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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.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Moving Newton Forward February 15, 2013 at 07:15 PM
To Geoff Epstein & Stephanie: WRT "In the last round of contract negotiations, health care costs were reduced substantially by adjusting the options to be much more aligned with the state health care plans in cost structure." Then why is it that health insurance premiums paid by the city in 2012 ($40M) have exceeded what was paid in 2010 ($39M)? http://www.newtonma.gov/gov/comptroller/finreports.asp "the expanding student population." Why is it that enrollment has grown by 8% from 2003 to 2012 yet general fund education spending has increased by 39% during that same time period. http://www.movingnewtonforward.org/didyouknow/didyouknow.htm#Newton, Education Spending "The override is largely directed at building infrastructure" We're trying to reconcile the crumbling infrastructure rhetoric by Geoff Epstein with the fact that Newton spent $338,416,636 on infrastructure and buildings from 2004 to 2012. http://www.newtonma.gov/gov/comptroller/audrep.asp
Moving Newton Forward February 15, 2013 at 07:25 PM
To Geoff Epstein's 2nd Comment: "You pay absolutely no respect to the huge progress made in the last 3 years on solving our structural financial problems. The 2011 contracts solved the structural financial problems in staffing and save $180 million over the next 6 years." If that is the case, then why is the city's general fund spending increasing from $287.5M in 2010 to $332.2M in 2014? "I cannot imagine a more reckless or unjustified comment than: 'In other words, they see these three overrides as "first steps" towards more tax increases and going back to David Cohen-era spending growth.' That is simply and clearly complete nonsense." If your extravagantly expensive overrides pass, Setti Warren's annual spending growth will be 3.67% from 2010-2014, which isn't that much different than David Cohen's. "That's what Setti's administration has accomplished so far and their new and innovative approaches will continue to bear fruit over the next 5 years, especially if boosted by a YES override vote." All this innovation and yet annual general fund spending will have increased by nearly $45M from 2010 to 2014. "We can solve some real problems: neglected buildings" Which were neglected in order to fund fat pay raises. "an increasing student population" 8% Cumulative Enrollment Growth since 2003 versus 39% growth in spending. 84% of that spending growth went for increased salaries and benefits.
Geoffrey N Epstein February 15, 2013 at 07:36 PM
1. Taking your numbers on health care costs, if they grew by just $1M in 2 years on a base of $39M, that is an annual increase of 1.25% which is phenomenally low. Much less that the Prop 2.5 ceiling. Proof of a great job done the city. 2. With a flat student population and costs aligned with 2.5% annual increment, education spending would have increased by about 28% in that period. If you add money for the added students, you'd get a ball park of 36% (very rough!). The fact is that under the prior administration costs were not aligned with 2.5%. Now they are and we can figure the true picture where we are sustainable in the NPS budget except for student growth. 3. Take a look at the Mayor's capital plan and you'll see the backlog. You cannot wave a magic sentence or two and have the Angier/Cabot problems evaporate nor conjure up capacity for another 800 students over the next 4-5 years.
Geoffrey N Epstein February 15, 2013 at 07:45 PM
I'm getting dizzy at your arithmetic! I think that you're still unhappy with Prop 2.5 and the revenue increases it allows underpinning constrained spending increases. We could go at this all day! What is an acceptable figure for spending growth in your universe?
Moving Newton Forward February 15, 2013 at 08:07 PM
1. "Taking your numbers on health care costs, if they grew by just $1M in 2 years on a base of $39M, that is an annual increase of 1.25% which is phenomenally low. Much less that the Prop 2.5 ceiling. Proof of a great job done the city." The city didn't save anything, they merely reduced the rate of spending increases. Besides, two years of 1.25% doesn't make up for six years at 7.325%. 2. "With a flat student population and costs aligned with 2.5% annual increment, education spending would have increased by about 28% in that period. If you add money for the added students, you'd get a ball park of 36% (very rough!). The fact is that under the prior administration costs were not aligned with 2.5%. Now they are and we can figure the true picture where we are sustainable in the NPS budget except for student growth. " Newton's general fund spending for education increased by 39% from 2003 (Period 0) to 2012 (Period 9), not 2003 to 2013. That increased by 46.6% "The fact is that under the prior administration costs were not aligned with 2.5%." Not only that, but they used the money normally devoted to maintenance to give generous pay raises and benefits. 3. "Take a look at the Mayor's capital plan..." $338M wasn't enough? "nor conjure up capacity for another 800 students over the next 4-5 years." We can conjure up capacity for another 538 students by only enrolling non-resident students whose districts give us a full reimbursement of tuition costs.
