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Mayor’s Budget Proposal: Lean but Optimistic

Despite state aid cuts and a weakened economy, some new positions and a push for two new building projects

City Financial Director Chris Pile

NORTHAMPTON – Despite warning that the city’s financial situation remains under pressure on a number of important fronts, Mayor Mary Clare Higgins yesterday proposed a Fiscal 2011 budget that adds several new positions and lowers employee health costs. At the same time, she asked the City Council to OK building a new police station and start planning for a new public works facility.

“While this may be a less dismal year than some previous years, we are not out of the woods yet,” Higgins wrote in her prepared budget message to the council. “We continue to be tested on the revenue side by anemic state aid and rock-bottom interest rates.”

The mayor’s $74.6 million city budget proposal, if OK’ed by the City Council next month, would increase city spending by $331,551, up 4 percent over the current fiscal year. Of that amount, about 61 percent would be funded by local property taxes, which will rise about 3.3 percent. Another 20 percent would come from state aid, with 9 percent from services and fees, and about 1 percent from the federal government.

In a briefing for reporters Thursday hours before she presented her budget to the City Council, Higgins said that, while state aid cuts and the flagging economy present obstacles for her budget, deep cuts made last year – including layoffs, furloughs, wage and hiring freezes for non-school municipal employees – have put the city in a good place to continue providing services and plan for the future.

“Because we froze wages and steps last year, we’re growing from a lower base,” Higgins told reporters meeting in her City Hall offices.

The City Council is expected to hold public hearings on various aspects of the mayor’s budget with a final vote expected to come June 17. Fiscal 2011 begins July 1.

Police Station and DPW Facility

DPW Chief Ned Huntley listens in the back of the room as councilors discuss capital spending

At Thursday night’s council meeting, Higgins asked councilors to consider a Proposition 2 ½ override to partially fund the approximately $17 million new police station, to be built on the Center Street parcel where the current building stands. The mayor suggested overrides of either $10 million or $8.5 million, with the rest to come from regular long-term borrowing as the debt decreases on other municipal building projects, like the fire station, the Bridge Street and high schools.

Higgins told reporters the current police department building is woefully inadequate to serve the 70-plus employees there, a point she said was driven home during last December’s arson spree. At that time, she said, police investigators had to use rented space elsewhere in the city to handle the response, and that the building is too small and outdated during normal operations.

“I feel so strongly about this,” Higgins told reporters. The building, she said, “Is not adequate for the important job they have to do.”

While lower interest rates have lowered the value of the city’s investments, Higgins said, it has helped keep down projected costs of the new police station. For that reason, and because of a competitive bidding climate among general contractors, she added, last year’s halt to building the new police headquarters is not expected to result in significant added costs for the project.

The mayor also asked councilors Thursday night to OK funds for an engineering study of replacing barns, offices and out-buildings at the Department of Public Works headquarters on Locust Street. While some buildings there are old and inadequate, Higgins said a new facility would better serve the DPW’s mission to store and maintain equipment for the schools and other departments. A new facility, she said, would also allow consolidation with the Water Department – now housed in an old building on Prospect Street – while providing up-to-date facilities for a fuel depot, indoor and outdoor vehicle storage, engineering and interdepartmental fleet maintenance.

The budget also allocates slight increases for both the School Department and the Smith Vocational and Agricultural High School, but how those funds are spent will be the subject of separate votes by the respective school committees.

Overall, proposed school spending would rise by $232,000 to $28.9 million The budget would boost the School Department budget by $122,391 to $23.16 million (a 5-percent hike over current spending ) and Smith Voke’s funding by about $110,000 to $5.825 million, up 1.9 percent.

Human Resources

Councilors Schwartz, Plassmann, Spector, Carney, and Narkewicz

Because teachers voted last year to take furloughs instead of freezing salaries and pay hikes, school officials will face tough decisions on layoffs and other cuts in FY 2011, Higgins said.

Not only does the mayor’s budget proposal call for no city-side layoffs, but it would add several new positions to various city departments.
One is a full-time post in the Human Resources Department, which now handles personnel matters for both school and non-school employees, a measure instituted last year to streamline operations.

Another new post is a part-time inspector’s job in the Building Department to pick up what Higgins said is the expected bump in building permits as the economy continues picking up. Although her budget includes money for a full-time inspector’s job, Higgins said the position – to be funded by anticipated building permit fees – will begin the fiscal year as part-time.

In addition, the Water Department and Parking Division are each budgeted to hire one additional person, to be funded by the Water Enterprise Fund and the Parking Meter Reserve Fund, respectively. And the budget allows for adding two new Emergency Medical Technicians (EMTs) to be hired for the Fire Department’s new ambulance service, to be paid for from rising revenues there.

On the health insurance front, Higgins attributed tough negotiations and hard work by the employees’ Insurance Advisory Committee for a reduction in the projected FY 2011 group medical insurance costs. Overall, Higgins and her financial team have pegged the health insurance budget at $9.716 million – a decrease of $77,332, or .8 percent – from the current year.

Originally, Health New England had projected the city’s healthcare tab would rise by about $700,000, slightly less than the increase a year ago. Instead, the city proposed a self-insurance scheme that calls for an increase in employee co-pays for doctor visits and surgical procedures. But those out-of-pocket payments, Higgins said, would be reimbursed by the city’s Employee Health Insurance Reimbursement Fund; City Finance Director Christopher Pile said that fund currently has about $80,000.

As a result, Higgins and Pile told reporters, city employees and retirees will pay about $100 less next fiscal year than they do now, the first time in the mayor’s memory that this part of the city budget will decrease.
The health insurance numbers are subject to approval by city-side unions, all of whose contracts with the city Higgins said are up for renewal this year.

An Altered Fiscal Landscape

Councilors Adams, Tacy, and Labarge

As explained by Higgins and Pile, the FY 2011 budget plan reflects an altered fiscal landscape shaped largely by state and national economic woes.

One of the largest drops in expected revenue comes from investment income, pegged at $110,000, down 56 percent from the current year. In FY 2008, that income was more than $458,000. Parking ticket receipts are also projected to drop $150,000, or 22 percent, to about $630,000.
State aid is expected to sink from $17.34 million to $15.95 million, a decrease of $1.4 million, or 8.1 percent. That drop is due to state cuts, as well as a number of other factors, Higgins said, including decreased reimbursement for several building projects.

One example Higgins gave to illustrate the tough economic times was the city’s Undesignated Fund Balance, or free cash account, which was depleted by the end last fiscal year, and in fact was headed towards a negative balance. It was balanced, she said, by a series of transfers last June from other reserve accounts.

Normally, free cash reserves end the fiscal year in the black and are used to balance the year-end budget. In FY 2008, $1.38 million in free cash reserves were used to plug a hole in the operating budget; in FY 2009, that figure was just over $1 million. Included in the mayor’s FY 2011 budget is $80,000 from the Capital Stabilization Fund, up $30,000 from the current year.

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