Loading...
Mayor's 8 week financial reportBEVERLY’S STATUS AS SEEN AFTER EIGHT WEEKS IN OFFICE You will recall that I stated my intention on Inauguration Day to give you an update on the City’s financial condition in 60 days. Tonight is not quite 60 days into the term, but close enough. The City budget for the current fiscal year depends heavily on one time revenues including $925,000 from the sale of the Edwards School and other revenues totaling at least $1,000,000 from sources which will not be available for the upcoming fiscal year starting July 1. As you know we have recently and reluctantly reduced the number of fire engines with ladders in service from two to one, and we eliminated the position of Aide to the Mayor. We are watching every dollar closely. Against this background it is anticipated that we will finish the current fiscal year approximately at budget provided snow and ice removal costs remain moderate. The situation for the upcoming year is far more bleak. Not one of the City’s 13 unions is operating under a current contract. While -2- negotiations are proceeding with several unions, no agreements have been reached. The non-availability of the one-time funds which balanced this year’s budget combined with other issues have led the Council Budget Analyst, Kathryn Griffin, to conclude that projected expenses will exceed revenues by about $4,000,000 for FY 2005. Kathryn Griffin’s thinking is logical. Beverly’s retirement costs for next fiscal year are up 13% or $640,000 to $5,500,000. Much of this increase is due to the ill-advised Early Retirement Program. The City faces an increase in its trash collection and disposal costs in the order of $700,000 annually. Medical costs continue to rise. Simply maintaining the existing medical benefit for employee family plans means approximately an additional 2% of salary cost increase to the city each year with no increase in benefits to the employee. That statement is based on 8% annual increases in medical costs. Actual cost increases have been greater in recent years. In addition, State Aid is totally level funded, while as you know essentially all of our costs are increasing. -3- Before I start discussing the ways to try to deal with these challenges, I think it’s important to note the drop-off in public school enrollment in our city. Since 1997, our elementary schools, which are in excellent physical condition and staffed with excellent teachers have seen enrollment drop from 2462 to 2081 pupils or a decrease of about one of every six children. Beyond that the Superintendent sees continued declines in the overall population through at least 2009 or a period of 12 straight years. You might ask what is happening, and I think that a major part of the answer is that our City has become too expensive for many working class families with children. This phenomenon in my opinion is not something which is coming but something which is here, and I expect will continue. Person after person tells me that his or her children can’t afford to live in Beverly. My thinking needs to be questioned, and I welcome feedback on this subject. But if I am right, we will need to rethink the appropriate physical facilities to meet our future needs. -4- Let me also go on record at this point in saying that as a general rule, I very much disapprove of selling assets to fund operating expenses. Those who would pursue this approach must eventually run out of assets to sell. There are times, however, when special circumstances prevail. As we replace or upgrade assets, we will have opportunities to dispose of assets that are no longer needed or are inadequate to the needs of the community. Good asset management requires that we not only have and maintain capital assets necessary to accomplish our goals, but that we do not appropriate scarce dollars to maintain assets that don’t enable us to reach such goals. Now to a first look as to how we will deal with next year’s budget. We have begun specific action aimed at reducing overdue taxes. We are reviewing and in many cases increasing building permit related fees while ensuring consistent and logical application of rules. There have been some loopholes in our regulations. -5- We are working with Main Streets and the Beverly Chamber of Commerce on possible increases in parking fees. We have begun action to increase voluntary contributions from non-profits for next year. These contributions are better known to some as PILOTS (Payments in Lieu of Taxes). We will of course review all budgets thoroughly as part of next year’s budget process for possible expense reductions. I have requested that the Harbor Management Authority increase revenues by finding appropriate means to add to the number of boat slips in the harbor. I have requested that the Airport Commission proceed to sell surplus land for economic development. Total trash collection and disposal costs will increase during next fiscal year to an annual rate in excess of $2.5 million. For next fiscal year I anticipate proposing a quarterly user fee of $25 per household. I must say I will make this proposal with great reluctance. Special provisions would be made for low-income seniors and hardship cases. The annual proceeds from this fee are estimated at $1,000,000. During the next month we will establish a Committee comprised of six -6- community members to evaluate the City’s options for controlling future trash collection costs. To facilitate this process we have obtained a State Grant, which will provide data on the experiences of the nearly 100 Massachusetts communities which have a charge per bag system. The Committee