Geoffrey N Epstein February 15, 2013 at 08:59 PM
OK. We had a pretty good joust! How about you go plant some NO signs around the city and I go plant some YES signs and we reconvene on Monday for another round?
Walter Jones February 16, 2013 at 10:55 AM
Moving Newton Forward-- I am concerned about your organization being extremely vocal without a sufficient understanding of the facts that underlie your opposition. We have schools that are in terrible condition that need to be replaced, and our city prides itself in valuing our children and education. Unless you don't share those values, it is YOUR responsibility to have a competent understanding of the facts. Examples: 1. Your fundamental premise is that compensation costs of city employees should be lowered from 80% to 76% of the budget and that would cover the costs of the spending needs associated with the override. These compensations costs are linked to union contracts to be negotiated to the city and are locked in for the next few years. You say that we should renegotiate these contracts when they expire in "2014 or 2015." WHICH ONE? This is fundamental to your solution and you don't even know the year in which we could start realizing the cost reductions? Time matters here, students are being educated in deplorable conditions. Do you have so little sensitivity for their plight that you are that loose about understanding the timing implications of when your savings would be realized and we could start building new schools. More to be posted.
Walter Jones February 16, 2013 at 11:09 AM
2. State matching funds. All of your calculations assume that we continue to keep the state matching funds. You haven't assumed that we lose those funds and instead calculate the cost reductions we need to cover the full cost of the schools, not just the override funds (which assume state matching funds). If we don't have school plans in place by the appropriate time, then we lose access to those state matching funds, and Newton will be responsible for paying for the full cost of the schools, not just the Newton portion. Do you know what those deadlines are? Can our union contracts be negotiated within that timeframe? If not, can we reapply or do we lose those funds? Is it possible that you are proposing an answer which will burden Newton taxpayers even more because of the loss of state matching funds? Do you know any answers to these extremely basic, fundamental questions that underlie your alternative proposal? Without clear answers to these questions NOW, it seems clear to me that you're more concerned with saving money-- at any expense, even if that means our children suffer in horrible school facilities. That is clearly a choice, but you should be explicit if that is Moving Newton Forward's belief.
Moving Newton Forward February 16, 2013 at 02:53 PM
Walter, we are concerned that you lack a sufficient understanding of the costs associated with replacing those schools. Newton is planning on spending $120M gross ($102.5M net of "state aid" to replace and renovate three high schools. That represents a net average cost of $34.167M per school. Let's compare that to Burlington, which built its new elementary school (similar size in terms of student population and square footage) two years ago for $16,742,506. http://www.kbaarchitects.com/burlington-memorial.php Why can't we get the same price for our elementary schools that Burlington got? If you and Geoff want to pay $300+ annually in higher taxes, that's your business. When you want to force us to pay more taxes for three overpriced elementary school projects then it becomes our business.
Walter Jones February 16, 2013 at 03:25 PM
Now you're changing what you're saying-- be consistent. You've stated as core to your platform that we should lower compensation of city employees to cover the cost of override. Now you're saying that the cost of the schools themselves are too expensive. Which is it? Are you opposed to the cost of the schools? Or think the costs should be covered via budget reductions? Where in my post did I demonstrate ANY lack of understanding of the costs associated with the schools? The ONLY thing I have stated is that your statements are based on flawed logic and missing facts. I stated NOTHING which implies that I don't understand the costs of schools. I expect an apology for that attack, or demonstrate where in my postings that I don't understand the cost of schools. Further-- answer the original questions posted. You do not have sufficient information on YOUR OWN proposals. You said we should renegotiate with the unions. You don't even know when that would take place. You show numbers that don't factor in state matching funds. Now you're changing your story and say that you're opposed because the schools are projected to cost too much. You're being exposed. Answer the questions being posed to you. Stop false attacks on me. I want an apology. And answers.
Geoffrey N Epstein February 16, 2013 at 03:27 PM
MNF has the facts wrong on capital construction projects. See: http://www.massschoolbuildings.org/node/42012 where it is clear the the Mass School Building Authority (MSBA) reimbursed Burlington $14 million of $26 million in reimbursable expenses. The actual project cost was $29 million (see http://www.bostonglobe.com/metro/regionals/north/2013/02/03/burlington-school-district-eyes-another-building-project/qqUmvFuBnAw3Wz3pvdo6pO/story.html) That project replaced a 55 year old school. So the architects' website is quoting the cost to the town after MSBA reimbursement. The costing we have for our 3 school projects is sound and overseen by the MSBA who, with a greatly improved new process, are making sure towns and cities get value for money. The commentary from MNF reflects again the fact that in many of their statements they are guessing at best. We cannot base the future of our kids on guesswork. We have a very sound plan behind the override and a YES vote on all 3 questions will ensure that we solve our highest priority problems: inadequate school buildings and a rising student population.
