Sunday Notes – Tight Budget, Revenue challenges are Fiscal Warning Signs

Don’t shoot the messenger I should shut up and just watch things play out but I can’t, its a problem I have..

There is very little money available ! The city appears to be using reserve funds to stabilize the budget. It’s an election year and the city is trying to build a new High School so the Manager is again running operations on a shoestring and keeping the tax levy increase at 1.5% instead of the 2.5% allowed by law.

Under Proposition 2½, a municipality is subject to two property tax limits:

Ceiling: The total annual property tax revenue raised by a municipality shall not exceed 2.5% of the assessed value of all taxable property contained in it.

Increase limit: The annual increase of property tax cannot exceed 2.5%, plus the amount attributable to taxes that are from new real property.

The property tax levy is the revenue a community can raise through real and personal property taxes. It is the largest source of revenue for most cities and towns.

“New growth”: Prop 2.5 allows for new growth. So, for example, when a new house is built, the tax levy may increase by the amount of taxes collected from that house.

Excess Tax Levy – Occurs when the city has been taxing under what it could assess in property taxes by law. That excess tax-levy capacity is considered a badge of honor by many city councilors and Managers.

The State budget is
$462 million under what was forecasted and the DOR Commissioner stated “These results make it unlikely that the Commonwealth will meet its FY17 revenue target with less than 20% of expected collections remaining in the final two months in the fiscal year, and we will also need to take a look at FY18 projections.”

There is a possibility that the State Senate will have to consider cutting the Houses increase in Ch. 70 and unrestricted state aid in the upcoming budget.

Fiscally the state and city aren’t in the best shape.

In his budget presentation the City Manager states:

Personnel costs will continue to increase in FY18 based on a 3% cost of living adjustment. This represents the final year of a planned 0% (FY16) – 3% (FY17) – 3% (FY18) offer upon which all unions agreed. These costs, combined with our financial commitment to our key focus areas, limited our ability to expand funding for the various City departments. In fact, many line items were not just level-funded but yet again reduced. These necessary cuts in expenses were spread evenly across the departments and were focused on limiting any disruption to service delivery

I would be remiss if I did not stress the need to increase revenue streams in the coming years, particularly as we look toward bonding the largest high school project in Massachusetts’ history.

Despite that information, the current School Committee is looking for another $700,000 + for 2017/2018 school year after the Manager fully funded the Supt.’s budget and they gave the Supt. a guaranteed 10% raise in a 4 year contract.

It is because of these budget challenges in the state and city that I’m starting to see the warning signs that out of possible financial necessity the city has to keep the High School downtown. I’m worried about the city and schools being able to properly fund their operational budgets.

If it comes down to Cawley being twenty to thirty million dollars higher to build because of the cost of running in all utilities and related site work, traffic work, the cost of replicating fields and the cost of busing (which I know could be addressed but it would wipe out the STEM Academy and other Citywide schools) I can see the rationalization to keep it downtown.

The total cost to the city or individual may not seem that high between sites but I’m looking at that extra $20-$30 million and being able to use a few million of that in the operational and capital budget. Those needs are just as important has the need for the new High School.

All the talk about the Labs and the concern on size and yet no one has mentioned that to keep busing cost down and to do the proposed rezoning it would mean the elimination of the Stem Academy. You would have to either have neighborhood stem schools in every sector or you bring back Science teachers in the middle schools but all that has cost.

The State will be cutting funding based on the decreasing revenue and so will the city. Charter schools and students leaving for other schools will continue to reduce funding for education from both the City and State.

The Lowell Public Schools may be inline for more in Ch. 70 state funding this year but they received $851,160.00 less in cash this year from the City due to the increase in charter school enrollment. The new transportation contract also ate into the available cash.

The City plans to increase the tax levy by only 1.5% instead of the 2.5% allowed by law trying to run on a shoestring to lessen the burden of taxpayers before hitting them with a 6% – 7.5% property tax increase for a new High School. Lowell budgets the city side knowing they will have less “Free Cash”at years end than the State DOR recommends.

We need a new High School in one form or fashion, I prefer the campus state of the art build out at Cawley but the realist in me looks at these warning signs and thinks that with the financial condition of the state and city , the city might not be able to afford the New High School at Cawley.

I won’t be in favor of a just the renovation or of Option 2 which is the worse of any option still there.

I’d be willing to settle for Option 3 – The downtown location with a new building, less disruption during renovation, less costly than Cawley and it should include a plan to renovate without students in the building. It’s hard to lobby to take away a business but it’s been done for the betterment of the public which a High School is.