will fully investigate a per bag proposal with a modest fee per bag which would allow a reduction in the quarterly assessment and encourage recycling if investigation shows that approach to be feasible. Let me make it very clear that I personally don’t like the Trash Fee or the per bag fee, but the law demands that we balance the budget and the entire process is a balancing act. As you know, I have proposed the rezoning of the Edwards School property. Notwithstanding my general concerns with the sale of City assets, the decision to sell the Edwards School was made last year and our current year’s budget was predicated on it. The City has an opportunity to shape the value of that asset in both the short term and the long term. Taking advantage of this opportunity is essential to our financial future. The administration agrees with the Planning Board’s -7- recent recommendation that the Council encourage 100% residential use of the building. The administration further agrees with the recommendations to require a minimum of two parking spaces per unit and to impose façade restrictions on the building. The administration does not support restricting the building height, which is set at 55 feet under both the existing and the requested zoning. Such a restriction would take away the imagination of the architect and deny the City significant dollars in both the short and long term, since much of the tax revenue the City expects to get over the years will be due to the post- acquisition investment by the chosen developer. It is also believed that investment in this site will foster additional investment in the neighborhood. As an alternative to limiting the height, the administration would support a defined maximum number of units on the site of say 40 total units. Many are of the opinion that 40 residential units on that site will have far less traffic impact than did the operational Edwards School of two years ago. Although it is opinion, I personally believe that a thoughtfully redeveloped site will fit in nicely with the -8- neighborhood. The first $925,000 from the school sale proceeds is needed to balance this year’s school budget. The balance will, of course, be important to next year and to our future. We hope to be able to judge Edwards School RFP responses by early June so as to know just where we stand before the vote on next year’s budget occurs. Over the years most of the City’s new annual funding has gone to the schools. In the future, I believe school funding needs to be looked at in two parts. I expect that the annual operating budget will more closely resemble the Net School Spending requirement or in other words, the required spending amount as determined by the State. Simultaneously, we must make every effort to develop the funds to put our secondary schools in proper physical condition. In the case of our High School there are two projects needing to be done. The first of these is a short- term project which, I believe, can be reduced in scope to less than $7,000,000 from the nearly $14 million first estimated. That project is necessary to get the High School off probation and would -9- require funding in the amount of approximately $500,000 per year for 20 years. My optimism regarding the cost reduction is based on investigation of the cost estimates which thus far is promising. I intend to make every effort over the next year to promote appropriate new growth which can be the source of the funds for that project which I would like to see commence in July 2005. In the same vein I am setting the date in my own mind for the major project at the High School to begin four years out in July 2008. This project is likely to have a $40 to $50 million price tag. I would consider moving that project in even closer if it would further reduce the cost of the short-term project. There will also be the need for a Middle School Project. The current student enrollment trend starts to suggest that one middle school can adequately handle Beverly’s entire needs. While timing of this project is less certain, I am setting it at July 2010 for planning purposes. We do not yet have an estimated cost for this project. From conversations with State Officials I fully expect the SBAB Program to be reopened during calendar 2005 although -10- percentage reimbursements are not yet clear. I am going to make every effort to pursue these projects without overrides. I see it as the Mayor’s job to get those tasks accomplished without overrides although at this time I cannot promise that I will succeed, I can only promise my best efforts. The various efforts to balance next year’s budget which I have described clearly narrow the gap but do not currently appear sufficient to close it completely. As we move deeper into the budget process and the numbers firm up, I will be able to tell you more. The Council has asked for a preliminary budget before May 1; I will comply with that request. Let me also add that the Request for Qualifications for a thorough study of our Police Department has been issued. I will at the next Council Meeting bring forward a request to fund that project estimated to cost $55,000. From the study we will learn what is good about our department and what could be better. The study will deal with all aspects of Police Department operations. -11- Clearly we face difficult times and difficult choices. The setting of our budget is indeed a balancing act. A close working relationship among all those interested in the future of Beverly is our best weapon in this fight which has, and will continue to have, our full attention. Beverly’s Status – 8 weeks in office