What Ch. 17 is, Why this Administration thinks it’s time to Repeal, why I say keep it!

tax-dollars

This is what Ch. 17 is, it was passed by the State Legislature during a period in the mid 1990’s when Lowell was in Dire Financial shape.

Chapter 141 AN ACT AUTHORIZING THE CITY OF LOWELL TO ESTABLISH A CEILING OF THE AMOUNT REQUIRED TO BE APPROPRIATED FOR THE SUPPLEMENTAL RESERVE FUND.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows: (BOLD MINE_GN)

SECTION 1. The third paragraph of section 6 of chapter 17 of the acts of 1992 is hereby amended by striking out, in lines 15 to 19, inclusive, the words “nineteen hundred and ninety-seven and each subsequent fiscal year shall be an amount equal to one and one-half percent of the gross amount to be raised for the prior fiscal year for the general operating fund as appearing on the city’s tax rate recapitulation for such prior year” and inserting in place thereof the following words:- 1997 shall be an amount equal to one and one-half per cent of the gross amount to be raised for the prior fiscal year for the general operating fund, as appearing on the city’s tax rate recapitulation for such prior year; and the required amount of the supplemental reserve fund for subsequent fiscal years shall not be less than the amount of the supplemental reserve fund for fiscal year 1997, plus any additional amount, if any, as the city shall determine.

SECTION 2. This act shall take effect upon its passage.

Since that time Lowell recovered but then during the COX administration and under the supposed supervision of then Council Elliot and Mercier among others, the Administration raided and used the reserves to balance the budget and run the City resulting in Lowell once again on the State Watch List.

Now here is the answer I received from the Administration when I asked why the City would want to get out of this requirement to save:

In order to further our efforts to fully comply with the Commonwealth’s school finance statute, Chapter 70 of the General Laws, the administration has worked diligently to devise the following plan. According to a memorandum from Jay Lang, Deputy Superintendent of Finance and Operations for the Lowell Public Schools, provided to the Lowell School Committee in January of 2014, the City of Lowell was projected to fall $4.2 million below the required net school spending target by the end of fiscal 2014. Subsequent to the aforementioned memorandum, the City Council appropriated $2 million from the Chapter 17 Stabilization Fund, to be transferred to the School Department budget.

While this transfer helped to mitigate the impact of the carry-over deficit, it neither fully satisfied the deficit nor provided a permanent solution. Part of the legislation that created required Lowell to maintain the special reserve fund from which the monies were transferred (Chapter 17 of the Acts of 1992) also required that the city replenish the funds in the following year.

The provisions of this legislation are the remnant of a time when Lowell, financially, was in dire straits. The special stabilization fund was the only source of reserves and intended to be a failsafe as Lowell regained its fiscal stability. Today, Lowell is in much better financial shape, demonstrated by our most recent credit rating and the improved Financial Management Assessment (FMA) score from the ratings agency, Standard and Poor’s. The City now utilizes progressive revenue and expenditure controls, employs long-term forecasts, and maintains reserves of over $9 million. These factors render the need for the special stabilization fund redundant and superfluous, considering that the net school spending liability has continued to grow.

After careful consideration of the matter and discussion with the city’s financial advisers, I would advise that we introduce a vote to the City Council to authorize the repeal of Chapter 17 of the Acts of 1992. By working with the members of the Lowell Statehouse Delegation, the requirement to replenish the fund can be lifted and we can introduce a subsequent vote to transfer the remaining $2.2 million in the Chapter 17 Stabilization Fund to the School Department.

Now while there is little doubt that the City is presently in better financial shape than it was during the mid 1990’s and during the COX years, there is a great amount of risk given the city’s history and the long range fiscal picture of abandoning this safeguard.

The 2015 budget approved by this Council included some major increases that in required the 3.5% Tax Increase including a $3 million additional pension assessment because the City’s pension assessment has increased by almost 20% to over $20 million in FY15 , the City funded a portion of this $3 million increase using ALL of the special Pension Stabilization Fund that was established using Free Cash in FY14.

The City Manager’s Budget Explained why they did this – This will provide the necessary relief to prevent cuts to critical city services.

There is also un-funded liabilities for post employment retirement benefits and health insurance costs for retirees.” that all cities in this State have to deal with and can’t keep kicking down the road.

The City has a solid Stabilization Fund Balance that now stand at approx. $12 million but this fiscal year alone the City tells us in their Budget book that Total expenditures in the General Fund have increased by $14.6 million (5%) over FY14 and The amount allocated to the Lowell Public Schools has already increased by $2.9 Million.

All of these numbers will increase in 2016 and Lowell will have to find the additional revenue or start to cut services or increase fees and taxes. If they shudder Ch 17 and give the Schools the additional $2.2 Million it adds more pressure to the 2016 Budget because that will have to be included next year also. You can’t give then take away and stay in compliance of Net School Spending.

The Law and Ch. 17 clearly forces the City to have a min deposit on record and a requirement that if you take from this account you have to pay it back. Think of it has forcing the City to have a min. safety net to protect us from State takeover like we saw in the past and almost saw the last time a former State Rep. was Manager.

The Law states the City needs 2/3 Vote of the Council to use Stabilization funds but given this Council’s mindset and the fact that 2015 is an Election year, the city’s finances should have at least some fail safe because this Council in my estimation will raid the savings in the name of Public Safety and not having to cut services to get themselves re-elected and use these funds to kick the can down the road.

Having the ch 17 funds guarantees that when the City Council wants to vote to use millions out of the Stabilization Accounts to balance the budget in an Election Season next year, Lowell will at the very least have a $4.5 Million dollar insurance policy in place. Think of it as forced savings or a cushion or responsible management and lobby the Councilors to vote NO or better yet lobby the State Rep. and Senator Donahue to NOT allow Lowell to repeat its past history and not have some minimum reserves that can’t be used unless it is paid back.

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