Topic

Liabilities, reserves and the credit rating

How large are the Town's long-term obligations and reserves?

Brookline's long-term liabilities are on a path to fall from $914 million to about $203 million by FY2040, as the pension system reaches full funding, existing bonds are repaid, and the Town's schedule pays down retiree health, paid off in FY2036 on the actuary's own cost trend. Reserves are the quieter risk.

Liabilities

The rest of the forecast is about annual flows, revenue in, spending out, the gap between them. The Town's balance sheet is a different question: not what it spends each year, but what it owes. And on that measure the next fifteen years look markedly better than the operating picture does.

Brookline's total liabilities stood at $914 million in FY2024, the most recent audited figure. Three items are 95% of it, $865 million: long-term debt ($493 million), net pension liability ($171 million) and net OPEB liability ($201 million). Projecting each forward on its own real mechanics rather than a blended assumption:

(The debt line below counts the remaining principal on the Town's general bonds, $452 million at the end of FY2024 before a year of repayments. The audit's $493 million also counts $27 million of bond premiums not yet amortized, $12 million of water, sewer and golf course bonds, and about $2 million of smaller items.)

Total liabilities fall from $914 million to roughly $203 million by FY2040.

The pension line is the most reliable of the three, because it is not a projection in the usual sense; it is the Town's own actuarially determined funding schedule, whose last catch-up payment, in FY2030, brings the unfunded pension liability to zero by the start of FY2031. The debt line is similarly concrete: existing bonds run down on their real contractual amortization schedules, with four already-approved borrowings layered in.

The OPEB line is the interesting one, and it is where the pension payoff shows up. Retiree health liability keeps rising through about 2030, to about $224 million, because the benefit accrues faster than the Town is currently funding it. Then the pension full-funding milestone arrives, roughly $37 million a year of pension payments ends, and the Town's plan redirects it, with the current retiree health payment, $43 million a year in all, to the retiree health trust, on top of retirees' premiums, which are still paid each year. The liability then falls quickly. Each year it grows by interest and by the benefits active employees earn, and the forecast grows retirees' costs at the actuary's own trend, about 5.9% a year in FY2026 falling to 4.5%. On that trend the $43 million pays it off in FY2036, and the payment stops, freeing that money for other uses. The forecast holds it for that decision rather than counting it as room. What decides the payoff date is how fast retirees' health costs grow. If they grew with the base case's 8% health premiums, the actuary would book a loss each year and the liability would not be paid off before 2040. The audited record so far points the other way: the total liability barely moved from FY2017 to FY2024, from $292 million to $302 million, and payments to retirees rose about 1% a year.

Two honest qualifications. First, the retiree health figures are the least certain on this page. They roll forward the actuary's 2022 valuation, as reported in the FY2024 audit, and that audit puts one more point of health cost growth at about $53 million more liability; the next valuation will reset the starting point. The same audit shows the Town's payments into the trust that year matching the benefits paid out, so the budgeted prefunding may not all be staying in the trust. Second, and more materially: the Pierce School has roughly $114 million of already-authorized borrowing that is not in these figures. Including it would meaningfully raise the debt line. The $203 million figure is a defensible floor, not a confident point estimate.

Even with both qualifications, the direction is clear and it is the strongest piece of good news in the forecast. The operating outlook in the base case depends on decisions still to be made. The balance sheet depends on them less; it is on a path to shrink by more than half by 2040, largely because of decisions the Town has already made and is already funding. Retiree health is the part still open, and it turns mostly on health premiums.

Reserves: the third lever, and the one that moves quietly

Liabilities are one half of a balance sheet. The other half is what the Town has set aside, and it matters for a reason the annual budget conversation tends to miss. Reserves are the third thing that actually closes a gap, alongside overrides and cuts, and unlike those two they can absorb a shortfall for several years before anyone votes on anything.

Brookline's reserve position has more than doubled in five years:

"Available fund balance" is the measure credit agencies use, meaning committed plus assigned plus unassigned. For Brookline it equals total General Fund balance, because the General Fund carries no nonspendable, restricted or committed amounts. The narrower GAAP unassigned figure is lower, 15.33% in FY2024, and the two get quoted interchangeably more often than they should be.

