Article

PITTSFIELD’s INDEBTEDNESS: A TIME BOMB THAT’S TICKING DOWN

By DAN VALENTI

PLANET VALENTI News and Commentary

(FORTRESS OF SOLITUDE, TUESDAY, JULY 22, 2014) — THE PLANET had a couple commentators bring up the question of the total indebtedness in the city of Pittsfield. How much is the city in the hole? It’s a query with an answer startling enough to sober up Foster Brooks.

Debt is simple to understand. It occurs when a person, business, or other enterprise spends more money than it makes. How does one spend money one doesn’t have? Borrow it from someone else at interest. At this point THE PLANET is tempted to comment on the immorality of usury. We have long held in contempt the practice of money as a commodity for making additional money, since money is an abstract and symbolic construct meant to be a unit of exchange in the free-will barter and trade among people. We shall resist the temptation, however, to get back to the question of the city’s indebtedness.

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Going into FY2015, Pittsfield had an official indebtedness of $72,608,148. This outstanding obligation totals an unhealthy 52% of the city’s total budget. Worse still is the city’s debt-to-income (DTI) ratio. In the Dreaded Private Sector, lenders’ red flags go up when a prospective borrower’s DTI goes past 28%. Lenders who make loans eligible for sale to Fannie Mae or Freddie Mac hit the “reject” button when the DTI goes over 40%. In Mae, Ellie Mae‘s average home borrower “had a back-end [DTI] ratio of 34%”  (LA Times 7/20/14). For FY’15, Pittsfield anticipates raising $73,542,981.41 in taxes, a killer $3,193,980.45 increase. This leaves the city’s DTI for taxes at a lethal 98.7%.

That is not a typo. Based on The Empty Suit‘s approved FY15 budget, Pittsfield has a DTI of 98.7%.

It’s sadly funny how numbers like these never come up during the budget cycle, either when it is proposed or when it is “debated” (so-called) and approved.

But wait! Bianchi’s disastrous financial product gets worse.

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Credit Bianchi: City’s $72.6 Million Debt is Just the Beginning of a Financial Mess

The $72.6 million indebtedness represents but a small portion of the total obligations borne by the city. At this point, as if we had to remind you, when we say “borne by the city,” THE PLANET means “borne by taxpayers.” Pity the poor Pittsfield taxpayer, who alone must carry the heavy loads piled on their backs by politicians who can’t say “no” to the Special Interests.

The largest portion of taxpayer indebtedness goes to Other Post-Employment Benefits (OPEB). THE PLANET has for several years been trying to educate citizens about the ticking time bomb of OPEB, because once Mary Jane and Joe Kapanski have a working grasp of this situation, they will instantly realize the necessity of throwing out of office all Status Quo politicians and putting in their place those who are smart enough to grasp the problem and resolute enough to fix it, politics be damned.

Thus, when we refer to the salaries of municipal employees, THE PLANET also includes the phrase “plus bennies.” For example, we say that the mayor makes “87,500 a year-plus bennies.” We do this because government on all levels compensates workers “in a variety of forms” (Department of Labor).

“In addition to a salary, many employees earn benefits over their years of service that will not be received until after their employment with the government ends. The most common type of these post-employment benefits is a pension. Post-employment benefits other than pensions generally take the form of health insurance and dental, vision, prescription, or other healthcare benefits provided to eligible retirees, including in some cases their beneficiaries. They may also include some type of life insurance. As a group, these are referred to as Other Post-employment Benefits, or OPEB” (source: mma.org).

OPEBs include all of the benefits and perks politicians granted public employee unions over the years when citizens weren’t paying attention. The “Other” in OPEB refers to all the benefits not counting pensions. The cost of pensions for public employees occurs as a separate indebtedness, as if The Kapanskis needed additional woe and headache.

As of 2011, according to the Massachusetts Taxpayers Association, the city of Pittsfield had an OPEB obligation of more than $334 million. The MTA, in its Bulletin of Oct. 10, 2013, writes:

Retiree Health Care: Overwhelming Liabilities

Even more staggering than pensions, the state and municipalities face enormous unfunded liabilities for retiree health care benefits. Without changes to benefits, the state and municipalities will need to set aside the extraordinary sum of $46 billion just to meet the costs of the benefits already owed to current employees and retirees.

The problem is most severe for municipalities. Retiree health care liabilities are overwhelmingly unaffordable for nearly all communities—statewide, unfunded municipal retiree health care liabilities are twice that of their unfunded pension liabilities—because the benefits are exceedingly generous. For example, most current employees are eligible to retire as early as age 55 and need just 10 years of service to qualify for full benefits that include a health care premium contribution of 80 percent from the state or 50 percent or greater from nearly all municipalities.

