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Article 11 ( Articles 12, 13 & 14 under consideration for withdrawal )

Article 11 ( Articles 12, 13 & 14 under consideration for withdrawal ). Sponsored by: The Board of Selectmen. Overview. The Selectmen with Warrant are in the process of creating a framework to establish a long-term strategy for the Town’s financial reserves

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Article 11 ( Articles 12, 13 & 14 under consideration for withdrawal )

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  1. Article 11(Articles 12, 13 & 14 under consideration for withdrawal) Sponsored by: The Board of Selectmen

  2. Overview • The Selectmen with Warrant are in the process of creating a framework to establish a long-term strategy for the Town’s financial reserves • In connection with this strategy the Selectmen are requesting the Town’s permission to set up a stabilization account to fund Dover’s share of the Regional Schools Other Post Employment Benefits (OPEB) liability • The Region’s OPEB liability represents Region’s legal obligation to past and present employees to fund their retirement health-care benefits • Retirees are responsible for the portion of their premiums • In addition current employees are also entitled to this benefit upon retirement ~ and an estimate of this amount is also included in the development of the liability • The most recent estimate of this liability is approximately $28M and Dover’s share is approximately $16M or56.7%

  3. Our Plan • In 2009, Dover funded the Town employees OPEB Fund with a contribution of $1.9M ~ using the proceeds we received from a legal settlement • Today our liability is 60% funded, a very healthy funding standard by comparison to our share of the Region’s OPEB liability which is 0% funded • We will recommend to Town Meeting that we transfer from cash reserves $1.6M or 10% of our approximate share of the Region’s OPEB liability • In addition, we will design a contribution schedule that targets a 60% funding ratio in 10 years • Our contributions to the fund will be offset by the share of contributions made by the Region towards this liability annually

  4. How will this fund work? • The Town will set up a stabilization fund (provided by State law) and deposit the funds into the account earmarking the funds to be used for the Town’s portion of the Region’s OPEB liability • The funds will be used ONLY to satisfy Dover’s share of OPEB ~ Sherborn nor the Region has access or claim to these funds • We are simply setting up a Dover account that will fund our portion of the Region’s OPEB liability • The funds will require a 2/3 vote at Town meeting to access and will be used to fund our share of the Region’s OPEB liability required to fund under the Regional School Agreement • In the event the fund becomes over funded or the liability is settled for less, the funds can be returned to the Town’s general fund

  5. Where is the funding coming from? • As of the fiscal year ended June 30, 2018 ~ the Town’s cash reserve balance was certified at$9.8M representing approximately 24% of the Town’s operating budget • The credit rating agencies typically recommend fiscal reserves of 5% - 15% of a Town’s operating budget as prudent to maintain the Town’s AAA bond rating and sufficient to weather difficult economic times • The Board of Selectmen is evaluating a target range for Dover as an integral component of a long term strategy for the overall management of the tax rate • A critical component is maintaining our AAA rating • Communities with AAA rating are at the higher end range • Using the upper limits of the range, we can comfortably transfer $1.6M of Free Cash to start a long-term plan for funding this liability

  6. Cash Reserves How and Why? • Our cash reserve is also referred to as “Free Cash” • This balance is akin to a Savings Account • Funds in this account are earmarked for: • Funding the Town’s liabilities current and long-term • Funding the replacement of long-cycle assets • Citizens tax relief • Protecting the Town and its citizens from unexpected events and economic down turns • Cash reserves are accumulated from the following: • Excess revenues versus estimates when establishing the tax rate • Budget turn backs and unfunded articles at Town meeting • Reimbursements such as: Circuit Breaker and grants

  7. Management of Cash Reserves • The Board and Selectmen and Warrant Committee are designing a “long-term strategy” to manage the Town’s cash reserves • This strategy will be established and implemented over time to ensure: • No cash reserves will be allocated without a specific plan in place for the utilization of such resources • That all liabilities have been evaluated • An analysis of long term needs has been established • A plan to reduce the growth of the tax rate, if possible, has been put in place • We ask Citizens to be patient and thoughtful about our cash reserves. An impulsive decision made without an in depth analysis of the Town current and future needs may result in unintended negative consequences to the Town’s financial position • We do not want to sacrifice: “short-term gain for long-term pain”

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