Hanover Confronts $42 Million OPEB Liability as Health Insurance Costs Soar Beyond Projections
HANOVER - November 3 - The Hanover Select Board received sobering financial news Monday night as actuarial advisors revealed the town’s liability for retiree health benefits has grown to $42 million, while health insurance premiums for fiscal year 2027 are now projected to increase by 10 percent—significantly higher than the previously anticipated 7.1 percent increase. The higher premium costs will add approximately $126,000 in expenses for FY2027 and nearly $1 million more by FY2032 due to compounding effects.
The Full Story
Budget Director Jim Hoyes and Parker Elmore, president and CEO of Odyssey Advisors, presented a comprehensive update on the town’s Other Post-Employment Benefits (OPEB) obligations, emphasizing that while Hanover is better positioned than many Massachusetts communities, significant challenges remain. The town’s net OPEB liability stands at $33.2 million when accounting for the $9.2 million trust fund balance.
“OPEB and pensions are the number one and number two liabilities on your balance sheet,” Elmore told board members. “We have a client similar to you, similar funded status, and after several years they just got downgraded from AAA down to AA+ by S&P even though they’re reasonably well funded in the OPEB context.”
Hanover’s OPEB trust fund, first established in August 2017 with $1.7 million, has grown to $9.2 million through consistent contributions from local meals tax revenue and strong investment returns. The fund has achieved an average annual return of 8.7 percent since inception, with a three-year average of 15 percent. The portfolio maintains an aggressive 75 percent equity and 25 percent fixed income allocation, managed by Rockland Trust.
From 2013 through fiscal year 2024, the town contributed 100 percent of meals tax receipts—totaling over $5.5 million—to the OPEB trust. However, that strategy has shifted, with $450,000 of meals tax diverted to operations in FY2025 and $750,000 in the current fiscal year, leaving only approximately $150,000 for OPEB contributions this year.
Elmore warned that demographics are working against Massachusetts communities. “The total fertility rate is down to 1.6 in the U.S.,” he explained. “In a state like Massachusetts or Connecticut or New England in general, these are largely out-migration states, which means best case scenario is you’ll have level population over the next 30 to 40 years. That population is likely to be older, fewer children.” He added bluntly: “As hard as these budgets seem today, these are the glory years. This is as easy as it’s ever going to get.”
At 21 percent funded, Hanover ranks in the top third of Massachusetts municipalities for OPEB funding status. “In the OPEB context, 21 percent funded looks good,” Elmore noted. “In any other context, it looks horrible.” The statewide average is approximately 11 percent funded, with the national health insurance premium increase averaging 14 percent in Massachusetts and 18-20 percent nationally. Hanover’s 10 percent projected increase, while concerning, has been moderated by Mayflower Health Group’s large stability fund.
The revised health insurance projections came as part of broader fiscal year 2027 budget development. Hoyes presented five scenarios for property tax increases ranging from 3.1 percent to 5.8 percent, depending on how much of the town’s excess levy capacity from the FY2026 override is utilized. The town manager and budget director are recommending using approximately one-third of the excess levy capacity over three fiscal years, which would result in a 3.8 to 4 percent property tax increase for FY2027.
Under this recommended approach, the town would face a roughly $2 million budget gap to be addressed through free cash allocations, meals tax revenue, or expense reductions. The budget assumes no free cash, no meals tax receipts, and no expense cuts in the preliminary calculations presented Monday.
Medicare supplement plans constitute 75 percent of Hanover’s OPEB liability, making retirees over age 65 the primary cost driver. Elmore noted that Medicare Part B premiums are expected to increase approximately 12 percent next year, with supplement plans likely following suit. He pointed out that while the town could consider reducing prescription drug coverage to control costs, “that’s where the money is, so you have to either decide you’re going to do it through funding, liability, or a combination of both.”
If Hanover maintains $400,000 annual contributions to its OPEB trust, the fund could reach full funding in approximately 40 years. However, the town is legally obligated to fund its pension obligations each year, which constrains available resources for OPEB contributions. Elmore emphasized that the actual cost of the plan is measured by benefit payments over time, regardless of actuarial assumptions.