Moving Newton Forward February 16, 2013 at 06:04 PM
Walter, you need to relax. We are saying that the city has to choose between unaffordable pay raises to government workers or spending money on schools. "You said we should renegotiate with the unions. You don't even know when that would take place." Well, we discussed union contracts in a different report. We can see that the Teachers Union's Contract ends on August 31, 2014 and the Teachers Union represents the largest segment of municipal employees. http://newton.patch.com/articles/school-committee-approves-new-teacher-contracts-details-released#pdf-8298035 If the override fails, Newton could still afford to start work on Zervas when the objections to the naming rights deals were overcome and once the naming rights deals are commenced. Newton could also begin work on Cabot and Angier on September 1, 2014 if Newton teachers were willing to forego pay raises for one year. "the state matching funds." Why did Burlington get over 50% matching funds while Newton only gets 25%? "Where in my post did I demonstrate ANY lack of understanding of the costs associated with the schools?" When you overlooked the fact that the Zervas renovation costs more than the project to rebuild Angier . "I expect an apology for that attack, I want an apology." We think that distinguished alumnus of the London School of Economics Sir Michael Phillip Jagger said it best when he said "YOU CAN'T ALWAYS GET WHAT YOU WANT"
Moving Newton Forward February 16, 2013 at 07:06 PM
Geoff Epstein, we love it when pro-override School Committee members engage in lawyerballing in order to try to cast doubt on their opponent's message. You're not the first member of the pro-override to do so. Assuming that the Boston Globe-Democrat had the most accurate cost figure for Burlington Memorial School, its gross cost of $29M is still 25% lower than the average gross cost of Cabot, Zervas and Angier. ":We cannot base the future of our kids on guesswork." If anything, you are the one engaging in guesswork since you have two contradictory numbers. As for the state reimbursement, why exactly did Burlington get over 50% while Newton only gets 25%? "rising student population." 8% cumulative growth in student enrollment from 2003-2012 versus 39% cumulative growth in spending during that time period. Newton Taxpayers are Taxed Enough Already. Newton taxpayers have had to make tough fiscal choices during this period of economic weakness and it is time for Newton's city government to do so as well. We Believe in Moving Newton Forward, with Fiscal Responsibility and Sustainability.
Walter Jones February 16, 2013 at 07:18 PM
Moving Newton Forward-- " We are saying that the city has to choose between unaffordable pay raises to government workers or spending money on schools." There you go changing your reasoning for opposition again. Your last post was talking about the costs of the schools. Now its back to choices between workers and schools. Which is it? I'm glad to see that you looked up when the contracts expire. But you're already publicly on the record not knowing if it was 2014 and 2015, which demonstrates how little you care about when the students would actually get to be in schools that aren't falling apart. The timing of your proposed savings is critical to when we could start building, and your own prior statement made clear that you don't even know that. Its just evidence that Moving Newton Forward does not share the values of most citizens. "When you overlooked the fact that the Zervas renovation costs more than the project to rebuild Angier ." I never did. There is no statement that demonstrates that. Quote one that proves otherwise.
Walter Jones February 16, 2013 at 07:20 PM
"YOU CAN'T ALWAYS GET WHAT YOU WANT" I actually am getting what I want. This thread shows that you made an unfounded attack on me, stating that I didn't understand the costs of rebuilding the schools. And that simply demonstrates your callousness. Honest people make honest mistakes-- when you can't acknowledge that you made an unsubstantiated attack, and apologize, everyone reading this blog can see Moving Newton Forward for what it is. Its increasingly clear how little logic or fact underlies your opposition. And now we have proof on how shallow and petty Moving Newton Forward is. You make attacks on others that are unsubstantiated and won't apologize. It all for everyone here to read. Keep showing everyone in Newton your true colors.
Moving Newton Forward February 16, 2013 at 07:43 PM
Wally, If anything, your rhetoric has shown the true colors of override supporters. When we question the override as well as show facts and figures contradictory to the pro-override rhetoric, you guys engage in Alinskyite smear tactics to demonize and attack us for opposing your $11.4M annual tax grab.
