You
may have seen the headline in last week's Boston Globe: "Pensions to
strain city, town finances – New infusions needed as funds lose value."
And it may have sounded like the most boring topic on earth, but
appearances can be deceiving: this is an important issue and it
provides a good example of how Somerville's conservative fiscal
management will help us weather this recession.

In past opinion
pieces, I have written about how our strong bond rating has steadily
improved over the past five years – and continues to give us access to
credit markets at reasonable cost. I've written about creating the
City's first-ever Capital Stabilization Fund, which sets aside
predictable amounts of revenue for routine expenditures on our parks,
schools and other facilities. I've explained how investing in the basic
infrastructure of our community helps increase our economic viability
by maintaining property values and encouraging commercial investment.
And, more recently, I have outlined some of the ways we will be cutting
back on spending – including the deferral of hiring to fill some
existing vacancies (public safety hiring will proceed) and the
reduction of the City's share in the cost of non-union employee health
benefits from 85 percent to 80 percent.

We've been increasing
our efficiency in other ways as well. Last year, we came out with an
Environmental Strategic Plan (ESP) that included the hiring of an
Energy Services Company (ESCO) to design and install a series of energy
savings projects in all our buildings. The guaranteed savings over the
life of the project will be $2.7 million. An automated shutdown program
puts city computers in sleep mode when not in use – and turns them off
entirely at the end of the business day unless workers specifically ask
for them to be left on. The savings from this single initiative is
estimated at $25,000 annually. Over the past three years, we moved
every department in the city to a Voice over Internet Protocol (VOIP)
phone system while getting rid of older copper lines no longer in use
(by the way, the phone service failure at City Hall last Friday was due
to one of Verizon's old copper lines getting wet – our VOIP system
never failed). These changes are saving taxpayers roughly $170,000 per
year. And, we just saved another $18,000 per year by switching to a new
vendor for push-to-talk, cellular and data-card service.

Even
as the recession has deepened, all of these factors have kept
Somerville in a stronger position than many other cities and towns.
Nobody would call us a wealthy city, and there is no doubt we are going
to feel the sharp pinch of a struggling national economy, but we are
going to survive without losing ground on the progress we've made.

All
of which brings me to the issue of retirement system management: Every
city, town and state authority in Massachusetts has an independent
retirement system with its own investment portfolio. All of them –
including ours – have been hard hit by the steep decline in stock
prices. The average loss for the calendar year in Massachusetts
municipal retirement systems is 29 percent; Somerville's loss is 28
percent. The effect of that decline, however, varies widely among the
various systems – and, as in so many other areas, Somerville is in
better shape than many of its sister cities and towns.

As
recently as 20 years ago, our investment funds supported only about 40
percent of our obligation to retirees – the rest had to come from city
appropriations. Nowadays, thanks to the prudent action of several
administrations, and the skillful management of our retirement fund
investments, we're over 62 percent. That's far from ideal, but it puts
us in significantly better shape than many other small and mid-sized
cities across the Commonwealth. We've also seen our retirement
investments perform as well or better than the state's Pension Reserves
Investment Trust (PRIT) and our neighboring communities of Cambridge,
Brookline, Belmont and Medford. Calendar Year 2007 investment rates of
return were: Somerville (12.14 percent), PRIT (11.9 percent), Cambridge
(11.89 percent), Brookline (6.96 percent) and Medford (6.91 percent).
On a five year basis, Somerville's rate of return was 12.46 percent.
All of this means that we have been able to manage appropriate payments
from the City to the retirement system while still having enough
resources to expand public safety, education and other basic services.

I
can't take any credit for this solid record, because the Retirement
Board makes independent investment decisions. Its five governing
members are Chairman John M. Memory (elected), Mary Phinney (elected),
Larry Murphy (appointed), John Rourke (appointed) and Ed Bean (ex
officio). They're doing a fine job, and the rest of us in the
retirement system owe them a debt of gratitude for their dedicated
service. But what they've accomplished is just as important for the
taxpayers, because our Retirement Board's strong performance ensures
that the negative impact of a slumping stock market will be less severe
in Somerville than in neighboring communities.

Of course, every
little bit helps, and I support the Mass Municipal Association's call
for legislation that would tack on several more years to the state's
current 2028 deadline for fully funding state retirement systems. Such
a change would allow us to further soften the impact of pension system
costs on taxpayers, and provide more operating budget dollars at a time
when the state is contemplating cuts of up to ten percent in the 2009
local aid budget.

Regardless of the outcome of that proposal, or
any of the ideas now on the table for more diversity in local revenue
sources, Somerville's taxpayers have an advantage in their prudent,
conservative Retirement Board.

In terms of policy – from the
environment to human rights to the expansion of city services – this
administration has a strongly progressive record. But when it comes to
financial management, a conservative approach is best. That's the
approach our Retirement Board has taken – and it's paying off for
taxpayers and retirees alike.