Present: Thomas Trimarco, Chairman Alan LeBovidge, Mayor Charles V. Ryan, City Council President Tim Rooke, City Clerk Bill Metzger. (Absent: Jake Jacobson) Executive Director Philip Puccia, Asst. Director David Panagore.
The audience included (for varying lengths of time): City CFO Mary Tzambazakis, Councilor Kateri Walsh, Election Commissioner Kathy Fleury, Community Development mmissioner Juan Gerena, City Solicitor Patrick Markey.
Alan LeBovidge: ...the next meeting for June 29 to go over the budget and whatever other matters come before us, but we have one item that needs attention, so that’s the reason for today’s meeting. I guess, officially, after we have this meeting which hopefully [glances at the clock] will be a short one, we’ll going into executive session to talk about labor and litigation matters, and we will not be returning from that meeting. So the first thing is, we have the minutes from the last meeting, and...the May 27th meeting. Do we have a motion to accept the minutes from the last meeting?
**MOTION PASSES UNANIMOUSLY.
I don’t know...Phil or Mary who’s going to lead the charge. Just kind of tell us what we’re doing, and why we’re doing it.
Savings from New City
Bonding Arrangement
City CFO Mary Tzambazakis: We’re going to be undertaking several items over the next few months dealing with our short-term bond anticipation notes and issuing long-term debt, and the purpose of this meeting is to go through each of the activities we’re going to be doing and to ask permission of the control board. As you are aware, we’ve been working over the last year to try to clean up our whole issue around our bonds and our capital projects, and we’ve made some significant strides, and, actually, one of the actions you took last month has had a positive influence on what we’re going to be doing in the next few months with bonding.
The first issue is that we need you to authorize us to issue $30,206,000 in state qualified bonds at bond note. We have a short-term note that was issued last year; it’s coming due this month. What we’re asking you to do is to approve us to roll over the short-term note for a 30 day period, and then that will be consolidated with another short-term note in July to issue long-term debt in the amount of $49,236,000. What we will be doing at that time over the period of June and July with these pay-downs and roll-overs is we will be paying off the debt from Municipal Hospital so that will no longer be an outstanding debt, which is very good for the city, because we won’t be financing a deficit anymore with our bonding. The issue will be cleaned up, and we will be actually be paying for bricks and mortar projects that have been in process or completed.
The next item...so the second item is authorizing us to issue the $49million of state qualified bonds at an interest rate not to exceed 5%--we need to negotiate that at the time—and this will happen between the periods...the second bond-anticipation note will be due on July 8, but the complete roll-over with delivery is on the 22nd of July, I believe. Again, you authorize us to issue this with no greater than 5% interest.
The fourth item that we are asking you to do is to allow us to appropriate and transfer under Chapter 169 the sums of $738,000 and $46,000 from unexpended bond proceeds. As you can recall, the last time I was here on bonding, you authorized us to transfer $1.9million of unissued...unused debt. Based on what those items were, and what we’re refinancing for, we can apply $738,000 and then another $46,000 in July which will allow us to reduce the amount of money we have to borrow long-term debt.
And then you are also authorizing the executive director, Mr. Puccia, to apply to the Municipal Finance Oversight Board for us to qualify under Chapter 44 for the Qualified State Bond Act for a period of one year, twelve months and one additional month, so that the issuance will not be due in July, but in August. (That was a recommendation from Jim Johnson from the Department of Revenue.) And also authorizing Mr. Puccia to negotiate and enter into contracts with individuals necessary to provide the underwriting and selling of these issuances of long-term debt.
AL: By doing this, are we saving the city money?
MT: There is an opportunity with the refinancing that we’re looking at doing of refinancing approximately $100million which would save $7million ($2million to the city of Springfield and $5million to the state) and that’s why we’re pursuing this. Now we haven’t gotten all the numbers worked out yet. But our preliminary estimates and from our financial advisors in Boston: they’ve told us that there’s an opportunity to refinance approximately $100million which would result in approximately a savings of $2million to the city.
AL: But that’s over a period of years?
