CHATHAM – In a step toward covering the town's $17 million other post-employment benefit liability, Gov. Charlie Baker last week signed legislation authorizing a property tax surcharge to help address the financial obligation.
The legislation allows the town to levy a 1.5 percent surcharge on property tax bills beginning in 2020, when the current 3 percent Cape Cod Land Bank excise tax ends. The new surcharge sunsets after 10 years, and is expected to raise $5.8 million during that period.
Other post-employment benefits, referred to as OPEB, represent the town's future financial obligation for its 50 percent share of the cost of health insurance and other benefits for eligible retired town employees. Each year the town budgets funds to cover the annual OPEB costs, and since 2015 has put $150,000 into an OPEB liability trust fund annually as an initial step toward funding the overall liability. At that level of funding, officials said it would take decades to meet the obligation.
Last year, in an effort to find ways to increase funding of the OPEB trust fund, selectmen and the OPEB board of trustees asked voters to institute the 1.5 percent property tax surcharge when the 3 percent land bank tax sunsets in 2020. Currently the land bank tax brings in $981,895 annually. Half of that amount, or about $500,000, would be generated annually by the OPEB surcharge, with the amount increasing with property valuations over time. That's almost double the total amount currently in the trust fund account.
Town meeting voters authorized selectmen to seek special legislation to institute the surcharge.
Increasingly, bond rating agencies are putting emphasis on prefunding OPBE obligations, the town said in a press release issued after Baker signed the bill Jan. 9. Maintaining Chatham's triple-A bond rating is an annual goal of the board of selectmen.
The $17.2 million liability is an actuarial estimate based on the number of current and past town employees.
In the press release, the town thanked Rep. Sarah Peake, D-Provincetown, and State Senator Julian Cyr, D-Truro, for filing the legislation and ushering it through to approval.