This is Pittsfield’s present situation, thanks to the mayor. These are eerily similar to the causative factors that sank Detroit, whose bankruptcy nears the trial stage after about a year of wrangling among the various stakeholders. Not the least of these is the public service employee unions, whose greed preyed upon the politicians’ lack of backbone to create the present Motown mess.

The saving aspect of bankruptcy is that is wiped out all pre-existing city contracts. Detroit’s receivership took advantage of the situation to impose necessary cost-saving measures, for example, canceling health insurance payments for city employees.

Unless the 2015 city election radically changes Pittsfield fiscal course, it may as well re-christen itself “Detroit East” of “Massachusetts’ Motown.”

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“Last night I went to sleep in Dee-triot city.”Country Western song.

“OPEN THE WINDOW, AUNT MILLIE.”

LOVE TO ALL.

39 Responses to “PITTSFIELD’s INDEBTEDNESS: A TIME BOMB THAT’S TICKING DOWN”

  1. dusty
    July 22, 2014 at 2:06 am #

    So what does city auditor Scanlon say about all this? I have not heard that he is worried about it.

    Also if the city goes bankrupt do all the retirees lose their pensions and health benefits?

    If I move to another city will this whole mess not be my problem? (sic)

    • B. Clairmont
      July 22, 2014 at 4:33 am #

      The auditor has warned the city about the OPEB liabilities several times. I personally have had many a conversation with the auditor about this.

      This is why I pushed so hard to establish a trust fund to help off-set these liabilities.

      Barry

      • dusty
        July 22, 2014 at 4:52 am #

        So why is the mayor spending and borrowing like he was Midas?

        • C. J.
          July 22, 2014 at 5:01 am #

          To pad his pension and raise taxes as desired.

      • BOC
        July 22, 2014 at 6:17 am #

        Barry, can you please explain how a trust fund solves the problem? Isn’t that just another fund paid for by the taxpayers? Not being familiar with trust funds, any info on them is appreciated.

        • B. Clairmont
          July 22, 2014 at 11:33 am #

          BOC,

          It doesn’t “solve” the problem, but it helps. And, yes, it is paid for by the taxpayers.

          The problem is that we are incurring expenses today (benefits to be paid for in the future) without taxing the taxpayers today for those benefits to be paid in the future. We are passing the expenses onto our children.

          The trust fund would allow some tax to be collected today and be set aside to be invested to help offset those future costs when they get paid out.

          The Mayor’s current plan is to fund $50,000 per year towards the trust. Is it adequate, no. Does it help and start a plan into motion, yes. Will your taxes go up to fund this trust, yes.

          While no one wants their taxes to go up, it is the responsible thing to do, if and only if, you cannot find expense reductions. I have proposed cuts at budget sessions that were not only embedded with logic and proof of evidence, but were reasonable, in my opinion. Those efforts were rebutted and not supported by anyone.

          I hope this helps answer your questions.

          Barry

          • levitan
            July 22, 2014 at 1:31 pm #

            How about we stop borrowing against hypothetical future assets (taxpayers in 2025) and start funding pensions based on current taxpayers’ capacity.

            Who gets pensions these days anyway?

          • Payroll Patriot
            July 22, 2014 at 3:30 pm #

            There won’t be any taxpayers in 2025, all non profits and group homes for all. Think about, Mr. Clairmont!

  2. amandaWell
    July 22, 2014 at 3:43 am #

    Thank Heavens for free Cash!

    • EddieP
      July 22, 2014 at 6:26 am #

      What??? Free cash is not free.

  3. Nota
    July 22, 2014 at 5:17 am #

    I could have sworn that a certain Councilman said,concerning the unfunded liabilities, that we weren’t in that bad of shape. Then gave the proverbial catch phrase…compared to other communities. Guess who?

  4. BOC
    July 22, 2014 at 6:13 am #

    The entire concept of paying pensions and OPEB to employees who are not working is fiscally irresponsible. That is why most private companies have switched to 401k plans. That way when the employee retires, they won’t be getting paid to do nothing. Another factor is the healthcare benefits are often these ultra expensive cadillac plans that no one in the private sector gets, and of course the 85/15 split is an issue too.
    This is why the whole idea of all these raises for the mayor and city managers is outrageous. If you add their current salaries PLUS the bennies (which is known as Total Compensation in the dreaded private sector) one soon finds out they are actually being overpaid.

  5. Gene
    July 22, 2014 at 6:47 am #

    Excellent coverage DV of a problem that has sunk a bunch of cities across the nation. Pittsfield is next unless it takes the “radical” steps as your article mentions.

    Thank you for covering this “ticking time bomb.” No one else is doing it.

