust to pay the cost. They also renegotiated the benefits union members get in order to lower the overall expense.
Under Internal Revenue Service rules, the city would have to leave at least 120 percent of the expected pension fund needs intact in the existing trust. It could only tap money over and above that figure.
This week, the city’s fire and police pension funds are still so flush that the city could easily meet the IRS rules to tap into them. There’s also enough in the general city trust fund to dip in on a yearly basis.
Overall, the three trust funds totaled $426 million as of Tuesday. They reached a low of $412 million at the low end of the market this fall. They have been as high as $550 million last spring.
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