The presentation also addressed regulatory changes for PFAS (per- and polyfluoroalkyl substances) treatment at town water facilities. Eric Kelley from Apex Engineering provided an extensive update on the $28 million project to install PFAS treatment systems at all three water treatment plants—Pond Street, Beale, and Broadway. The federal government recently announced it would only regulate two PFAS compounds (PFOA and PFOS) at four parts per trillion each, rather than the broader six-compound mixture initially proposed.
Kelley explained that pilot treatment units have been operating since July at all three plants, testing both granular activated carbon and ion exchange resin technologies. “We’re running around eight to eight and a half million dollars per treatment facility for a total of about $24.5 million,” Kelley reported, with total project costs including design and construction services reaching approximately $28 million.
Pond Street remains the highest priority for treatment installation due to its higher PFAS levels and status as the town’s workhorse facility operating 24/7/365. The plant’s raw water PFAS levels have ranged from the low 20s to mid-30s parts per trillion, though current drought conditions have kept levels lower. “It’s weird to say, but it’s like the best quality water you can get,” noted Deputy Superintendent, Water Operations Adam Flood. “When the rainwater starts to really hit the swamp, it starts to change those numbers drastically.”
The Beale and Broadway plants show PFAS levels hovering around the proposed four parts per trillion federal standard, meaning they’re technically in compliance with current Massachusetts regulations but may face issues under stricter federal rules. The project includes construction of approximately 2,000-square-foot pre-engineered metal buildings at each site to house the treatment equipment.
Kelley outlined several construction sequencing options, including completing all three facilities under a single contract over 20 months, or phasing the work to prioritize Pond Street first. The town has applied to the state’s Drinking Water Revolving Fund for potential zero-percent financing, with an award article planned for the 2026 annual town meeting.
The board also discussed water supply concerns in the context of MBTA Communities Act housing requirements. When asked whether the PFAS treatment work would be sufficient to handle significant new housing development, Kelley responded that the plants are being designed only to meet current operational capacities. “We can’t increase the yield from these facilities by any of the work we’re doing,” he explained. Town Manager Joe Colangelo added that while Hanover has maintained adequate water supplies, the town is “one failed well away from having a problem.”
Regarding potential MWRA water connections, Colangelo noted that Hanover continues working with a smaller consortium of towns on extending the MWRA transmission line, though such a project remains years away. “Right now you’re probably fine,” Kelley advised, “but if MWRA was there and we were taking, say, 30-40 percent of our water from MWRA, you’d be golden.”
In other business, the board unanimously approved closing out numerous old capital projects, returning approximately $130,969 to free cash, reducing debt authorization by $806,101, and returning $480,275 to Community Preservation Committee accounts and $335,147 to water enterprise retained earnings. This represents the first systematic closeout under newly adopted financial policies requiring annual review of outstanding capital appropriations.
The board also set the warrant for the December 8, 2025 special town meeting, which will include articles on MBTA Communities zoning compliance, establishing a $275,000 contingency fund in case of state penalties for non-compliance, and a citizen petition for a recall provision. Lead petitioner Walter Dixon presented his case for including the recall article, citing Massachusetts General Law Chapter 39 requiring inclusion of properly certified citizen petitions. Select Board member Vanessa O’Connor abstained from voting on the recall article, stating it appeared to be “clearly a personal or at least directed attack towards me.”
Board member Rachel Hughes reported progress on multiple financial policies adopted or amended this fiscal year, including the newly implemented policy that enabled Monday’s capital project closeouts. She and board members are developing what they call the “Hanover 2032 Plan”—a comprehensive set of financial policies addressing excess levy capacity utilization, meals tax allocation, and departmental budget run rates designed to ensure the FY2026 override remains sustainable through FY2032.
Traffic safety emerged as another concern, with Colangelo reporting that motor vehicle crashes are on pace to reach 600 this calendar year—a 20 percent increase over the typical 500 annual crashes. While Fire Chief reports haven’t shown a corresponding increase in hospital transports, suggesting many are minor accidents, the trend has prompted calls for renewed efforts to lower speed limits on state-controlled Route 139, which currently permits 40 mph travel through town.
