Mayor Morse Presents FY16 Budget Text Size
Below is the full transcript of Mayor Morse’s letter to the City Council:
After much due diligence and with an eye towards fiscal stability, I present you with a $125,860,553 budget for FY2016, an increase of less than 1% over the budget I presented for FY2015.
This year’s budget process was a continuation of the honest budgeting practices we adopted last year, based on recommendations of the Fiscal Advisory Committee, formed under the leadership of the Greater Holyoke Chamber of Commerce and the Holyoke Taxpayers Association. It is a document that is an honest reflection of the needs of the City, based on historic trends. You will notice that line items typically underfunded in the past, such as veterans benefits, snow removal, and overtime, are now funded at an adequate level. In addition, we have estimated revenues based on the same historic trends and have accounted for a modest 1.5% increase in property values. This document also includes information that councilors have requested in the past, such as departmental revenue, an itemized breakout of police overtime, and a legend that defines employee pay codes.
My proposed budget is lean: many departments will see no increases over FY15, and many will see decreases. It calls for no layoffs or furloughs, and I do not expect to propose any additional cuts in personnel before the budget is balanced and the tax rate is set later this year. However, there may be opportunity for additional cost savings as part of the departmental reorganization plan that I will submit to you at your meeting on June 16th. In this budget, I seek to preserve and enhance essential city services, such as public safety and public works, while bolstering efforts to reduce blight.
This budget preserves these services in our departments through new investments and the addition various new positions. The Police Department will see an additional $20,000 for reserve officers. The Personnel Department will see the creation of a second Personal Assistant, as is called for in both the Collins Center report and the recent review by the Massachusetts Department of Revenue. The Law Department will see funding for an additional Assistant Solicitor, who will focus on civil litigation and work hand-in-hand with the new CDBG funded position focusing on receivership and code enforcement. This new position will also allow us to reduce the amount needed for outside counsel.
As you can see from the Budget Summary presented to you, Department Requests for FY2016 totaled $128,504,357. After meeting with individual department heads and reviewing the budget line by line, I made $3,233,800 in budget cuts from those requests to bring the total general fund obligations down to $125,860,553.
The budget for the Holyoke Public Schools for FY15, based on net school spending requirement derived from the House budget proposal, would be $64,130,544. This figure is subject to change in the next several weeks depending on the state budget process.
Nearly all budget increases proposed for FY16 are fixed costs that we have little to no control over. These include the city’s contribution to retirement, health insurance, veteran’s benefits and our long-term debt service payment on projects that the city has bonded for in the past. Combined, these four individual lines of the budget comprise an increase of $1,031,976 – essentially 91% of the total increase you can see between FY2015 and FY2016.
As the Council is aware, this budget also includes salary adjustments for those city employees that are members of particular collective bargaining units, as my administration recently signed 3-year contracts with the Clerical, Council on Aging, and Professional Supervisor Unions. This has a cost. But having three-year contracts in place gives the City stability in projections over the next three years. The only group that will not see a cost of living adjustment are the non-union employees that are part of the recently completed compensation study. I urge the Council to act swiftly to pass this as it will bring a number of positions in line with the market, and allow a modest increase to employees who have not seen any salary increase or cost of living adjustment in nearly eight years.
Given current projections from the state and the current allocations, I anticipate there being a general fund deficit in the amount of approximately $1.5 million. However, in working with Acting Auditor Bellamy Schmidt and Acting Treasurer Sandra Smith, we have developed a plan that will balance this budget using two new sources of revenue. First, this will be accomplished through the sale of a number of instruments of taking, commonly known as Tax Titles. This is not a sale of property, but a sale of the debt associated with the property. This is very similar to the way we currently handle delinquent excise tax bills. Because of the way the state treats this type of revenue we are not able to include it as part of our estimated local receipts on the budget recapitulation sheet. They will be included as part of free cash that will be certified this fall. If successful, we will conduct a second sale in FY2016 for use in FY2017. By selling the city’s tax titles, we are confident we will bring it at least $1.5 million. Second, I am requesting the Council double the monthly parking fees at our municipal parking facilities, bringing it inline with the market, which would raise the city an additional $100,000 annually. These two new sources of revenue will balance the general fund budget.
In addition to the general fund deficit, and as has existed in years past, there is a sewer fund deficit in the amount of $1.3 million. On its face, it would be easy to assume that this is due to rising costs associated with operating the sewage treatment plant. This could not be farther from the truth. Nearly 100% of this deficit is due tointerest on bonds required to address the unfunded federal mandate, requiring improvements to our combined sewer overflow system. Absent any action from the Council, this money will have to be raised by all taxpayers.
In the past I have asked the Council to address this through increasing the sewer rates. After researching how other communities have tackled this unfair federal mandate, I no longer feel a rate increase is needed. Rather, we should implement a stormwater utility fee to close this deficit. This would bring us in line with neighboring communities, such as Chicopee and Westfield. My administration will provide additional details on this proposal in the coming weeks.
If the City does nothing to address the sewer deficit in the next few months, we will be be forced to take $1.3 million dollars from our certified free cash account or from the city’s stabilization fund, as the city has unfortunately done in the past. I would prefer that the Council address this fee to avoid such a decision that will take money that could be used to fund important capital expenses such as police cruisers and sidewalk improvements. I implore you to take this action, as the executive branch can only recommend this fee. I also continue to advocate for other long-term options to eliminate such a revenue shortfall, including pursuing Chapter 40N legislation that would create a centralized Water & Sewer Authority that would have the jurisdiction to adjust rates and aggressively collect unpaid bills.
Overall, I acknowledge that while making these strategic adjustments to the budget is a promising start, it will not be enough. In order for us to maintain the current level of city services we provide, we must aggressively work towards attracting new growth and expanding our tax base. In the past year we have seen a number of good projects break ground, such as the $5 million Marcotte Ford expansion and the $8.5 million redevelopment of the old Holyoke Hotel. These are two good examples of projects currently underway, but there are others that still need support from the council. I urge the full council to pass the zone change that has been proposed for the land on Whiting Farms Road, allowing the expansion of Gary Rome Hyundai. This $10 million project will not only generate much needed tax revenue; it will also create jobs, and show a commitment to a local business owner who is helping grow Holyoke. Furthermore, I expect the City Council to have to weigh in on zoning decisions that will determine whether or not we advance on the promising redevelopment proposal at the former Lynch Middle School – a project that will also generate jobs and tax revenue.
In general, the City is in good financial shape. Our stabilization fund is currently at $12,285,079. This represents a 3% ($358,144) increase over last year, and the fund is up 22.24% over the past five years. In terms of long term borrowing (greater than a year), we have an A1 rating from Moody’s, which means we are considered upper-medium grade and are subject to low credit risk, and that we have superior ability to repay short-term debt obligations. Standard and Poor’s has issued an A+ rating, recognizing the city’s strong budgetary performance and very strong budgetary flexibility. In terms of short term borrowing (less than a year), we have an MIG1 rating from both S&P and Moody’s. This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, and demonstrated broad based access to the market for refinancing.
I look forward to working with each of you on the FY2016 budget to both preserve essential city services, and to respect the hardworking men and women who dedicate their lives to our great city. I look forward to your thoughts and input and I am available for questions at anytime.
Mayor Alex B. Morse
Posted on May 15, 2015 by Mayor's Admin