NORTHAMPTON — In March, the chairman of the Hampshire Council of Governments came before the executive committee of the Hampshire County Group Insurance Trust with what some have characterized as a strange proposal.
In his speech to the executive committee, Rus Peotter said that the council of governments — known as HCG — would agree to completely separate itself from the trust, but only on the condition that the trust assume $2.2 million of the council’s pension and benefit liabilities, according to the minutes of the meeting. If that didn’t happen, Peotter said, HCG could fall into state receivership, thus putting the whole insurance trust under state control, according to the minutes.
The problem: The trust is prohibited from using funds for anything other than trust obligations. And, according to Joe Shea, the insurance director at the trust, HCG already knew that. HCG’s lawyers had already informed the organization of that fact in both 2012 and 2018, Shea said.
“It was a little bit odd,” said Mike Sullivan, the town administrator in South Hadley who was in the room for the meeting. “I understand it, though, from Rus’ perspective.”
As the minutes of that meeting make clear, Peotter said that HCG had “hit many roadblocks” and had been “exhausting all outlets” to try to get the state to acquire its liabilities after closure. Sullivan said he saw the move as a “last-ditch effort to stay in business.”
But that didn’t happen. HCG ultimately did relinquish its duties and rights to the trust in June, and without the trust having to take on the organization’s liabilities. And now, with its money running out, the council is looking to go out of business.
The anecdote illustrates the complexities of unwinding HCG, which is the successor to the Hampshire County Government. And the whole region is now looking to the state to make the next move after the local delegation on Beacon Hill filed legislation that would dissolve HCG, transferring its liabilities onto the state.
The legislation calls for an appropriation of $6.5 million to cover the council’s retirement and health care obligations, as well as “other costs” associated with the organization’s dissolution.
HCG has managed to transfer much of its programming, as well as employees, to other entities, including the Franklin Regional Council of Governments. It has laid off two employees, and has not been able to sell off its energy businesses.
But plenty of questions still remain, and that bill could change as it moves through the legislative process. And as the insurance trust’s executive committee meeting in March suggests, HCG has already run into obstacles trying to wind down its operations.
Peotter did not respond to a voicemail left on his cellphone Wednesday afternoon.
It was only last year that HCG sent a letter to local officials in 20 Hampshire County communities, suggesting that should the council go under, cities and towns would be liable for the legacy costs from the Hampshire County Government, including retirement expenses, health benefits and a workers’ compensation claim.
Local officials pushed back at the time, rejecting the idea that they were on the hook for those costs. And state lawmakers from the region stated that they had not yet taken any position on whether the legacy liabilities are the responsibility of Hampshire County communities.
Sullivan, South Hadley’s town administrator, said he doesn’t believe the dissolution of HCG will force municipalities to accept those legacy costs. But he also pointed to other past instances in which the state has passed off such costs on cities and towns, much to their dismay.
“We’re confident that it doesn’t at this time present any additional liability for the town of South Hadley,” Sullivan said. “That could change. The Legislature could change that. Hopefully, they don’t.”
Sullivan said it would be unfair to saddle communities with costs that they were not responsible for. It was the state that decided to dissolve county government, he noted, and it was HCG that managed its own finances over the years, leading to the insolvency the organzation is now facing.
“The message from South Hadley is we don’t feel as though we should be saddled with costs that were incurred by another entity we really had no control over,” he said.
Northampton Mayor David Narkewicz said that he agrees with that sentiment, and that he appreciates the work of state Sen. Jo Comerford and the rest of the area’s delegation in trying to get the state to take on the financial burdens of dissolving HCG.
“The commonwealth created this situation, so I just think it would be responsible for them to figure out a way for them to responsibly wind it down that didn’t put an unfair burden on cities and towns,” Narkewicz said.
For Northampton, there’s also another big factor to consider: the historic Hampshire County Courthouse downtown, which HCG owns. In the current version of the legislation filed to dissolve HCG, the building would be conveyed to the state, but only after essentially offering the city of Northampton the right of first refusal.
Narkewicz said that the city could play a role in making sure the building found a new tenant or owner that would keep the building in service, but before taking on any responsibility for the building, the city would need to assess what maintenance issues and other liabilities would come with it. There are no city agencies that have any need for the building, he added.
“My number one priority and concern is not having this historic structure lay dormant in our downtown, and potentially fall into disrepair,” Narkewicz said.
As to the question of whether the state will step in and take on HCG’s liabilities, Narkewicz said he is optimistic, and that the local delegation is working hard to make that happen.
Narkewicz did mention, however, other instances when the state hasn’t provided adequate assistance to cities and towns, like Chapter 90 funding for capital improvement projects or money to mitigate the cost of students who leave a school district to attend a charter school.
Narkewicz said that if it begins to look like the Legislature is going to put costs of HCG’s dissolution onto local communities in the county, he and other elected officials will be vocal in their opposition.
“There’s obviously lots of examples of state agencies that have gotten into financial difficulties and the commonwealth has seen fit to bail them out,” he said.
Dusty Christensen can be reached at dchristensen@gazettenet.com.