MT: Over a period of years. We were trying to front-end the savings as much as possible, but it will be over a period of time. The good thing is that we’d also be saving the state $5million as well.
Mayor Ryan: That’s not part of what we’ve got today. You’re setting the stage for...
MT: We’re laying the foundation for the legal paperwork that has to be done to do that. We’ll have to come back to you gentlemen in July, or whenever we do this, to get the authorization to go forward.
AL: That’s why we’re meeting today on this issue because we need the authorization to go forward.
MT: All of this is laying the groundwork for the paperwork that has to go forward in order for us to execute.
AL: OK.
Tim Rooke: Mary, what is the interest rate that we’re paying now on the existing bonds? do we have, do we know that?
MT: I don’t have that off the top of my head, I’m sorry.
TR: Is it about...is it higher than 5% that we’re shooting for?
MT: No, I
don’t believe it’s higher than 5%, because these are short-term notes that
we’ve rolled over for 12 months, “clips.”
They’re projects that were undertaken that were rolled over 3 times—this
is the third and last time they can be rolled over as short-term debt—and they
need to be consolidated into long-term debt, a period of twenty years or so.
TR: And the anticipated savings of the $2million is that over the twenty year?
MT: The $2million savings is a whole separate issue. The $2million savings is based on the existing portfolio. They reviewed our outstanding debt, and they identified $100million of the outstanding debt that’s already issued in long-term debt to restructure and refinance that. That will save the city $2million in interest payments and $5million to the state.
TR: Thank you.
Philip Puccia: Tim, it’s in the area where some of the...where we gain a favorable interest rate on portions of the long-term debt that accrue the savings.
TR: Oh, OK. Thank you.
AL: The city’s debt is more than $100million.
MT: It’s $400million plus.
PP: It’s substantially more than $100million.
CVR: Mr. Chairman, I’d just like to say that I’m aware first hand of the amount of work over many, many months that has gone into the matters that are before us today, and I really want to express publicly my appreciation for the leadership of Mary. She’s had many people helping her, but this is complex, it’s serious, and I think she’s just done an outstanding job of getting on top of a very, very complicated issue, and this is a tremendous performance, I think, on her part.
AL: You just have to close the deal.
MT: Yes, sir. [Laughs]
AL: Very good, Mary. I guess, formally, we need a motion to accept this executive order.
**MOTION PASSES UNANIMOUSLY.
OK. Thank you. That was great. That’s the only item on my agenda. Does anybody else have anything else they would like to add before we go into executive session?
CVR: I’d like to make some remarks, Mr. Chairman, and I know Tom Trimarco has a report to make. I’d like to defer to Tom.
AL: Mr. Trimarco.
Improvements by
Investment of City Workers’ Pension Funds
Thomas Trimarco: Well, a bit of good news: I just came from a meeting of the retirement system of Springfield where I am a member. (The mayor appointed me several months ago.) And, today, by a unanimous vote, the board has determined to transfer the management of the investments of our fund, which is approximately $260million, to the state-run Pension Reserve Management Trust (it’s called “Prim”) where there is a professional board and professional managers, and whose returns historically both in the near-term, medium term, and long-term have been significantly higher than the returns that we have earned through management of our own local system. So, I made a recommendation that that transfer be made, and the chairman and Mr. Harrigan and their members, Joe Nowak and Jeff Poindexter and the city’s auditor, Mark Ianello, and I voted unanimously to do that.
And I think it was a very positive step to move those funds into more professional management . Over the last eight years, to just give you an example (and, obviously, past returns are never a predictor or future returns), but, over the last eight years, had our money been managed by the “Prit” [sic] fund, rather than by our own management, the funds, our funds, would have earned an additional $100million in the past eight years. And, because of the higher returns and more professional management that... the state fund is a $36billion fund, and, obviously, we are a much smaller fund, and it’s difficult for us to attract the kinds of managers, on the one hand, and on the other hand, to have the kind of asset allocation that can lead to higher returns in a...in a market that is...that we’re currently existing so it was a very good step.
