Methuen Retirement Board Asks AG to Resolve Stalemate

By Edward Mason, The Eagle-Tribune, North Andover, Mass.

Jun. 30–BOSTON — The Methuen Retirement Board is turning to Attorney General Martha Coakley to settle a monthslong dispute over whether it must liquidate its entire $80 million investment portfolio before joining the state pension fund.

The standoff, an apparently narrow disagreement over an arcane financial matter, deals with the broader concern of state and Methuen Retirement Board officials who want to ensure the city is able to pay its retired workers’ pensions.

A 2007 state law requires underperforming local pension funds to turn their assets over to the state. The Massachusetts Pension Investment Reserves Trust, or PRIT, will only accept cash. Methuen wants to hand over the actual investments.

“We’re asking the attorney general to interpret the law,” said Michael Hennessey, a retirement board member. “The law when it was written said you have to turn over the assets. It’s silent on whether to turn (the assets) over to cash.”

In the meantime, Michael Sacco, the board’s attorney, plans to meet with PRIT Executive Director Michael Travaglini to try and reach an agreement before a retirement board meeting July 31, said board Chairman Thomas Kelly.

Since December, the retirement board said it has resisted liquidating its portfolio at a time of stock market volatility out of concern it would be inexpensively selling off its investments. PRIT, however, believes the board is taking its time meeting the legal obligation to hand over the assets.

The battle reached a head Tuesday when the state Public Employee Retirement Administration Commission said it would give Methuen and PRIT a month to reach an agreement.

If a deal can’t be struck, the commission, which oversees the Methuen board, would order the panel to turn over its assets.

Kelly said the board is trying to avoid a lawsuit from retirees or city workers if it sells its assets too cheaply.

To Kelly, the standoff is not simply Methuen being stubborn. Rather, it’s about protecting the current and future city workers who will rely on the Methuen pension fund for their retirement.

“We’re not trying to be difficult,” Kelly said. “We have an obligation to the retirees.”

The law was advanced by the Patrick administration as a way for communities to save money. State law requires municipalities to make annual payments to their pension funds to ensure they can meet the obligation to retirees. By investing in the better-performing state fund, the cities and towns would save money.

The law says “assets” must be turned over. PERAC Executive Director Joseph Connarton has said he believes lawmakers meant “cash” when they said “assets.” So does Travaglini, who said he made it clear to the Patrick administration when it was drafting the law that he would only accept cash. He said he doubts the attorney general would interpret the law differently.

Travaglini said he is not unsympathetic to Methuen’s concern about a forced sell-off of securities. He said he’s “amenable” to a staggered liquidation of the Methuen board’s investments.

But Travaglini also said he is unwilling to bend on his resistance to accepting stocks instead of cash.

“If they want another meeting to tell me to take securities,” Travaglini said, “that will be a very brief meeting.”

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