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What if the City of Newton was a company?

Our Analysis and Evaluation of municipal pensions and health insurance benefits for the City of Newton's employees in relation to pensions and health insurance benefits in the Dreaded Private Sector

Imagine the City of Newton as a company in the private sector with Mayor Warren as our CEO and all of us serving on the Board of Directors.  As taxpaying citizens of Newton, we need to figure out our role in order to answer the upcoming override question that we are voting on in March.  We need to compare ourselves to the private sector in order to gain a realistic answer to the question of,” Can we afford to raise our taxes greater than 2.5% per year without bankrupting our citizens?”  This is because the people paying for the salaries and benefits of our City personnel mostly work in the private sector where they are not provided 50% health insurance premium coverage nor any lifetime pension. Our CEO has been coming to us recently and telling us that we need more money than we have in order to rebuild our infrastructure so that we can more effectively compete against other cities and towns in the Commonwealth.  Despite the fact that revenues have been rising 2.5 percent per year this century, our costs have been rising faster than that.

As the Board of Directors, we need to ask ourselves how we can attain the necessary revenue to replace three elementary schools, replace a fire station and fix our roads so that we can regain our status and reputation as a very desirable place to live.  Should we ask our customers (citizens) to pay higher prices for their product (education, infrastructure, services) and promise them that the product they are buying will once again become what they have come to expect in prior years.  What happens if our customers determine that they are already paying 50% to 60% more than people in comparable towns for comparable services.

We would then have to ask ourselves if there is a better way to achieve our goal of upgrading our infrastructure.  Could we look within our organization that is already bringing in $350 million to $400 million to improve our efficiencies?  Our CEO has told us that he has done all that he could to make our organization more efficient.  But a closer look would reveal that while CEO Warren has made a valiant effort, to improve efficiencies within our organization by getting the unions who represent our employees to make concessions such as paying 25% of their health insurance premiums rather than 20%, we realize that it is only just a start to making our organization more efficient. 

When looking at our competitors in the private sector (where most of our customers work), we see that they require their employees to contribute at least 50% of their monthly health insurance premiums.  We also see that these other organizations do not guarantee their employees lifetime pensions.  In fact, they do not offer them any pension as it would make the cost of hiring personnel too high and thus making the cost/benefit ratio of running their organizations to be very inefficient.

Seeing the inefficiencies that exist within our organization, i.e. allowing our employees to pay only 25% of their health insurance premiums and guaranteeing them lifetime pensions, could we not make our company more efficient by providing our employees with the same benefits as our competitors?  In addition, is it possible that we could realize even more money for the necessary infrastructure upgrades by weeding out unnecessary and extraneous administrators?  Another question we must ask ourselves, how did our costs rise by 60% this century while our customer base has actually declined by 7%?  We should be very thankful that we have been able to maintain revenues rising at 2.5 percent per year.

Perhaps it is time to meet with our employees and let them know that we need to cut costs and become more efficient in order to stay in business.  If we do not ask our employees to expect the same benefits as our competitors (other organizations in the private sector), they will soon be out of a job as we will soon be out of business and our customers will leave us for more efficient organizations who can provide the same services at lower costs.  After all, it would be foolish to expect our customers to pay us even more than 2.5% more each year so that we could afford to provide our employees with better health care and pension benefits than they could ever expect to receive in their current or future jobs.

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Moving Newton Forward February 16, 2013 at 09:38 PM
Walter, WRT "You said the schools cost $14M.Changing facts and statements once again. Making it up as you go along.", That was Geoff who said that and I can provide the link. http://newton.patch.com/blog_posts/what-if-the-city-of-newton-was-a-company#comment_6404272 "Which one is based on a substantive set of accurate facts?" We're posting five more research reports here on Patch. Feel free to pedantically analyze and evaluate them to see if we crossed our t's and dotted our i's.
Geoffrey N Epstein February 16, 2013 at 10:25 PM
The cost of the Burlington school was $29M. Period. The MSBA reimbursed Burlington $14M. Period. Obfuscation gets no-one anywhere and it should stop. The cost estimates for Angier, Cabot and Zervas are sound and we will secure MSBA reimbursements up to $27M if we vote YES on the two debt exclusions. That is all sound. We should move on to other topics.
Moving Newton Forward February 17, 2013 at 04:18 AM
The Minimum Cost of Angier is projected to be $35M. Period The Maximum MSBA aid for Angier is projected to be $12M. Period The Minimum Cost of Angier is projected to be $45M. Period The Maximum MSBA aid for Angier is projected to be $15M. Period Now that we agree on that we can move on to other topics. We are planning five to seven more reports here on Patch and members of our group are planning at least two more at the Newton TAB/WickedLocal.com
Harry Sanders February 17, 2013 at 01:10 PM
MNF Although I applaud your groups' (individual?) efforts to not blindly accept at face value the proposed tax burden, the potential for self-inflicted taxpayer harm exists should you not be spot-on accurate in your argument. I say this not to devalue your argument but in the hopes that your case be improved upon with clear logical sequencing.
Stephen Zisk February 18, 2013 at 06:05 PM
So health care spending by the city increased 5.75% per year over the past 8 years. *Way* below actual health care costs and well below most other cities I've heard about. This sounds like pretty good management to me. And pension spending has increased about 5% per year over the last 12 years... not ideal, but not so horrible, and, as others have pointed out, this is not under Newton's direct control. And as for your misrepresentation of Baker's comments, how about if you go back to what was actually said: "We have to be willing to say this is not enough for what we need to do," Baker said Thursday night. "I'm very troubled about putting [the override package] on the ballot the way it is." Baker argued that a number of added costs have come in since the initial override amount was announced, including higher enrollment projections in the schools and higher construction estimates for fire station projects. [http://newton.patch.com/articles/tell-us-should-newton-aldermen-request-a-higher-override-amount]

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