Walter Jones February 16, 2013 at 07:55 PM
Please also address Geoff Epstein's comments that you quoted the Burlington school costs incorrectly. There seems to be a lot of incorrect facts and misunderstandings coming from Moving Newton Forward.
Moving Newton Forward February 16, 2013 at 07:57 PM
We already addressed Geoff Epstein's comments. We quoted from the architect, he quoted from other sources.
Geoffrey N Epstein February 16, 2013 at 08:06 PM
Hmm! Now MNF, you have to understand that the Burlington project is complete. Angier completes in 2016. Construction costs rise with time. You can be assured of one thing and that is the MSBA will be looking out for value and the cost per sq ft for these construction projects, inflation adjusted, will be comparable. Also, the actual MSBA reimbursement is known for Burlington but not for us yet. When you factor in these, the construction costs of our schools will match quite closely to the one in Burlington. You should at least concede that you just made a gross error in the cost of the Burlington school by not looking into the matter in sufficient detail to ascertain that the MSBA reimbursement dropped the real cost to Burlington by $14 million. When you make a mistake like this at least acknowledge it. Also, it is ironic when you want our MSBA reimbursement to be more than we estimate, when you are committed to ensuring it is zero. If the debt exclusions fail, we lose all of the MSBA reimbursement money - up to $27M. You cannot have it both ways! Further, I am not 'lawyerballing'. I'm being very specific in my arguments and trying to get more accuracy and detail from you.
Walter Jones February 16, 2013 at 08:32 PM
I'm still waiting for you to show where I misunderstood school costs or apologize. Any decent person would do so. I've also never stated that I support the override.You're once again assuming information that rather than use facts. If you were actually informed you'd know that I've been questioning the union negotiations on health benefits for years, rather than your johnny-come-lately attitude. Where were you last year when the actual negotiations were ongoing? Feel free to read back on the Newton TAB blog during the contract negotiations-- I was very clear that Warren left money on the table. I'm writing in here because of a consistent pattern where you don't address issues, misstate facts and have incomplete logic. I would more than welcome thoughtful debate. Moving Newton Forward has not demonstrated its ability to do that. Instead, Moving Newton Forward has been exposed for its amateurish, incoherent analyses that misstate facts, or use incorrect information. Its all here for Newton to read.
Walter Jones February 16, 2013 at 08:37 PM
"We already addressed Geoff Epstein's comments. We quoted from the architect, he quoted from other sources." Wow. The incompetence is amazing. So you standing behind an architect website on the cost of Burlington, rather than sources of the MSBA and Boston Globe? Can you say definitively that the architect is including all costs, rather than construction of the building only? Does it include purchasing of equipment, furniture and other materials INSIDE the building? Does it include the tear down of the other school? Is this an actual apples-to-apples comparison to a total project cost of Cabot or Angier? Does Moving Newton Forward do adequate research before it takes positions, or does cherry pick any data that it can find?
Geoffrey N Epstein February 16, 2013 at 08:50 PM
I have to agree with Walter. The architect's website is simply wrong. The MSBA and Boston Globe sites confirm that the Burlington elementary school cost was around $29M, which is what one would expect for an 80,000 sq ft school at around $400/sq ft. The MSBA reimbursement was $14M, so Burlington paid out $15M. The total cost was clearly not the $16M on the architect's website. So this is a very clear example of how MNF is presenting its arguments and how closely they are tied to sound data. I'd like to see much more precision and detail on the other MNF arguments so they can be related to an MNF real plan for moving Newton forward. I don't see anything solid yet.
Moving Newton Forward February 16, 2013 at 08:57 PM
We have to disagree with Walter and Geoff. If we use the Boston Globe's numbers, Burlington's net cost was $15M, which is still much less than the $27.5M net cost projected with Angier, $40M with Zervas and $35M with Cabot. Please stop trying to pedantically quibble in order to "cause doubt". We have many arguments against the overrides.
Walter Jones February 16, 2013 at 09:06 PM
You said the schools cost $14M. Now you're saying differently-- the "net cost" was $15M. Changing facts and statements once again. Making it up as you go along. Do you acknowledge mistakes when they're made? Or does Moving Newton Forward think it is acceptable to just change facts and move on? I am still waiting for an apology where you stated that I misunderstood school costs without any substantiation.
Walter Jones February 16, 2013 at 09:11 PM
"We have many arguments against the overrides." Which one is based on a substantive set of accurate facts? Each one mentioned is based on facts that you change once they're tested. Union contracts, Burlington school costs, even the rationale for your opposition. You stated in your op-ed what was presumably an official position, now you say there are many arguments. Is there any consistency to your thinking?
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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