Cambridge City Manager Robert W. Healy goes over his City Council agenda at a Jan. 31 meeting. (Photo: Kristy Robinson)

After 30 years as Cambridge city manager, Robert W. Healy is the envy of his peers for his fiscal management of a city that has Wall Street’s highest bond rating and property taxes that have been held well below what the city is entitled to collect.

Other city managers might also covet Healy’s compensation, which eclipses what many of them could imagine: $336,317 last year. That is double what the highest-paid municipal managers in the state make.

Soon, however, Healy’s deal will get even better, thanks to lavish but largely unnoticed provisions in successive contracts he negotiated with the City Council that will boost the city’s total cost of his retirement by at least $1 million — to at least $5 million.

Among the most expensive benefits: lifetime nursing home care insurance, not just for Healy, but also for his wife, Jacquelyn. And a pension of more than a quarter-million dollars a year — the state’s largest.

Yet Healy’s package may be less of a drain on the treasury than the potential $10 million the city may have to pay to satisfy a legal judgment for Healy’s treatment of an employee he terminated in 2003, according to documents obtained by Cambridge Day and the Initiative for Investigative Reporting at Northeastern University through a public records request.

The information became available only after city officials took eight weeks to produce the records. The costs of Healy’s employment agreements have never been made public.

The most generous public pension

Thanks to the City Council, Healy will have the most generous public pension in Massachusetts if he retires next year at age 69.  Ordinarily, it would be $220,358 a year, and his wife would get two-thirds of that for life if he dies before her. But the council approved a supplemental pension benefit that will boost his pension by nearly $39,000 a year — to $259,245.

Then in 2009 came an extraordinary sweetener, unheard of in the public sector and negotiated in private: The city is paying annual premiums so Healy and his wife can have long-term care insurance policies, “as selected by him,’’ that will cover the couple for life, according to the contract.

Healy selected expensive plans: Two years ago, the city began paying premiums for both policies — $39,643 a year for 10 years, according to the documents.

The long-term care benefit alone will cost the city a minimum of $396,430, but probably much more: The insurer is seeking rate increases of up to 40 percent, which the city would be obligated to pay if they are approved by state insurance regulators.

That’s not his only city-paid insurance benefit.

Between 2006 and 2009, the city paid escalating premiums for a $120,000 life insurance policy for Healy as city manager. In the 2009 contract, the council agreed to extend that policy for Healy’s lifetime, at a cost of tens of thousands of dollars more.

When Healy retires, he will also leave City Hall with a pot of cash for unused vacation days, sick days and compensatory time, a payout estimated at $282,000.

Altogether, if the Healys live until average life expectancy, his retirement will cost the city at least $5 million.

“I am worth every penny of it,’’ Healy said of his compensation and retirement benefits. “I fully realize that the money comes from the taxpayers, but the taxpayers of Cambridge have the lowest residential property tax rate in the commonwealth.’’

As for the long-term care policy, Healy said the city’s AAA bond rating has resulted in interest cost savings over the past six years that are more than enough to pay the $396,430 in policy premiums.

Richard C. Rossi, his longtime deputy city manager, has a lucrative employment agreement of his own and an annual salary of $270,194, and Rossi also got a pension enhancement. If he too retires in 2012, Rossi would normally get an annual pension of $182,379. The council decided to give him an annual supplement that would amount to $32,185.

Healy’s retirement provisions are contained, though not explained or monetized, in a 2009 employment contract negotiated with Healy in private by a council committee. The deal was approved by the full council with just one dissenting vote during a meeting in which no mention was made of any of its costs. Only councillor Craig Kelley voted no.

At that Jan. 12, 2009, meeting, three councillors expressed discomfort at their unfamiliarity with contract provisions they had not seen until that evening. But effusive praise for Healy drowned out those concerns, according to a video record of the session.