AL: We pay fees now, do we have to pay fees to the state or do they do it for free?
TT: No, the management is...the management is...they pay fees for the...but there is no cost to us.
AL: We actually save money in other words.
TT: We will, we will, in other words, the fees and expenses that are coming out of our fund will no longer be charged to us, and we will have alloc-able piece of the states larger system.
AL: Well now by doing this, there’s still local control by the local board as far as retirements and...
TT: Absolutely. None of that has moved. All the dealings with retirement issues, involuntary retirement issues, all that remains with the board here. It’s just the investment of the retirement funds themselves.
AL: Sounds like a win-win.
TT: No, it really is, and the board is to be complimented for doing what I consider to be the prudent and right thing under these circumstances.
AL: Great.
CVR: Mr. Chairman? I’d like to express my own feelings of great delight at what has happened here.
Rarely, if ever, has the appointment of any individual brought about such a significant and quick return. Tom Trimarco was appointed to this board three or four months ago. He did an analysis which indicated to him that if we move the investment responsibility to the state system that we had a chance to stop finding ourselves getting less and less funded and really turn this whole curve around. And it was his analysis and then his leadership and his ability to work with his colleagues that, I think, brought about this result today. I’m so happy that...not only that the transfer has been made, but that it was by a 5 to nothing vote, Tom. I think that’s extraordinary.
Clearly, the information that I received from Tom is that we were losing as much as $10million a year, or that the system was, and that in the end, this is a system upon which the pensions of our retirees depends, so this is an extraordinary event and just congratulate Tom on it.
And I should also say for those who do not know is that while Tom Trimarco’s done a lot of things in his life...the reason he’s so well-qualified on this is that for eight years, as deputy treasurer of the Commonwealth of Massachusetts, one of his day-to-day responsibilities was the overseeing of this particular fund. Now he’s not any longer in that position, but he knows it intimately, and, therefore, clearly, went right to it to make that analysis that we’re now getting such a benefit from, so this is a great day for Springfield, and it’s a major accomplishment of the Finance Control Board. This would not have happened without—and I think you’d share that with me, Mr. Chairman--
AL: Absolutely.
CVR: ...that without Tom’s presence on this board, this opportunity would just have laid fallow.
AL: [laughing] We’ll have to find something else for him to do now. Thank you.
TT: Thank you, Mr. Mayor.
TR: Mr.
Chairman, if I just could...Tom, that’s a terrific job, and your professionalism
and your...you’ve always been a gentleman, and I think just with the information
you presented to the board, to Jeff Poindexter and Joe Nowak and Jim Harrigan and
Mark Ianello, you were able to persuade them that, not only was this the right
position to take for the city, but also for the retirees and those that are
anticipated to go into the system, and that is really the best news of all,
that.... Many retirees came to me and
were concerned about the potential change, and when I told them, as you had
explained to me, the benefit to the
program, they were thrilled, so I think, really, you’ve accomplished two
things: you put us on the right track
and the board has voted with you out of concern for the retirees and for the
city, and you’ve also put a lot of people at ease. And I know it was not a simple task, and you
put a lot of effort into it, and you should be publicly commended for that
along with the other board members, so thank you very much, Tom.
TT: Thank you.
AL: I agree. I don’t know the other board members, but my hat’s off to them, I mean... standing up for doing the right thing
TT: They asked the right questions. It was a process. We took about three months getting to today’s vote and decision, and they “kicked the tires on it,” Prim came out and met with us. We met with our current managers, and this was an informed decision and, in my viewer, a right one, and I think it’s a good thing.
AL: Anything else?
Response to Press Reports of Recent Threats by Secretary Kriss
CVR: Yes, Mr. Chairman, I’m sure all of us have seen [holds up several newspaper clippings] the newspaper articles of the last several days, and I really feel that it is something that I should comment on. I know that you’re aware of the fact that just because of the statues, the mayor of Springfield, really wears three hats: I’m not only the elected mayor, but I’m also, by virtue of the Plan A charter, chairman of the school committee, and also by Chapter 169 of last year’s statute, a member of this control board, and sometimes, kind of meet myself coming around. But I do think that, with some of the turbulence that has been around for the last several days, that I really would like to make a few remarks, not in a “bomb-throwing” mood at all, just really trying to sort out a few of the things as to where we are.
