$115 Million City Budget Filed by City Manager

May 5, 2011
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It will cost $115 million to run the city of Chelsea’s various programs and to meet the city’s multitude of responsibilities in the coming year, according to City Manager Jay Ash.

Ash submitted the city budget, which he considers historic, to the city council earlier this week.

The Fiscal Year 2012 budget provides for a 4.5% cut in overall spending and at the same time higher police staffing than ever before as well as contributing more to the city’s pension obligations than required by the state.

By themselves, these two budget items – the 4.5% cut in overall spending and higher contribution to the city’s pension liability funding – are extraordinary.

“And we’re still providing for much more,” said Ash.  “We’re going to take advantage of federal funding to add another four firefighters. We’re going to get even more serious about recycling by hiring someone to help push the effort in our community, and we’re continuing to be mindful of future budgeting issues by not overspending today or borrowing ourselves into bankruptcy tomorrow.”

Such heads up management of the city’s finite money resources has led to a far different Chelsea during Ash’s term as city manager.

Ash’s budget plan reveals that non-school local aid is down another 7%. This is the case all over Massachusetts and especially in the cities and towns nearest to us.

In neighboring Everett, that city received an added $1 million in Chapter 70 funding which cut the city’s overall needs by the same amount.

Chelsea’s loss of school aid amounts to  a $500k loss, putting the account at $6.4 million.  In FY’12, non-school local aid equaled $10.6 million.

“We’ve lost about 40% over the last decade in aid to support everything but education.  We’re managing through that, though, and have had some good economic development and entrepreneurial efforts to thank for helping to keep our budget funded,” Ash said.

School aid from year to year does not keep up with fixed cost increases born by the cities and towns. School aid from this year to next year is level funded. But level funding implies more cash needed because fixed costs keep rising.

Chelsea’s School budget would need an additional $2 million to meet contractual obligations in order to stay in balance.

“It may seem counterintuitive that we would add positions on the municipal side but cut them on the school side.  However, school funding is so much more dependent on state aid, so when state aid slows, levels or, heaven forbid, drops, the impact on school spending is much greater,” explained Ash, who said that state aid accounts for 83% of school spending, as compared to just 13% of municipal spending.

Other than the school budget, Ash said most departments were being level-funded.  In addition to the public safety jobs, Ash indicated that two positions would be added in public works, including a full-time laborer and two half-time positions, one each for solid waste enforcement and recycling coordination.  A position in the clerk’s office will be added to aid in the City’s implementation of a new parking program.  Another set of financial eyes is also going to be added to oversee water and sewer accounts and other areas of spending.

Ash said staffing in some offices at city hall is down by 50%. However, there remain a few offices where additional staff has been hired. It is all, according to Ash, a balancing act.

The largest increases in city spending are for employee benefits.

Health insurance alone is up 7% and retirement contributions are up 4.5%.

“Those accounts continue to wreak havoc on our budget.  On health insurance, for example, we’ve gone from spending 5.5% of the municipal budget to nearly 14% during my tenure.  I remain hopeful that the State will take action to give us the tools we don’t have today to bring health insurance spending and retirement costs better under control.  Until that happens, though, more and more tax dollars are going to employee benefits instead of direct services.  That’s probably our biggest trouble spot,” suggested Ash.

Last week, the House of Representatives passed legislation intended to give cities and towns the right to determine the shape and form of their health insurance programs, which are today, offering unsustainable packages.

In his recent Five-Year Financial Forecast, Ash indicated that the City’s structural deficit, defined as recurring expenses minus recurring revenues, continues to go down for FY’12 and beyond.  The imbalance for FY’12 is $1.9m, which will be filled with the use of the City’s reserves.  Ash says that non-school local aid cuts and skyrocketing employee benefits are to blame.

“Frankly, we’ve done a great job holding down spending.  If you were to look at debt service, for example, you’d see we are actually experiencing declining debt levels while still doing more projects.  However, we have little control over employee benefits and even less control over local aid,” emphasized Ash.

The proposal of the municipal budget is probably the single most important action Ash takes annually.  The budget provides insight as to the direction City thinking is going on numerous issues and reveals whether potential or real budget problems can derail efforts to provide for increased public safety, improved infrastructure and an overall level of service that can enhance life in the city.  At least one city councillor believes the news on those fronts is good, if not great.

“Frankly, in these continuing troubled times for municipal finance, to be able to be talking about providing adequate and then some service levels with a heightened focus on particularly important areas, like policing, is remarkable. And, to be able to do so while having the lowest tax burden around is astonishing,” said Councillor Brian Hatleberg while referring to the recent report that indicated that Chelsea was at least 23% less costly to live and own a home in than area communities.

Hatleberg and his colleagues will begin hearings on the City budget on May 16.  A public hearing will be scheduled prior to the Council taking a final vote on the budget.


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