    • Tim bartini
      July 22, 2014 at 7:46 am #

      Dan. Why is it in every article you write about city pensions you conveniently or is purposely never mention that Pittsfield city employees pay 10% of their pay per week (excluding overtime ) to the city Retirement board? You also fail to mention that pension reform legislation from 2014 now requires new hires to be at least age 57 to be able to receive full pension. Health insurance payment rates will now be pro rated at how many years of service the employee has at retirement. I wonder how many of your faithful take 10% of their weekly pay and invest it toward retirement. Oh by the way I won’t be able to collect Social Security, even though I’ve paid into enough quarters to be eligible.

      • Shakes His Head
        July 22, 2014 at 7:57 am #

        the 10% is instead of Social Security. Does Pittsfield contribute anything? If the City removes the pension, and offers a 457 plan, they will have to match the employee’s contribution to SS. Easily addressed, as long as every component is on the table.

      • T-bone
        July 22, 2014 at 1:18 pm #

        Are you serious Tim? My paycheks for all my working life have tons of withholding mostly for SS. I don’t get 85% of my health insurance lie you. I get 50%. 50-50. Try that on for zsize. As you say the whopping 10% toward pension doesn’t include OT which is at scandalous levels in Pittsfied. Finally, as for your pension. You pay 10%. I pay 90%. Thats what I call a rotten deal. You also have a job where you work two days a week!

        • Tim bartini
          July 22, 2014 at 1:26 pm #

          T-bone I believe anyone could take the civil service test that I took to become a FF. I guess you chose a different career. I may work only two 24 hr shifts per week I believe that adds up to more than forty hrs per week.

          • Payroll Patriot
            July 22, 2014 at 3:07 pm #

            Tim, so the taxpayers that pay for you to sleep, grocery shop using a city fire truck, be delivered to voting using a city fire truck, as per agreement, and have a 80% pension of your top 5 years should have applied for your job? Tim, if they did you would not have a job. So don’t you think you should be a little more humble toward the taxpayers? Tim it was the Democrats in Massachusetts that prevented you from collecting all SS benefits, but you can collect some.

          • Joe Pinhead
            July 22, 2014 at 6:50 pm #

            Tim,
            Please now let’s be at least a little bit honest and consistent here.
            1. I’ve read you rail against Romney and Bain capital to name but two: Could you not have taken the SAT gone to college and become a stock broker, an investment guy or anything else? But now when your salary and work conditions are questioned its how dare you scrutinize me, only I can scrutinize others.
            2. Please take a good honest open look at the hiring practices of the City and tell me in your sincerest words that the hiring in the City is all above board and not an ounce of who you know so there you go.
            3. Yes you contributed to SS and won’t be able to access that. Each taxpayer pays for your 85/15 health insurance split and they can’t access that either is that fair as well?

            I’m not saying that anyone’s job is roses and sunshine but please be honest and equal one set of values for all. I wonder how many people would be pleased to have an average of 42 hours a week at a single job? Please also keep in mind many of the people don’t have that type of work in part because of the people and policies you and the union have supported for your own gains at times in detriment to the community at large.

            just sayin

          • Tim bartini
            July 22, 2014 at 8:07 pm #

            Mr Patriot , Mr Pinhead. I took a test and got my job I’m sorry you could not pass it I was hired by Mayor Smith. I did not know him from Adam. He chose me from my resume and my score. Iam very proud of my 28 years of dedicated service to the City of Pittsfield . I enjoy every day on the job because we are dedicated to the people who need us. If all you think is that we sleep or go for grocierys well I guess you’ve never needed our service. When we are at the grociery store most people thank us for our duty. If we get a call when we are there, the clercks store our food until we come back .

          • Joe Pinhead
            July 22, 2014 at 8:38 pm #

            Tim,
            I never took the civil service test therefore I did not pass, not I couldn’t big difference there. I thought a guy who passed the civil service test could read. I asked what most reasonable people would consider normal questions that flowed from both the topic and your comments to the blog. As is typical from really “smart” people like you (smart being your self-proclamation I’m not certain the criteria from Mensa or any other group having the power to assign “smart” status seeks your approval first but evidently that is so) is to throw insults and not answer a single one of the questions. No one said you shouldn’t be proud of your service, in fact you should be, Just as those of us who have been successful in private endeavors should be.
            In today’s post as I said earlier the questions I asked were simple and straight forward, with all your “smarts” and pride you couldn’t muster up a better response than something about grocery shopping? I see patients and their families every day to Tim who thank me for the issues I’ve helped either them or a loved on through, yes Tim even those of us who didn’t take the civil service exam help the public in times of need.
            But alas my life is and shall be incomplete for 2 reasons I didn’t take the civil service exam and you failed to answer my simple questions.