Healy, said councillor Ken Reeves, “is possessed with a rare, rare thing. And that is the total and complete and utter love of the city of Cambridge.’’

In an interview, Healy acknowledged that the numbers, taken alone, might not cast him in the best light, especially at a time taxpayers and lawmakers are casting a skeptical eye toward budget-busting public sector salaries and benefits. But he said his strong fiscal management over 30 years has left Cambridge in extraordinarily strong fiscal condition. And the council in 2009, recognizing that, wanted him to stay.

“For me to do that, there needed to be a financial benefit to it,’’ Healy said of his stay-or-go decision.

Cambridge Mayor David P. Maher, one of two councillors who negotiated the 2009 contract on behalf of the council, said in an interview that the city is getting its “money’s worth,’’  given Healy’s managerial skills and accomplishments.

Maher said Healy could have elected in 2009 to retire at 80 percent of his salary “and stay home and do nothing. So looking at it in those terms, (the contract) is somewhat of a bargain if you think about it.’’

Cost of a legal judgment

Healy’s package is a bargain — stacked against the potential cost of the legal judgment.

In 2008, a Middlesex Superior Court jury awarded $4.5 million in damages to Malvina Monteiro, a former city department head, after finding Healy retaliated against and fired her because she had complained about racial discrimination. Of that amount, $3.5 million represented punitive damages.

At Healy’s insistence, and despite the qualms of some councillors, the city is pursuing an appeal. With interest, the potential cost to the city would now be $7.25 million. And the judgment is growing at the rate of $70,000 a month in interest.

If Monteiro prevails on appeal, the actual cost to the city will approach or exceed $10 million. That is because the city’s legal fees have already passed $2 million, according to documents turned over by the city.

Middlesex Superior Court Judge Bonnie MacLeod-Mancuso, who rejected the city’s initial appeal, wrote in a 2009 decision that the jury had evidence to find Healy’s conduct “reprehensible.’’

The judge also declared his testimony to be “inconsistent and incoherent,” and she wrote in her ruling that jury members were “free to draw their own conclusions as to whether he was covering up his wrongdoing.’’

Healy, who is 67, has been city manager — in a strong-manager form of government — since 1981. Until now, his gold-plated employment agreement has escaped public notice. Even his annual salary has attracted scant attention.

Back in 1974, Healy was passed over when the city of Lowell, where he lives, picked a city manager. It was, for Healy, a lucky break. Today, the Lowell city manager’s salary is $145,000. Healy makes nearly $200,000 more than that. Cambridge, like Lowell, has a population of just over 100,000.

Perks as well as pay

If Healy’s salary is remarkable, so too is the way it has ballooned in the last decade. As recently as 2002, the city manager’s salary was $176,213. But thanks to regular annual raises and three retroactive salary hikes, Healy’s annual base pay has increased 86 percent in nine years.

Then there are the perks. The city buys a new car for Healy’s “unrestricted use’’ every two years. His latest is a 2010 Ford hybrid sedan with blue police plates given him by the Cambridge Police Department.

In his contract, the city agreed to pay for hearing aids for its manager, at a cost of $14,000 for 2008, 2009 and last year. And each year, he can boost his total compensation by cashing out up to three weeks of unused vacation time; that is not small change for someone who makes more than $6,000 a week.

Much of the language in the contract is obscure, its costs are not included and the contract has not been published on the city’s website. The contract is posted, lost among hundreds of other documents, on the Cambridge Civic Journal, a website maintained by politics watcher and teacher Robert Winters.

The pension supplement is one example of legalistic language. Even though Healy’s salary guarantees him an outsized pension, the council wanted to give him an inducement to stay.

The contract declares that the city will supplement his pension “by paying him a monthly payment equal to the difference between his actual monthly retirement allowance, and the allowance he would have received had he selected Option A as specified in MGL c.32, Section 12.’’

