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State of the City and

FY2011 Draft Budget


Review
State of the City and FY2011
Budget Review
TO DATE WE HAVE ACCOMPLISHED MUCH
• Our neighborhood watch program continues to grow and out of
those discussions, we have found a way to hire two additional
police officers.
• We have worked with local groups such as the Community
Coalition to formulate a Youth Commission and we hope to
have that group up and running in the very near future.
• We have begun massive road paving improvements in our
corridors and in our downtown region.
• We have worked with a new community group called “Develop
North Adams” who just announced their plans to promote
business growth, marketing, and events for our city.
• We continue to partner with MCLA and MASS MoCA to find
ways by which we can more fully connect the dots between
their campuses and the downtown.
State of the City and FY2011
Budget Review
• Develop North Adams, is currently working on beautifying
some of our small green spaces to create “pocket parks”
in the downtown corridor.
• We will soon begin a cleanup of the old tannery site that
will spur the development of the Blackinton Mill.
• We have begun having discussions regarding a viable
Mohawk Theatre Project.
• We continue to move forward with the development of
Super Walmart.
• We continue to work towards completion of the massive
airport reconstruction effort.
• We just completed the most successful Community
Cleanup Day ever…in conjunction with MCLA
State of the City and FY2011
Budget Review
We should be seeing some very nice visible things
this summer…
• Pocket parks
• Benches on Main Street and the Veterans Memorial
• Public gardens
• Concerts at the Joe Wolfe Field complex in August
• Wilco at MoCA
• The Down Town Celebration
• The Food Fest
• Possibly some murals or public art
• I would love to light the Noel Field walking track,
playground, basketball court, and tennis courts till 10:30
every night for our youth and residents
• Birth of a Youth Commission
State of the City and FY2011
Budget Review
• We have put closure to the inherited and longstanding
insurance issues with our unions…and let me say we did this
while in constant contact with the Department of Revenue.
• We are having conversations with private investors with
respect to both business development and housing.
• We have spoken with and continue to have dialogue with two
companies that are very interested in placing a solar cap on
our landfill, helping to reduce our energy costs.
• We continue to move towards fulfilling the criteria to become
a Massachusetts Green Community.
• We have fully appointed many commissions and boards and
continue to work to get that completely done.
State of the City and FY2011
Budget Review
• We have been awarded a grant from the Berkshire Regional
Planning Commission that is allowing us to study years of
past planning documents. We are doing this with the idea
of developing a new document that will result in a
community visioning process, hopefully as soon as this fall.
This will be the first step towards long term planning for our
City.
• We have enhanced our website to provide more accurate
information as to public meetings, minutes of those
meetings, published agendas, and more.
• We have empowered our City Council, School Committee,
Boards and Commissions and are utilizing them in ways
that have not happened in years.
State of the City and FY2011
Budget Review
I received the keys to this city on January 4th and since
that time, have struggled with the many things that we
will be discussing here tonight. Shortly after entering
office I met with department heads, created a Finance
Team, created an Executive Team, and spent many
hours on the phone and in person visiting with our
labor lawyer and the Department of Revenue. I also
toured all of our schools, visited all city buildings, and
viewed all problematic infrastructure.
As these meetings became more regular and
intense, I began to truly see the trouble our City
is in.
State of the City and FY2011
Budget Review
• We have one of the lowest cash positions in the
Commonwealth…virtually no financial reserves
• Our infrastructure at all levels, water and sewer,
DPW, Public Safety, equipment, all in deplorable
condition…left to be patched and patched again
• Three of our city dams and many old walls need
significant and very costly work and repairs
• This city owns way too much property and we have
to find a way to sell – The city should not be a
landlord, competing with the private sector
• A transfer station/landfill issue that has been a
nightmare for residents, employees, and most
specifically the people in that neighborhood
State of the City and FY2011
Budget Review

• 8 union contracts to settle – two of those unions


without contracts for the past two years
• We had the threat of arbitration and potential law suit
due to the Medical Insurance Trust issue…which if
litigated, would have probably cost the city millions in
court costs and damages
• Millions in recurring debt and operating expenses being
pulled from our budget and paid from reserve accounts.
These past fiscal practices are now haunting our budget
and truly keeping this City from moving forward
• We have a city with significant needs and not enough
staff to take care of those needs.
State of the City and FY2011
Budget Review
Here are some of the fiscal facts:

Free Cash as a % of Tax Levy Free Cash plus


(as of 12/31/09) Stabilization funds
• Adams – 35.90% $ 2,805,000
• Williamstown – 8.84% $ 1,165,000
• Clarksburg – 40.56% $ 503,000
• Florida – 24.28% $ 467,000
• Pittsfield – 13.98% $ 8,427,000
• Greenfield – 7.75% $ 1,881,000
• North Adams - .03% $ 313,000
State of the City and FY2011
Budget Review
• We have the lowest per capita income in Berkshire
County at $16,381
• We have the highest unemployment rate at 11.2%
• New growth continues to erode…putting increasingly
more pressure on the existing tax payers and businesses
• State aid as a percentage of our overall receipts
continues to be problematic
• In the past 4 years, the average single family tax bill has
increased 19% from $1453.00 to $1729.00 and it
certainly will be up again this coming fiscal year
State of the City and FY2011
Budget Review
• Our local receipts since FY2006 have dropped 10% or
approximately $634,000
• Alarmingly, our free cash on July 1, 2001 was $3.3
million….today it is $307,000.
• In the past three fiscal years, we have used $3.4 million
from reserve accounts to pay recurring expenses such as
retirement of debt, transfer station expenses, police
salaries, cemetery salaries, fire salaries, etc.
• So while free cash is virtually gone, most of our reserve
accounts have been used up to include our Sale of City
Land, Landfill, Parking Meter, Sale of Cemetery Lots and
Perpetual Care, Technology, and our Tax Overlay
accounts…all virtually depleted in the past two years to
pay “recurring” expenses.
State of the City and FY2011
Budget Review

So now we are in the perfect storm…we


have seen:
• Extensive state cuts over the past three years in
excess of 17%
• The past fiscal practices of reducing the budget
and then utilizing reserves to pay recurring long
term debt and operating expenses
• The past mantra that “low taxes” equals “good
fiscal management”
• Past fiscal management that has caused
our house of cards to collapse.
State of the City and FY2011
Budget Review
• We have spent hours with the city’s
finance team and have been in
constant contact with the
Department of Revenue at both the
regional and state levels. They are in
full agreement with our assumptions
and quite honestly…they helped in
the formation of much or what I will
cover next.
State of the City and FY2011
Budget Review

ALL INDICATIONS OF A VERY BLEAK FINANCIAL


PICTURE ARE PRESENT:
• No Cash
• No Reserves
• Crumbling infrastructure – years of “deferred” maintenance
• Using cash reserves and not revenues to pay the bills
• Under-utilization of revenue sources
• Shrinking local economy
• More of our residents on some sort of public assistance
• Higher drug and property crime
State of the City and FY2011
Budget Review
We are currently working on some initiatives to help with
revenues…
• Investigating the sale of city parcels and buildings to include the
Windsor Mill
• Capping the landfill with solar to reduce our energy costs
• Looking at alternatives for the transfer station that could reduce
costs and increase revenues
• Looking at increases in water rates (third year without an increase)
• Looking at a sewer fee
• Better utilization of Windsor Lake and the Campground
• Creating partnerships and collaborative purchasing efforts with
neighboring communities
• Consolidation of utility accounts throughout the city so that we can
better manage those costs
• More calculated assumptions for revenue…most specifically our
local receipts
State of the City and FY2011
Budget Review
As for growth…I have been meeting with the
following to discuss current and future
opportunities:
• MCLA
• MoCA
• MA Development
• Berkshire Regional Planning
• Berkshire Economic Development
• Our neighboring Town Administrators
• The Governor
• Congressman Olver
• Representative Bosley
• Senator Downing
• Local business leaders and developers
State of the City and FY2011
Budget Review
NOW I HAVE SOUNDED PRETTY HARSH
SO FAR BUT….There are many great
things happening:
• Roads
• Bridge
• Sidewalks
• Airport
• Community Groups
• Community excitement
• $50 million in Science Center development at
MCLA
State of the City and FY2011
Budget Review