I think that it is incredibly important for the people of Springfield to understand that, in spite of the fact that we are still under water--and we’ve got a long ways to go--that this board has made enormous progress in the last ten months. It has not been easy; as a matter of fact, I’ll go the other way, it’s been difficult, but the progress is being made, and I would like to ask Mr. Puccia and with the assistance of Mary T. and anybody else he wants to call on—hopefully by our meeting of the 29th, to be able to give some sort of a...essentially a ten-month resume of the accomplishments of this board. I think it’s high time that that be shared in some sort of detailed form, not only with the Springfield community, but also with some of the people in Boston upon whom we’re counting in the long run for some real support and a sense of partnership whether it’s in the governor’s office or whether it’s in the legislative leadership.
But I would like to make a comment on some of the events of the last few days. I am going to be mentioning the role of Mr. Kriss and, probably, to a certain amount, critical of some of the things he has said, but I want to preface that by saying publicly that Mr. Kriss has done some very, very positive things for the city of Springfield. So, I get very unhappy when, in a sense of competition or advocacy, people talk about whatever the negative is and, for some reason, have trouble acknowledging the positive. But, as the board knows, and with Mr. Puccia, really, leading the way, we have a series of constructive relationships with department after department after department in the state administration that is really a very, very positive coming together of events. And whether it’s in the public safety field, whether it’s in the housing field, whether it’s in the economic development field, whether it’s in the MIS computer field—all of these things are happening, and they’re happening, in my opinion, because of the fact that Mr. Kriss is the day-to-day person who is insisting that this happen. And so, for that, I’m grateful and the people of Springfield should be grateful; it’s just that they don’t know nearly as much about the dynamics of this as we do who are exposed to it.
I also should point out that, and [waves sheaf of papers marked with state seal] this is the legislation that Chapter 169 of the Acts of 2004. Essentially, this was drafted by Mr. Kriss, so he’s no stranger to it, and he presented it to the legislature last June 2, about year and a week ago. He not only is the author of the legislation, he is the person who probably played the biggest role in the selection and appointment of our three state members and also Mr. Puccia. And so, again, he has, from the beginning played a very, very strong role.
You may remember that when he drew this legislation and drafted it in the beginning, he called for the abolition, in Springfield during the life of the control board, of collective bargaining. This was summarily taken care of by the legislature. They took that out and also his attempt to take away civil service protection. That’s indicative of the feeling of Mr. Kriss that this can’t work as long as there’s traditional collective bargaining. That’s his feeling, not mine, but, again, he has not given up on that, and several weeks ago he again indicated to the board that he’d like some support on that. The board did not support him on that, but it is clear Mr. Kriss does not beat around the bush. It’s clear from his statements and his speeches and his writings that he feels that public unions are not part of the solution, but they’re a big part of the problem.
Last Thursday, he evidently varied his message somewhat by telling legislators, our local delegation, that he wanted this law [waves papers] changed to allow him, among other things, to appoint a single arbitrator to decide labor contracts, and he indicated a primary reason for that is that things were going too slow. I think that the inference was that they were going too slow because of the unions, when the truth of the matter, as I understand it, is that of the 29 labor unions, I think we have made a proposal only to 1, namely the teachers’ union, and the others, we have not yet put anything on the table, so I don’t think we can blame the 28 other unions for dragging their heels when there really isn’t anything, as far as I know, to respond to at the present time. (I think that the police will be getting a proposal very, very quickly.) The other thing is that his statement asking for unilateral power to appoint a so-called arbitrator came within 24 hours of the first mediation meeting between the control board on the one hand and the teachers’ union on the other.