Translation: Healy is entitled to a pension equal to 80 percent of the average of his salary for his last three years — $259,245 annually if he retires Sept. 30, 2012, when his contract expires. But like most retirees, Healy would take a reduced pension of $220,358  so his wife will keep getting the bulk of it if he dies before her. The council decided to make up the difference, obligating the city to pay him an extra $38,887 a year — nearly $600,000 if he reaches average life expectancy of 83.

That opaque provision has been part of his contract since 2002.

The long-term care insurance is the most controversial benefit, and the major change the council added to the 2009 contract. Long after Healy leaves Cambridge City Hall, it obligates the city to pay expensive annual premiums for custodial care costs that could quickly deplete even a sizable estate.

In the interview, Healy rejected the notion that he picked a “Cadillac’’ policy, describing it as more like a “Pontiac.’’ If that is so, it’s a souped-up Pontiac. It would pay up to $300 each in daily benefits for Healy and his wife, with no limit on lifetime benefits.

Mayor David Maher, one of two city councillors who negotiated Healy’s current contract, said of the city manager’s request for a generous, city-paid long-term care clause, “Quite frankly, I think that with him working well beyond the age of 65, it was very smart.” (Photo: Liv Rachelle Gold)

In late 2008, the nine-member council charged a two-member committee, Maher and then councillor and Vice Mayor Brian Murphy, to negotiate a new contract with Healy.

But when Murphy and Maher met with Healy, there was not much more they could add to his package.

In 2008, Healy was 65. “As the council was discussing my continuing on the job, there had to be an advantage I perceived to my wife and children for staying in this job,’’ Healy recalled. So he asked the city to pay for long-term care insurance for he and his wife.

“That is a provision I requested,’’ Healy said. “I was 65 years old and the City Council was asking me to stay. I have two children and five grandchildren, and I don’t want to be a burden to them.’’

“Quite frankly,’’ Maher said, “I think that with him working well beyond the age of 65, it was very smart of him to ask for that.’’

When the council met Jan. 12, 2009, they were presented with Healy’s expiring 2006 contract and a letter from Maher and Murphy attached to a page with amendments they proposed to add for the 2009-12 contract.

The amendments included a retroactive, $8,000 pay hike; 3 percent annual pay hikes over four years; language to make the $120,000 life insurance policy a lifetime obligation for the city; and the addition of a long-term care policy “as selected by’’ Healy.

During the ensuing debate, not a single dollar figure was mentioned.

Kelley, Reeves and councillor Sam Seidel all expressed reservations about voting on the contract without knowing what it contained.

When Kelley objected to a vote without any public discussion of the costs, Maher interjected that he and Murphy “didn’t want to float the new contract’’ until it got council approval.

Murphy, who is no longer on the council, argued it would be folly not to retain Healy. “We are the strongest community in the commonwealth in this fiscal crisis,’’ Murphy told his colleagues. “It would be insanity to abandon this city manager at this time.

“If we did not have his leadership,’’ Murphy added, “we would be paying his pension and paying for another city manager. It’s actually a bargain that serves our city quite well.’’

Murphy, who left the Council in 2009 for a $110,000-a-year state position, was recently hired by Healy to be Cambridge’s director of community development, an assistant city manager position drawing an annual salary of $157,188.

By almost any standard, Healy’s compensation alone is breathtaking. Newton, which has a population of 82,000, pays its mayor, Setti Warren, $95,000. Boston Mayor Thomas M. Menino’s salary, at $169,750, is barely half of Healy’s.

Worcester has the same strong-manager form of government as Cambridge — and a significantly bigger population at 175,000. Yet City Manager Michael V. O’Brien is paid $182,000 a year. And O’Brien, according to his contract, opted not to take annual raises in 2009 and last year, and will not get a raise this year either.

Healy can point to plenty of things he’s done for Cambridge as city manager, and many agree with his assessment. A few say Healy has done even better by the city than it’s done by Healy. (Photo: Kristy Robinson)

What Healy’s done for Cambridge, or vice versa

In an interview, Healy politely answered questions about his compensation, and sidestepped most questions about his high compensation by pointing to his conservative fiscal management of a city with a $460 million annual budget.