The Town's own formal Reserve Policy sets a floor of 20% of revenue, with a stated goal of reaching the median of Massachusetts Aaa communities. Brookline now sits above that floor, at 22.91%. Certified free cash tells a consistent story, rising from roughly $7 million a year through FY2016 to $12 million to $14 million from FY2019 to FY2022, and $23 million and $25 million in the two most recent years.

There is no FY2025 audit yet, so FY2024 is the most recent verified year.

What the rating actually turns on

Brookline holds a Aaa rating from Moody's, one of only fourteen Massachusetts municipalities that did as of 2024. That rating is worth real money. The spread between AAA and AA municipal bonds was roughly 10 basis points at ten years and 20 at twenty to thirty years in September 2026, which on Brookline's projected debt is worth a few hundred thousand dollars a year.

Moody's names two credit challenges for Brookline, and neither is the one this document has spent the most time on. They are below-average reserves for the rating category, and elevated leverage from recent school construction. Pensions and OPEB, which occupy most of this section, are not among them.

That pattern is not specific to Brookline. Across every Massachusetts downgrade since 2010 whose stated rationale could be verified, the driver was reserve depletion or structural imbalance. Sharon lost a notch in 2013 with Moody's citing shrinking reserves and the town's resistance to raising its levy to capacity. Braintree lost one in October 2025, with Moody's describing "a structural imbalance though as growth in revenue is not keeping up with rising costs" after its available balance fell from 29.9% to 13.5% in a single year. Pension and OPEB liabilities appear in these reports as secondary factors, not as causes.

Two things are worth holding together here rather than choosing between them.

Against its own standard, Brookline is meeting the test. Reserves are above the Town's 20% policy floor, and above the level at which Moody's says it would look again.

Against its rating peers, Brookline is at the thin end. Moody's Aaa communities nationally run available reserves around 62% of revenue. Brookline's figure on Moody's own measure, which is defined differently from the Town's, was 27.1% for FY2023 in its May 2025 report; the Town's General Fund measure above was 21.14% that year. On Moody's own scorecard this sub-factor scores an A where several Massachusetts peers score Aa or Aaa.

The resolution is that every Massachusetts Aaa community is thin by national standards. Wellesley sits around 30%, Concord at 27.0%, Wayland at 25.6%, and Moody's has told Wellesley and Concord the same thing it tells Brookline. Massachusetts towns run leaner reserves than Aaa communities elsewhere, and Brookline is unremarkable within that group rather than an outlier from it.

One comparison to treat carefully: Lexington, Hingham and Newton report stabilization funds inside their fund balance, which lifts their figures relative to Brookline's. Comparisons built on audited statements rather than on the agencies' own series will overstate the gap.

When reserves would come under pressure

Rolling the last audited balance forward and letting reserves absorb each year's operating result gives a usable picture of what they are insuring against:

On the base case, reserves are never drawn on, because revenue stays ahead of spending for the whole window. The second row is the stress case: if costs follow the Town's plan, reserves fall below the Town's own 20% floor in FY2028 and run out around FY2033. The decisions in Will Brookline need another override? sit between the two; pay and premiums both running high would turn the operating balance negative from about FY2031, and reserves would start to absorb it from there.

This is not a prediction of a downgrade, and it should not be read as one. Agencies weigh a full scorecard, they disagree with each other about the same town in the same year, and a single ratio crossing a threshold is a flag rather than a mechanism. What the exercise establishes is narrower and still useful: on the current path reserves are not the binding constraint, and on the stress path they stop being available around FY2033.

It is also worth being clear about what a downgrade would and would not cost. The interest penalty is real but modest, in the low hundreds of thousands a year against a declining debt portfolio. The expensive part is the condition that produces a downgrade, not the downgrade itself. A downgrade signals sustained deficits and falling reserves; the deficits and lost reserves are the real cost.

Go deeper

• The base case to 2040, in full: If costs and revenue keep behaving as they have, where is Brookline's budget headed?
• Will Brookline need another override?: When would Brookline need another override, and what would prevent it?
• Data and sources: Where does each number come from?

Last updated 2026-10-14. What has changed.