Bill for long-unfunded benefits has come due
Bloomfield Township, established in 1827, is a beautiful, bucolic, primarily residential community of about 41,000 people spread out over 26 acres. But Bloomfield Township has a dirty little secret that has just begun to be aired – it has a massive unfunded liability of what is called Other Postemployment Benefits (OPEB) liabilities, and it's about to cost residents dearly.
In the last few months, the township has begun discussions at board of trustee meetings and trustee study sessions referencing their OPEB issue, and the problem that is beginning to unfold. In a nutshell, for decades Bloomfield Township was what was called a “pay-as-you-go” municipality for retirement health benefits. That meant officials had not set aside money in a fund to pay for former employees and their spouses, but would pay for their health care, which includes benefits such as medical, dental, vision and life insurance, at promised levels out of current funds. It made Bloomfield Township a great place to work for, as retirees were generously taken care of.
But the rules of the game changed along the way. In December 2017, the state legislature passed and Gov. Snyder signed into law Public Act 202, also known as the Protecting Local Government Retirement and Benefits Act to have their unfunded mandates be a minimum of 40 percent funded. The act, which took effect January 1, 2018, requires municipalities to develop collective action plans to show how they will get to a minimum of 40 percent funding in the next 30 years. The township can no longer pay for those expenses as employees retire and accrue actual costs, or pay-as-you-go, a practice once used by many municipalities.
In total, only about 6.7 percent of about $164 million of OPEB liabilities are funded, according to a 2017 township OPEB report – a shortfall of about $65 million. There's only one place that money is coming from, and that is from township taxpayers, in one way or another.
Supervisor Leo Savoie, who noted the township is now in the bottom 20 of Michigan municipalities with this shortfall, was directed by the board to have a survey of residents conducted so they could get feedback from residents as to what to cut or tax. Among the difficult choices are outsourcing police and/or fire; closing Fire Station 4; contracting out assessing; eliminating various township services, including animal welfare, gypsy moth control and hazardous waste disposal; and other reductions in services and/or increased fees for services.
The township is also considering bonding between $65 and $160 million to fund 40 percent or more of the liabilities – but that comes with its own set of obligations, including a debt for homeowners of between $4,000 and $10,000 total, over the course of the bonds.
It's important to recognize that the OPEB deficiency is not a fault of the current board of trustees, or of the current slate of elected officials, including Savoie. They're working to fix a bad situation. This harkens back much further, to the era of supervisor Fred Korzon, who like others of his time, both civic and corporate, gave employees (particularly union employees) benefits and retiree health benefits as an easy out from the bargaining table rather than increasing wages. After all, those bills were far down the road.
Well, the rubber has hit the road, with skid marks. And the bills have come due.