I think it’s difficult for anyone to have confidence in the fairness of a situation where the secretary of A and F, with his philosophical origins so clear, that there can be some sort of equity in a system where he would appoint a single arbitrator who would then decide. And I think it’s a very, very difficult situation to try and espouse, and my guess is that he wouldn’t be any more successful on that than he was a year ago in trying to do away with collective bargaining. If anybody wants to bring this to a conclusion, if they feel that time is running and that time is licking us, I think that there’s no problem in re-examining this whole issue of binding arbitration with three arbitrators, and we pick one, and they pick one, and the two together pick a third, but I’m not sure that we’re there, and kind of contradictory positions are being taken care of in good faith, but there are ways to move this forward if speed is the most important element rather than trying to comes to grips through the collective bargaining system with....in a traditional way.
I think that the so-called ultimatum threat was spelled out is most troubling which is kind of “pass it (pass this legislation) or I will dissolve the control board” and, impliedly with it goes the $52million worth of credit. The dissolution of the control board, which was created with legislation drafted by Mr. Kriss seems to just go contrary to it, especially when, I think our view [gestures down the table] is that we are making significant progress, not as fast as we’d want. Not as fast as he’d want, not as fast as the people of Springfield would want, but we are making significant progress. And I do not understand for a minute what kind of positive result would come from the abolition of the control board and taking away of the line of credit. This is especially confusing when Mr. Kriss prefaced his remarks, evidently, last Thursday by saying that we, Springfield,are one of the poorest cities in Massachusetts and, yet, he didn’t seem to hesitate to take away the only lifeline that is presently here.
Clearly, over the past year, time and time again the only thing that has prevented payless pay days has been the line of credit. without that line of credit, we would have ceased to function, whether in the schools or in public safety or in trash collections or anything else, and so this is all that has sustained us as we desperately try and reduce the cost of government and increase the revenue we take in. And it’s a foot race that really nobody can predict how successful we’re going to be.
I was troubled that the newspaper headline on Friday indicated that the control board issued that ultimatum. The control board did not issue any ultimatum. As a matter of fact, I think that the board and virtually all of its members that I have talked to were as surprised as I was. And I spoke to Peter Goonan about it; he agreed with me that that was an erroneous headline and it’s unfortunate that that really has yet to be corrected. But there was no discussion or no vote by the control board in private session or in open session authorizing such a threat. I think that this threat, as most threats, is destructive and not constructive and I think that it makes our job a little bit harder.
One of the items in yesterday morning’s paper indicated that the legislators would be influenced by what the mayor of Springfield said as to what the consequences would be of the abolition of the control board. And so, in a word, let me say, that such an abolition would be disastrous, nothing short of that.
I mean, if we don’t have any money, and there’s no other place that we can see money coming from other than the line of credit that we’re getting, we would cease to be able to exist. And I think this is too bad, because of the fact that we...not only have we made some significant financial multi-million dollar savings already, as you know, we are moving forward on studies in a half a dozen significant departments whether it’s police, fire, the administration of the school department, on street and off street parking, DPW and so on . And you have to get the studies in before you can even begin to implement them and what we’re hoping is that the kinds of savings that we can create because of the guidelines of these studies will help us significantly to reduce the amount of the deficit in 06 from what we’re looking at in 05.
And so, when I say disastrous, I would say this, that if we stop being able to rely on this line of credit, we really would have almost a state of anarchy and the fundamental betrayal of , in my opinion, of the state’s responsibilities to this city. So I would hope that we could continue forward, that we could lower the tone of our voices. We were interrupted in our work by this flurry and this exchange. We’ve come out the other side now. It has done nobody any good that I can see. We all here at Springfield have got to continue to work hard. We know that if we lose, if we’re not successful, everybody loses, and I would hope that, sooner or later, that all of those involved, whether they’re here or in Boston, would understand that if we are successful, that everybody wins.
And so I just wanted to, for what it’s worth, Mr. Chairman, express some of my sentiments on the events of the last several days.
AL: Any other comments? It’s nice to know that we’re wanted by somebody. [Laughter]
CVR: Well, maybe the thought of losing us is going to change some opinions. I don’t know.
**UNANIMOUS VOTE TO GO INTO EXECUTIVE SESSION.