Why It Matters
The ballooning OPEB liability and soaring health insurance costs represent a significant long-term challenge for Hanover’s fiscal sustainability. With benefit payments projected to increase even in inflation-adjusted dollars over the next 20 years, and the town already diverting meals tax revenue from OPEB contributions to balance operating budgets, residents may face continued pressure for tax increases or service reductions. The situation is compounded by demographic trends that will result in an older, potentially smaller tax base supporting more retirees. The recommended approach of moderating property tax increases by spreading out use of excess levy capacity offers short-term relief but pushes difficult budget decisions into future years. Meanwhile, the $28 million investment in PFAS treatment—while necessary for regulatory compliance and public health—represents another substantial financial commitment that will require ongoing operational funding for media replacement every 12-24 months. For homeowners, the combination of OPEB obligations, water infrastructure needs, and limited state aid means the days of modest 3-4 percent annual tax increases may be ending, with town officials acknowledging these are “the glory years” before demographic and financial realities make budgeting significantly more challenging.
Meeting Minutes
Key Motions & Votes
Motion: Approve draft meeting minutes of October 20, 2025. Outcome: Approved. Vote: Unanimous (5-0). (Timestamp: 4:16)
Motion: Affirm town moderator’s reappointments of Mary Dunn and John Ferraro to Open Space Committee for three-year terms. Outcome: Approved. Vote: Unanimous (5-0). (Timestamp: 5:04)
Motion: Approve amendment to Class 1 automobile dealer license for GP1MA-DM Inc. (Mercedes-Benz Hanover) to expand dealership site to encompass former Ira Buick GMC location at 1845 Washington Street. Outcome: Approved. Vote: Unanimous (5-0). (Timestamp: 8:09)
Motion: Add citizen petition article (recall provision) as Article 5 to December 8, 2025 special town meeting warrant. Outcome: Approved. Vote: 4-0-1 (O’Connor abstained). (Timestamp: 1:53:58)
Motion: Insert capital project closeout amounts into special town meeting Article 4, minus one CPC rail trail article. Outcome: Approved. Vote: Unanimous (5-0). (Timestamp: 2:03:43)
Motion: Close special town meeting warrant with addition of citizen petition article. Outcome: Approved. Vote: Unanimous (5-0). (Timestamp: 2:04:45)
Public Comment
Walter Dixon of Hanover Street, lead petitioner for the citizen petition article establishing a recall provision for elected officials, addressed the board. Dixon argued that Massachusetts General Law Chapter 39 Sections 10 and 11 require mandatory inclusion of properly certified citizen petitions in town meeting warrants. He stated his petition received 139 certified signatures (exceeding the 100-signature requirement), was timely filed on September 26, 2025, and certified by the town clerk on October 29, 2025. Dixon emphasized that the select board cannot reject articles based on content disagreements or perceived poor wording, and that challenges to legality occur either through a point of order at town meeting or subsequent Attorney General review. He requested the board insert his petition into the December 8, 2025 warrant for deliberation by voters.
What’s Next
The select board will hold its December 8, 2025 special town meeting to address MBTA Communities zoning compliance, potential state penalty contingency funding, capital project closeouts, and the recall provision citizen petition. Town officials will finalize and post the warrant within the week. Board members will continue developing the “Hanover 2032 Plan” financial policies, with a draft potentially ready for board review at the next meeting. Plymouth County Treasurer Tom O’Brien is scheduled to present on county retirement system projections at the second December select board meeting. The planning board will provide an update on MBTA zoning proposals at the board’s next meeting. Eric Kelley from Apex Engineering will continue PFAS pilot testing through January 2026, with 90 percent design plans and state permit applications expected in early 2025. The traffic safety committee will develop recommendations for sidewalk network improvements in cost-effective locations identified by DPW. Town officials will continue monitoring motor vehicle crash trends and pursuing speed limit reduction requests with MassDOT for Route 139.