I also was blessed to inherit so many


wonderful and supportive folks who
are stepping up in ways that I had
only dreamed of…to help pull us up
and out of the position we are in.
State of the City and FY2011
Budget Review
We have created two new groups:
• Develop North Adams – Group of community leaders
who will be working to entice small business, re-brand
and market the community, and work on community
events
• Community Economic Development Advisory
Board – this group will be a vital component of the
growth process for North Adams and will be at the
forefront of the planning document we will be receiving
soon from Berkshire Regional Planning. We will be
hosting community visioning processes later in the year.
• Without growth…over time…in all sectors…
without new jobs…good jobs…we will not grow…IT
IS THAT SIMPLE!
State of the City and FY2011
Budget Review
We should be seeing some very nice visible things this
summer…
• Pocket parks
• Benches on Main St and the Veterans Memorial
• Public gardens
• Concerts at the Joe Wolfe Field complex in August
• Wilco at MoCA
• The Down Town Celebration
• The Food Fest
• Possibly some murals or public art of some sort
• I would love to light the Noel Field walking track,
playground, basketball court, and tennis courts till 10:30
every night for our youth and residents
• Birth of a Youth Commission
State of the City and FY2011
Budget Review
First let me explain the settlement of the Medical Insurance Trust and its
impact on the budget and on taxes going forward.
• Settlement was in reaction to an ongoing issue or “underfunding” the MIT by the
previous administration
• Upon entering office, I retained the services of Scanlon and Associates to confirm
or deny the allegations
• Scanlon confirmed the City had not been paying its fair share of insurance
“working rates”/premiums in FY2008, FY2009, and FY2010 – Exposure was
identified at a number in excess of 1.6 million.
• I approached the DOR for their guidance and worked with the city’s labor lawyer
to create a strategy
• Because we have no cash reserves…it was determined that any settlement
would have to be borrowed or amortized
• To do that, the City would have to tax in FY2011 to its full levy capacity – This
would indicate a minimal increase in property taxes of 10%
• Settlement with city employees based on previous practice of underfunding, will
cost approximately $800,000 over the next three years
State of the City and FY2011
Budget Review
Certified Free Cash:
FY2005 – $1,479,000
FY2006 - $ 906,000
FY2007 - $ 965,000
FY2008 - $1,344,000
FY2009 - $ 310,000
State of the City and FY2011
Budget Review
Other Available Funds FY2009:
City Reserve Accounts
• Sale of City Land Account
• Parking Meter Reserve Account
• Sale of Cemetery Lots
• Technology Account
• Cemetery Perpetual Care Account
• Overlay Surplus Account
These “surplus” accounts totaled
approximately $3,040,000 in FY 2009
Today approximately $1,300,000
State of the City and FY2011
Budget Review
Local Receipts projections over the past
three Fiscal Years have fallen short:
• FY2007 – 95.45%
• FY2008 – 98.27%
• FY2009 – 94.62%
• FY2010 – 95% projected based on YTD

We have worked very hard at projecting


local receipts for FY2011 and we are confident,
as is the Department of Revenue, that our
projections, while conservative, are very realistic.
State of the City and FY2011
Budget Review
Budget
FY2009 FY2010
FY2011 (draft)
School $14,851,697 $15,550,212
$15,637,641
City $20,284,437 $19,666,638
$20,002,060
MA Assessments $ 5,249,650 $ 5,113,699 $
4,793,163

Total $40,385,784 $40,330,549


$40,432,864
State of the City and FY2011
Budget Review
Receipts
FY2009 FY2010 FY2011 (draft)
State Aid $20,928,335 $18,997,071 $18,013,739
Local Rec. $ 6,865,835 $ 6,545,692 $ 7,302,000 ?
Local Taxes $11,052,149 $11,601,588 $12,760,113 ?
SBA Reimburse $ 659,939 $ 659,939 $ 659,939
Med Ins Trust $ 880,000
Total $39,506,258 $37,804,290 $39,615,791
State of the City and FY2011
Budget Review
FY2009 FY2010 FY2011
(draft)
Budget $40,385,784 $40,330,549 $40,432,864
Receipts $39,506,258 $37,804,290 $39,615,791

Deficit $ (879,460) $(2,526,259) $ (817,073)

Appropriated $ 879,460 $ 2,526,859


from Free Cash and Reserves to balance budget
Total Free Cash and Reserves utilized to balance FY2009 &
FY2010 budgets = $3,408,385
State of the City and FY2011
Budget Review
Why the large jump in Local Receipts?

