Everett,  May 18 2018

City Council reviews $232 million FY 19 budget

By Brendan Clogston


A joint session of the City Council and School Department got their first look at Mayor Carlo DeMaria’s $232,266,410 FY 19 Budget on Monday night. The last city budget before the Encore Boston Harbor casino comes online, administration officials are framing the document as a reflection of the city’s challenges and strengths as it hovers on the edge of what they hope will be an economic and fiscal transformation for the city.

CFO Eric Demas has long cautioned councillors that FY 19 would be a challenging year for the city’s finances, awkwardly sandwiched as it is between the expansion of the city’s resources in anticipation of the Encore Boston Harbor casino opening next year and the actual receipt of the revenues the project is expected to bring to the city.

According to Demas, this lead DeMaria to trim $2,667,651 off the budgetary requests of his department heads. “Certainly the mayor wanted to listen to all of the requests that were put forth, but as we’ve been saying for the past couple of years, FY 19 is a challenging year for the city from a budgetary standpoint, given that the casino will not be operational fully until FY 20 and there are a number of costs that the city has had to bring on – such as additional police, fire, and the like – over the three years prior to the opening,” said Demas. “The mayor felt that it was important to do everything that he could to reduce the amount of increases to this year’s budget so that people’s tax bills would be affected accordingly.”


Getting down to details

This year’s total tax levy limit is $135,219,268. The mayor’s proposed FY 19 budget will only levy $113,651,328; however, leaving an excess capacity of $21,567,940. This budget assumes that the $12.5 million payment Encore Boston Harbor will make to the city this June will again be applied to the tax rate, as it was last year. If the council decides to use the money in another way, the excess levy would be $9,067,940.

Other revenues include

  • Local receipts – $10,179,000
  • State aid – $75,005,778
  • School building assistance – $1,730,062
  • Enterprise fund revenue – $19,200,242
  • Other financing sources (Encore’s payment) – $12,500,000

This brings the total to $118,615,082 in other payments, bringing revenues to $232,266,410. Last year’s revenues totaled $227,398,677.

According to Demas, the city’s financial condition remains strong. Its stabilization fund contains $3,044,963, its Other Post-Employment Benefits (OPEB) Liability Trust, $4,613,586; its Capital Improvement Fund, $2,557,865; and its Community Enhancement Stabilization Fund, $12,500,000. It’s free cash has yet to be certified by the Department of Revenue.

The mayor’s budget is requesting $59,435,583 for city expenses. According to Demas, this reflects a four percent increase in the city budget, though when fixed costs are taken into account the increase amounts to only two percent. By department, city expenses include

  • General Government – $7,408,833
  • Public Safety – $33,404,990
  • City Services – $12,970,914
  • Human Services – $3,720,394
  • Libraries and Recreation – $1,930,452

The School Department is by far the largest portion of the budget. The FY19 Foundation Budget is $95,255,826, but the city providing an additional $6,500,000 to the schools, preventing the need for any emergency transfers to the department, as was necessary last year.

“There will be no more supplemental appropriations during the year form other funding sources, such as Medicare reimbursement, state funding, stabilization or free cash,” said Demas. “The goal is to put forth the total amount of what it costs to provide the fine education that we provide.”

Chargebacks to the city for shared expenses will be $25,074,871, bringing the total recommended school budget to $76,680,955. Adding $4,700,000 for special education transportation, the school education budget for the city will be $81,380,955, a nine percent increase over last year’s budget.

The city’s fixed costs total $55,846,555, an eight percent increase over last year’s budget, which includes

  • Retirement assessment – $15,231,838
  • Employee insurance – $22,112,777
  • FICA – $1,500,212
  • Employee injuries – $702,000
  • Property and liability insurance – $1,899,926
  • Debt service – $14,399,802

In all, budget expenses for the city and schools total $196,663,093. Last year’s total budget expenses were $182,960,373.

The council referred the budget to its Budget Committee of the Whole. The committee will review the school budget on Wednesday, June 13 at 6 p.m. and the city budget on Monday, June 4 and Wednesday, June 6 at 6 p.m. – all meetings in the City Council Chambers. A copy of budget is available on the city website, at the Parlin Library, and at the City Clerk’s Office. The FY 19 Budget has to be approved by June 30, the new budget year beginning on July 1.


Bond Rating stable at AA+

There was some concern last year that the city’s bond rating with Stand & Poor’s could take a hit after money was used from its stabilization fund to fill a multimillion dollar hole in the School Department’s budget. While S&P did express some concerns about the practice – as well as the ongoing investigation surrounding Encore Boston Harbor and its parent company, Wynn Resorts, after its founder, Steve Wynn, resigned amid allegations of sexual misconduct – they ultimately decided to maintain the city’s rating at an AA+ stable (the second-best rating under AAA).

“[T]he information that’s been in the newspapers on a national level involving Wynn Resorts has caused them to pump the breaks a little bit and leave us at ‘stable’ even though the resort is scheduled to open a little over a year from now,” said Demas, adding, “One of the concerns that they raised and one of the things that they cited as something that could have a negative impact was our supplemental appropriations related to the School Department that were done outside the School Department. We assured them on numerous occasions that this wasn’t going to be the case this year because we certainly didn’t have the ability to draw down on these existing reserves this year. The money that we used, we actually need to replace.”

Leave a Reply

Your email address will not be published. Required fields are marked *