            just sayin

      • BOC
        July 23, 2014 at 6:03 am #

        I did some quick calculations from my own paycheck (private sector) and I contribute 14% of my income towards my retirement. And I can guarantee I will NOT be getting anything close to 75-80% of my pay when I retire, nor the cadillac health insurance plan public employees typically get..
        Another point people miss is that, thanks to the internet, it has only become known recently to the general public what incredibly generous benefits public employees such as firefighters, police and school teachers receive. If I had known way back what I know now I would have chosen a different career path, probably the one with 14 weeks paid vacation.
        The simple fact that overtime does not have that 10% taken out for retirement is downright outrageous. When I work OT both SS and Medicare are taken out of that.
        I also have to work until 65 to get my retirement bennies. To be able to retire with full bennies at 57 is practically criminal

  6. Smart One
    July 22, 2014 at 6:49 am #

    Dan, Nice break down of how we are spending ourselves into financial oblivion. This will lead to eventual default and bankruptcy. This will not make our community more attractive to new residents no matter how much investment we put into (unneccessary) downtown streetscapes.

    You know, you could offer to be a consultant to the city! Plenty of funds available for that it seems!

  7. Johnny2Shoes
    July 22, 2014 at 8:09 am #

    Pittsfield has Dr.Jack Kevorkian in the corner office assisting the taxpayers of this city.

  8. Jonathan Melle
    July 22, 2014 at 8:30 am #

    As Pittsfield’s population shrinks, its budgets and debts increase.
    I wonder if that is an economic formula for bankruptcy?

  9. Still wondering
    July 22, 2014 at 10:43 am #

    Yes, the shrinking population is the big factor here. The “pie” gets smaller and the battles over it become more savage.
    Will saner heads prevail concerning the replacement or renovation of Taconic High School? Why are the powers that be determined to build a new high school? The demographics simply do not support a new high school. The population forecasts do not support more than one high school in this shrinking city. Hellooooo!!

    • T-bone
      July 22, 2014 at 1:21 pm #

      Power that be want a “new” school because of the money. Some favored parties are going to rich off this one. Same as with water upgades. Mr. Gaetani and Dr Wong system will save city at least $40 million. Mayor wants to spend at least that much more. People getting rich off
      taxpayers.
      I want this madness to end. I want a candidate for mayor who will end it

  10. Jonathan Melle
    July 22, 2014 at 11:32 am #

    It would take a miracle worker like Jesus Christ to solve even one of Pittsfield politics many problems. Sort of like the Middle East, only on a much smaller scale.

  11. Nota
    July 22, 2014 at 1:35 pm #

    Does the 48 hours, include time and a half for the extra eight hours?

    • Tim bartini
      July 22, 2014 at 2:02 pm #

      Nota. No it doesn’t Averaged over a 8 week cycle it is a little over 42 hrs per week, straight pay.

      • C. J.
        July 22, 2014 at 2:12 pm #

        Just curious does it include time spent sleeping. My employees were on call when sleeping and didn’t get paid unless called to duty/

        • Tim bartini
          July 22, 2014 at 7:32 pm #

          CJ. Please give me your phone number and I will call you when we get back from a call late at night. You seem to think all we do is sleep at night. So when I get back from a call I’ll let you know ok?

  12. Nota
    July 22, 2014 at 2:52 pm #

    Everyone knows non volunteer or city fireman sleep at the stations. They do need to be fresh after a fire fight.q

  13. amandaWell
    July 22, 2014 at 2:58 pm #

    i was watching the TES interview Lee Marvin on the mayor’s report show. Two words that came into play were Amazing and Invision. Also, a Christmas present in the form of an Innovation Center. it’s getting deep around here! And what is that corny theme music on that show?

  14. Ron Kitterman
    July 22, 2014 at 3:07 pm #

    Tim Bartini seems to have developed rabbit ears ? We all love fire fighters, Tim, thanks for your service.

    • Tim bartini
      July 22, 2014 at 7:37 pm #

      Ron. Thanks for your service to the city. The pension you recieve from the city is the same that all these bloggers seem to think we don’t deserve .

      • BOC
        July 23, 2014 at 10:07 am #

        A pension system designed by unions and put into place by extreme liberal politicians in a quid-pro-quo (you support this, we support your campaign) system has hardly been earned, or deserved. Anyone thinking they deserve to retire at 57 with full bennies is astounding.

  15. Nota
    July 22, 2014 at 4:36 pm #

    Everybody loves somebody sometime! Dino Martin!

  16. Sal
    July 22, 2014 at 6:44 pm #

    This is off topic, but I would like to thank Councilor Tully for working with the DPW and having the railroad tracks removed from Crane Ave. My car’s front end appreciates it.