The statement that Barney’s Deli, the Brazilian grocery store or the driving school could have stayed on the ground floor of the Ed Early Garage doesn’t mention that it included tripling (minimally) the rent and no guarantee it would not rise yearly. Three of the current councilor’s voted to take these buildings when John Cox was city manager, they voted to take private property and residential property for the New Howe bridge. Yet they seem to be telling us that a High School isn’t as important has a garage or bridge. Maybe students who can’t vote aren’t as important has business owners and their employees who can?

I’m also told no one from the City offered the Dentist the ground floor of the Hamilton Canals new Parking Garage with 75 reserved spaces for staff and patients. If option 3 is the best option downtown why isn’t the city doing everything possible to help make it happen?

This Council needs to keep option 3 on the table until the June 13th vote and 6 councilor’s need to be willing to take the dentist office . Skanska needs to come up with a program that makes sure construction in the Kirk St. building doesn’t occur with students present.

If the Councilor’s kill this option Tuesday Night, then Lowell is left with Option 2 or Cawley and option two isn’t practical.

For every picture that is put up about the conditions at LHS, some are unknowingly ignoring conditions like this at several other elementary and middle schools. These photos are from a few years ago but I’m sure similar situations exists today.

Maintenance has always been and will continue to be an issue and while this administration has at least made the attempt to address it more than the previous two administrations if we max out our tax levy than conditions at all other schools will get worse. We will not have the needed funding for our operational budgets.

Lowell needs to be able to fund services and maintenance at all schools. What good is a state of the Art High School but elementary and middle schools in disrepair?

Lowell also has to look at what its median income level is, look at the aging factor of the current taxpayer and the existing elderly and know that we have to consider the cost whether people want to face it or not!

Should we cut police? Close more fire stations? Not fund narcan and the fight against Opioids? Cut the CVB and advertising? Who need tourist?

If we spend $3.6 million additionally on busing what else do we cut in schools? The city has no more money to give. The Superintendent is 100% correct when he points out that in a $162,000,000 Operational budget the city pays in Cash $9,000,00 toward Net School Spending!

Transportation doesn’t count towards Net School spending and is paid out of the cash portion of the city’s contribution which affects the schools operational budget. For 2017/2018 the transportation cost are as follows

This School Committee may have saved Library aides at the cost of settling the UTL contract or will have to go back and change their vote. What do they cut next? The Stem School? Art, Music, Gym? Do we eliminate some of the programs at LHS? Cut languages except Spanish and Khmer?

Do we start charging for sports and busing like neighboring communities?

I fought for the C.E.P program to give every student in Lowell a free breakfast and lunch because we have so many low income families who already received the free and reduced meals that in my view the single mom or dad or family who are working and living from paycheck to paycheck deserved a slight break. This also brings in more funds that the school department uses (for many things beside direct food cost)

If we max out the tax levy for the High School not only are we strangling the ability for other capital projects but both the City and Schools operational budgets. We are also pushing those families on the brink into a hole that they can’t come out of.

The “average” city resident cannot afford a 7.5% tax increase to build the High School then a 2.5% tax levy increase yearly on top of that. Based on the current financial state, the city to fiscally function responsibility I believe would have to raise taxes to 2.5% maximum for the next 5-10 years.

People talk about losing the top 500 kids if we stay downtown but what happens to entire families who have to move out of the city because they can’t afford to live in Lowell? My daughter calls it the gentrification of Lowell. Is that what a city of immigrants is really about?

Lowell because they have not always taxed to the max of 2.5% allowed has built up a tax “reserve” that would allow the city to fund the high school project out of the operational budget by increasing the property taxes up to the amount of the available levy limit but that would leave the city without any excess capacity.

Another way to fund it would be a Prop 2.5% debt exemption that requires a community to vote to increase their taxes for a defined cost and defined number of years but that cost is over and above the cost of property taxes. So basically you would get two tax bills one the “regular ” quarterly property tax and a school assessment tax bill.

I believe the infighting that has occurred over a location makes a debt exclusion override nearly impossible to pass. To many bitter feelings.

That is my concern looking at things from the view of the average Joe who has a limited understanding on municipal finances. Maybe my reading of the financial condition of the city and state aren’t as bad has I think they appear but I’ve learned enough over the last 8+ years to think I’m more right than wrong.

I’d love a new state of the art school at Cawley but unless I can be shown that the cost isn’t $20-$30 million dollars more and that it will not cripple both the school department and city’s operational budgets than I’m willing to “settle” for Option 3 which makes the most fiscal sense and doesn’t put this city on what appears to me to be very thin ice in the years ahead.

Like it or not the fact is Money matters!! and given the current financial climate I’m worried that if we choose Cawley regardless of the price, then this city will find itself using all its reserves again and the city ends up again needing a fiscal control board like we have had in the past or worse..get taken over like Winchendon because we bankrupted ourselves.