Healy acknowledged that Cambridge is blessed with a large and vibrant tax base, much of it businesses drawn to the city by the incubating potential of Harvard and, especially, the Massachusetts Institute of Technology. In fact, MIT is the city’s largest taxpayer for the non-university properties it owns.

Because of the city’s wealth and Healy’s management, Cambridge is insulated from the budgetary pressures facing most every municipality. Cambridge and Hingham are the only two communities in the state that have AAA bond ratings from all three major ratings agencies.

The city has substantial cash reserves. And while the vast majority of cities and towns in the state raise as much in property taxes as voter-mandated Proposition 2.5 limits allow, Cambridge does not. According to Healy, the city could raise property taxes by 50 percent before hitting that limit.

Healy gets high marks for his fiscal management, even from those, like Kelley, who often disagree with Healy’s decisions and management style.

Even city councillor Craig Kelley, who voted against Healy’s current contract, believes the city manager delivers value to the city. “Am I going to quibble over a salary that he’s got, over one that’s $100,000 less? No,” Kelley says.

Healy, said Kelley, does not get the credit he deserves for aggressively keeping the city on firm financial footing. Given that, he said, “Am I going to quibble over a salary that he’s got, over one that’s $100,000 less? No.’’

Denise Jillson, the executive director of the Harvard Square Business Association, said the city “sets the standard’’ in Massachusetts for delivery of city services, for which she said Healy deserves credit. Compared with private-sector chief executives, she added, “he’s probably a bargain.’’

But would Healy be considered a bargain as city manager anywhere else?

Nancy M. Ryan, the former executive director of the Cambridge Commission on the Status of Women, who worked for Healy for 25 years, attributes much of the city’s fiscal strength to the magnetic draw it has become for many businesses.

To be sure, she said, Healy deserves some credit, especially for “carefully favoring development in ways that enhance the city’s coffers … He is a master negotiator — for himself as well as the city.’’

But Ryan suggested Cambridge may be more responsible for Healy’s success than vice versa. “If Bob Healy were the city manager in New Bedford, he wouldn’t be getting a $5 million retirement deal,’’ she said.

Moreover, Ryan and others point to the Monteiro judgment as evidence of flaws in Healy’s stewardship.

Healy himself called the jury’s stinging verdict unjust, and he says: “It pains me more than anything in my entire career.’’

He brushed aside criticism, though, that he should have recused himself from the decision to appeal the judgment because it was his treatment of  Monteiro that prompted the lawsuit and the subsequent judgment.  “It is my fiduciary obligation to the city to continue the appeal because it was not an appropriate judgment,’’ he said.

Josh Davis, a Boston attorney who represents management in employment disputes, said that in the private sector, it would be inappropriate for a chief executive whose reputation has been besmirched in a court judgment to be involved in deciding whether to appeal.

“The appropriate decision would be to isolate the CEO from the decision-making so the decision would be in the best interests of the company,’’ Davis said in an interview.

Davis, who has followed the Monteiro case, said the jury’s decision that Healy retaliated against Monteiro, along with the judge’s pointed language impugning his credibility, would have serious consequences if a private company’s president was the defendant.

“That kind of a decision compromises a CEO,’’ Davis said. “The underlying conduct, if true, would be fatal to most CEOs’ employment.’’

Also contributing reporting for this story were Chelsea Reil and Marc Levy. The story was updated Feb. 16, 2011, to correct a misstatement that the City Council gave Rossi a pension enhancement; the city’s Personnel Department confirmed that the council is not Rossi’s employer and does not negotiate his salary. The city manager hires the deputy and assistant city managers; and Feb. 28, 2011, to identify by name Robert Winters’ Cambridge Civic Journal site.