• Proposed 10% increase in water fees (average


homeowner cost of $26.00 annually)
• Proposed sewer fee (average homeowner sewer
fee approximately $118.00 annually – 42% of
average water bill)
State of the City and FY2011
Budget Review
Why the large jump in Real Estate Taxes?
Because we have to amortize the run out of the Medical
Insurance Trust, the Department of Revenue mandates that
we have to bill to our full tax capacity. This would result in
an approximate 10% increase in real estate taxes.
The reality is that with or without the MIT issue we
would have had to tax to the levy capacity to fund
our budget OR suffer MORE SIGNIFICANT CUTS!
State of the City and FY2011
Budget Review

HOW DO WE FIX
THIS?
I am suggesting three
scenarios
State of the City and FY2011
Budget Review
Scenario – 1
• 10% tax increase - $183 on average $140,000 home
• 10% water rate increase - $26 on average water bill
• Sewer fee – 42% of water bill or $118 on average

Monthly average increase cost to homeowner


= $27.25

Plus utilization of Water Shed Account to


offset debt in excess of $800,000, which will all
but diminish our cash reserves
State of the City and FY2011
Budget Review
Scenario 2
• If there is compromise between the Governor and the
Legislature on local receipts and we receive more aid…we could
consider a Proposition 2 ½ override of $1,000,000.
• This would raise our base…eliminate the need for a sewer fee,
water increase and utilization of what precious little reserves we
have left
• This would create an approximate 19% increase in taxes
impacting the average homeowner $333 annually
State of the City and FY2011
Budget Review
Scenario 3
• If there is no compromise between the
Governor and the Legislature on local receipts
and we receive aid as proposed by Ways &
Means…we could consider a Propositions 2 ½
override of $1,500,000.
• This would raise our base…eliminate the need
for a sewer fee, water increase and utilization
of what precious little reserves we have left
• This would create an approximate 23%
increase in taxes impacting the average
homeowner $408 annually
State of the City and FY2011
Budget Review
Scenario 1 Scenario 2 Scenario 3
Tax increase $183.00 $333.00 $408.00
Water increase $ 26.00
Sewer fee $118.00
Total impact $327.00 $333.00 $408.00

• Scenario 1 – would still need to utilize over $800,000 in reserves


• Scenario 2 – would fix the problem if there is a compromise in state aid –
without use of reserves
• Scenario 3 – would fix the problem if there is no compromise in state aid –
without use of reserves
State of the City and FY2011
Budget Review
• These are not pretty scenarios
• These are not economically pretty times
• We cannot continue to play the shell game with
our finances
• We cannot continue to count on the state or our
dwindling reserves to keep bailing us out
• We are faced with significant budgetary obstacles
• We are in a financial mess
State of the City and FY2011
Budget Review
• We need to make the financial adjustments to
get our budget back on track
• When the state finalizes their budget…I will be
making my recommendation as to what
scenario I think will be our best fiscal fix
• We need to consider not just how we get
through this fiscal year but how do we plan for
ALL that lies ahead
State of the City and FY2011
Budget Review
• As I mentioned…we have significant infrastructure
issues due to years of deferred maintenance
• We are currently looking at a new educational model
for our children, that in the not so distant future
could put significant strain on our resources
• The draft budget that I presented represents
approximately $700,000 in cuts
• I am currently working on a 5-year capital plan as
well as a three year budget projection document
State of the City and FY2011
Budget Review
• I WILL NOT RECOMMEND CUTTING THE
BUDGET ANY FURTHER!
• I WILL NOT EXPOSE OUR SCHOOL
DEPARTMENT TO FURTHER CUTS
• I TRULY BELIEVE THAT OUR SCHOOL BUDGET
IS THE ONLY REAL “INVESTMENT” DOLLARS
THAT WE SPEND
• I WILL NOT SHORT CHANGE OUR RESIDENTS
BY DEPLETING BASIC PUBLIC SERVICE AND
PUBLIC SAFETY LEVELS THAT WE HAVE
GROWN TO EXPECT
State of the City and FY2011
Budget Review
• This fine City of North Adams has so much
promise and potential
• It is up to us to move this potential forward
• I have inherited a fiscal mess…a management
mess…I need your help and support to fix it
• I intend to remain open and transparent
• I pledge…with your help…to move this city
forward
State of the City and FY2011
Budget Review

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