Like a forecasted Nor’easter that eventually dumps a foot of snow, the world-wide recession has finally taken its toll on the City’s municipal budget. This past week, 19.5 positions were eliminated, and City officials are scrambling for ways of plugging budget gaps created by historically low levels of local aid and development projects stalled by poor economic times.
“We all saw the storm a comin’,” said City Manager Jay Ash. “The severity of it, though, is testing our ability to withstand such an impact.”
Ash told City Councillors at two sessions in the last week and a half that the City’s budget deficit, once pegged at $3 million, has ballooned to $6.5m.
“We’re not panicking,” asserted Ash. “It would have been foolish to think that the worst recession since the Depression wouldn’t have any impact on us here, and we’re not fools. We’ve actually been preparing for this day for some time, and will put into place the necessary actions to make sure that we end the day with a balanced budget, again.”
Part of that plan, Ash said, is to reduce expenditures. With $3m of the $6.5m deficit having been eliminated through Council’s approval of the use of reserves, Ash said City budget officials are looking at addressing the remaining $3.5m budget gap. The action on the 19.5 positions, which included layoffs of 8 full-time and 1 part-time employees and the elimination of 11 vacant positions left vacant as part of the plan, will be part of $1.7m in savings the City seeks to achieve in equal shares from police, fire, general government and school operations.
In addition, Ash said the City is likely to implement an increase in health insurance charges to retirees and is seeking to eliminate a “53rd pay period” for current employees. The two would combine to save the City about $700,000 in expenditures.
Added to that, the City Council’s adoption of two local option taxes, the meals tax at 0.75% and the hotels tax at 2%, along with an increase in demand charges on late tax payments, is expected to raise another $500,000. Ash believes that State action to provide additional “municipal relief’ may then eliminate the remainder of the deficit.
“If not, we’ll be ready to act again, as soon as March, to reduce spending further,” informed Ash.
Ash said that fifty percent of the City’s departments had already seen a reduction in their accounts when the City’s budget was first adopted. After that action and the Council’s $3m reserve vote, the balanced budget was then impacted by a drop of another $1.2m in local aid and what appear to be sluggish results on building fees and interest on accounts.
“With the recession, less building activity, including new development, is taking place, which could cost us as much as $800,000 this year, and historically low interest rates may cost us another $400,000,” reported Ash.
Additionally, Ash says the City is losing $600,000 in revenues as a result of the State takeover of the Tobin Bridge. The Massport PILOT (payment-in-lieu-of-taxes) payment will not be honored by the State.
“That’s a big hit on our revenues,” stressed Ash.
The last $500,000 in projected revenue losses is in a variety of smaller accounts.
“We’ll be shrinking the size of government to match the revenues available to pay for services. I’d like to say that the public won’t be affected, but that’s not a promise I can make,” confided Ash.
Six positions were proposed for elimination in the Fire Department, although Ash said word had just come that a State grant might be able to save those positions. Earlier this year, Federal grant money was secured to avoid the six layoffs that had been planned for the Police Department.
“I got the call from Representatives (Eugene) O’Flaherty and (Kathi-Anne) Reinstein that awards were being made by the State to help hold onto the fire positions. We haven’t been able to digest it all, but I think the grant funds will be able to help us avoid cutting public safety this year. The longer we can do that, the more we can provide for the public and try to outlast the tough financial straights we find ourselves.”
Included in the 13.5 positions eliminated from general government were 4 empty positions in DPW and one in each of the City Clerk’s Office, ISD, the Library and the Treasurer’s Office. Single layoffs are occurring in ISD, IT and the City Clerk’s Office, as well as with the elimination of the City’s Licensing Department. The City’s part-time Graffiti Abatement Coordinator is also being eliminated.
Across the State, cities and towns are reeling, as Ash says chronic revenue generation problems are now exposing problems at the very foundation of municipal budgeting.
“When Proposition 2 ½ was adopted in 1980, non-school local aid was increased 425% that decade. The increase dwindled to 7% in the decade of the 90’s and has actually decreased by 22% this decade. We’re all trying to deal with 2010 problems with revenues from 1985 levels. In the end, it can’t be done, and that’s why cities and towns across the state have and will continue to see scenarios like the one we have now announced play-out in their communities,” explained Ash.
The prospect of another “tough” budget cycle at the State level does not give Ash much hope that next year will be better.
“In sports, when you have a bad year, its always ‘wait ‘til next year.’ That’s not a particularly encouraging refrain here because next year may be worse than this,” Ash stressed.
Ash indicated that the City is beginning to plan for FY’11 and will be looking at a $7m deficit, not including as much as $3.5m more the Schools may need to be level funded.
“We’re actually lucky because we’ve had some good discipline and have prepared for this storm. However, even when you’re prepared, a storm can still wreak havoc. That’s what we’ll now be dealing with, at least for the next 18 months,” concluded Ash.