The Proposed Budget and MLF Recommendations
June 20, 2011
In the FY 2012 proposed budget, the City Manager has incorporated some of the recommendations that Move Lowell Forward included in the paper entitled "Renewed Economic Growth to Stabilize City Finances".
A summary comparison of what was suggested for the budget document and what is in the document follows.
1. Develop Long Term Financial Goals - The City Manager maintains the policy of setting a stabilization account threshold of 5% of the budget (with a goal of 10%), but includes the proposition 2 & 1/2 "headroom" in that. We would suggest that the excess levy capacity not be included. He continues to direct free cash to non-recurring emergencies and increases in stabilization account as we would recommend. He continues the policy of limiting tax levy growth to 2.5% of current value plus new growth. However, he does not adopt our recommendation of defining commercial/industrial (C/I) growth targets (separately) and adopting a policy of using C/I growth in excess of that target to reduce the tax rate in that class.
2. Set Policies for Local Aid Allocation - The CM apparently has adopted our recommendation (although not specifically stated) to set the school budget to not greater than 1% higher than net school spending requirement (but at least to 100% of that requirement). In the out years he projects State Aid to increase by 2.5%, however he does not include our recommended policy that State Aid in excess of 2.5% (other than what is required to achieve net school spending) be used to reduce the property tax rate across the board, and to further recover the stabilization account to its goal.
3. Develop Plan for New Growth - he does include projections for new growth, but does not separate it into residential and C/I tax levy growth. He does list the TIF agreements and what contribution the maturing of those agreements provide to the tax levy over the next several years (which is good!). He does not adopt the policy of using excess new growth for property tax relief.
4. Set Policies for Tax Rate Allocation - although he includes a 2.5% projection in State Aid in the out years, he does not adopt the recommended policy of "when local aid is increased, any increase over 2.5% that is not directed to net school aid should be used to reduce
the property tax levy."
5. Set Policies for Personnel Costs - he doesn't include any budget for performance incentives, however, he does have every department
define "workload" and set goals for their performance. Inasmuch as there is no budgeted performance incentives in this year's budget it
is unclear whether he intends to follow the policy recommendation in future budgets. We would recommend that he does so.
6. Address Health Care Cost Issues - he has made significant strides in this year's negotiations, although not with the school department.
It remains to be seen whether the State will provide further capability for the city to implement lower cost plans across the board.
7. Retain the Meals Tax of 0.75% - he does so, although his projection for revenue may be higher than recent history would support.
1. Develop Long Term Financial Goals - The City Manager maintains the policy of setting a stabilization account threshold of 5% of the budget (with a goal of 10%), but includes the proposition 2 & 1/2 "headroom" in that. We would suggest that the excess levy capacity not be included. He continues to direct free cash to non-recurring emergencies and increases in stabilization account as we would recommend. He continues the policy of limiting tax levy growth to 2.5% of current value plus new growth. However, he does not adopt our recommendation of defining commercial/industrial (C/I) growth targets (separately) and adopting a policy of using C/I growth in excess of that target to reduce the tax rate in that class.
2. Set Policies for Local Aid Allocation - The CM apparently has adopted our recommendation (although not specifically stated) to set the school budget to not greater than 1% higher than net school spending requirement (but at least to 100% of that requirement). In the out years he projects State Aid to increase by 2.5%, however he does not include our recommended policy that State Aid in excess of 2.5% (other than what is required to achieve net school spending) be used to reduce the property tax rate across the board, and to further recover the stabilization account to its goal.
3. Develop Plan for New Growth - he does include projections for new growth, but does not separate it into residential and C/I tax levy growth. He does list the TIF agreements and what contribution the maturing of those agreements provide to the tax levy over the next several years (which is good!). He does not adopt the policy of using excess new growth for property tax relief.
4. Set Policies for Tax Rate Allocation - although he includes a 2.5% projection in State Aid in the out years, he does not adopt the recommended policy of "when local aid is increased, any increase over 2.5% that is not directed to net school aid should be used to reduce
the property tax levy."
5. Set Policies for Personnel Costs - he doesn't include any budget for performance incentives, however, he does have every department
define "workload" and set goals for their performance. Inasmuch as there is no budgeted performance incentives in this year's budget it
is unclear whether he intends to follow the policy recommendation in future budgets. We would recommend that he does so.
6. Address Health Care Cost Issues - he has made significant strides in this year's negotiations, although not with the school department.
It remains to be seen whether the State will provide further capability for the city to implement lower cost plans across the board.
7. Retain the Meals Tax of 0.75% - he does so, although his projection for revenue may be higher than recent history would support.
8. Examine Energy Performance Contract Projections - This item was exeedingly difficult to evaluate; he refers to other information provided to the city council for this subject, and does not include it in this budget (except for debt service and a reference to performance guarantees that kick in for FY 2013). We would ask for more comprehensible details on this subject.
9. Review the Street Light Purchase Cost Savings - he includes a significant operational savings in the budget. He does not show net savings that are reduced by the debt service for this purchase, although that debt service is included in the total debt service.
10. Reduce Trash and Recycling Deficit - he has implemented a more aggressive control program. There may be some question of who
executes this program and how effective the new approach will be, but it is obvious it is his goal to reduce the excess trash disposal, increase the recycling and target illegal dumping.
11. Plan Enterprise Fund Costs and Revenues - the current budget and future year projections are much more optimistic than in prior budgets. In most cases this improvement is due to actions to increased revenue. It is not obvious that any aggressive cost reduction program has been implemented (as evidenced by flat electric energy projections which belie the advertised solar installations undertaken under the stimulus program).
12. Capital Plan - not included, although an updated capital plan has been promised to the city council by end of CY 2011.
13. Department Level Summary of Changes - this has been included in the budget document and it should be of significant value to the city
council during budget deliberations.