'Pretty good' town finances face a very ugly future
Published 3:50 pm, Tuesday, August 30, 2011
When it comes to public debt and obligations that we can't afford, kicking the can down the road only leads to more serious problems and bigger downturns.
We need leaders to understand the dangers of mounting debt and do the hard work of putting together payment plans, presenting and defending them, then implementing them. Instead, we have leaders who don't seem to understand that financial problems don't just go away; kick them down the road, and they come back as bigger problems.
We need look no further than the town of Westport to see this happening.
Our first selectman said just a few weeks ago that the town's financial situation is "pretty good." Trying to understand what "pretty" good was, I went to the dictionary, looked up "pretty" and found the following:
Adjective: Attractive in a delicate way without being beautiful
Verb: Make pretty or attractive
Adverb: in some degree; moderately
Just a few weeks after First Selectman Gordon Joseloff made that statement, Moody's Investors Service announced it had downgraded its outlook for our Triple-A rating from "stable" to "negative." Moody's said it would evaluate the town's outlook in the coming weeks to determine its vulnerability to federal spending reductions and its level of financial reserves.
It's interesting that just a few weeks after our first selectman said we were in "pretty good" shape, Moody's thought we might not be.
Could Joseloff be kicking the can down the road? Is he in denial? What will Moody's do once it reviews our level of financial reserves given the town's pension obligation and other post-employee costs?
We know the town faces significant increases in its employee costs. Our pension liabilities have been forecasted at $50 million.
The town's Other Post Employee Benefits -- called OPEB -- also was believed to be $50 million, but actually been understated for many years. The town had been accruing for roughly 450 employees, but the number actually is more than 1,000 -- more than 120 percent more.
In addition, the medical-cost increases used for the OPEB projections were set below the typical increases the town or medical industry has faced. The new medical-cost increase that will be used to calculate the liability could increase by 100 percent.
Using simple math, the new liability just for OPEB could easily top $100 million -- yes, $100 million. That could put Westport's total liabilities for post employee costs at more than $150 million -- nearly as much as the annual town budget.
And that doesn't include the ongoing costs for current town employees or for our schools, our sewers, or roads and other essentials.
Adding to this mess is the amount of debt the town has amassed. Based on the latest numbers I could find, the town has approximately $180 million of debt. The accumulated interest over the life of the loans is more than $45 million.
Add it all up, and Westport has liabilities that could approach $400 million. That's more than twice the roughly $180 million annual town budget.
So I ask: Are Westport's financials "pretty good?"
I think not.
Is our first selectman in denial of what is going on? I think yes. Has Gordon Joseloff decided not to be the leader to help organize a solution to this coming mess? I think yes again.
We've watched the stock market melt down because our national leaders decided to kick the financial can down the road.
We can only hope our local leaders start seeing the town's financial condition for what it really is.