City, school surplus may reach $6M
Greater revenues than projected served as the principal driver of a $3.4 million surplus for the fiscal year ending June 30, as reported Monday by Mayor Scott Avedisian.
Citing the preliminary audit, Avedisian said expenditures for the year were under budget by $22,767 and revenues came in at $3.3 million more than budgeted.
This is the 12th time in 13 years that the city has posted a surplus.
Yesterday, the mayor credited department directors for their financial vigilance.
“Virtually every department came in under budget,” he said.
As for the greater than projected revenues, Avedisian said tax collections were better than originally estimated. Playing into that increase was what started off as one of the city’s largest tax sales. With the approach of the sale that came after the end of the fiscal year, property owners paid up or made payment arrangements to be removed from the sale. Nonetheless, the sale produced an additional $1.5 million in revenues. Those taxes were counted as part of the fiscal year’s revenues.
The surplus will boost the city’s unassigned fund balance from $8.3 million to $10.6 million. The reason the full amount of the surplus won’t flow into the unassigned fund balance is that $806,000 was transferred to last year’s supplemental budget plan.
There’s more good news.
School Department Chief Budget Officer Anthony Ferrucci reported yesterday that while the school audit hasn’t been completed, he doesn’t see the $2.5 million surplus forecast earlier this year going down.
“Nothing has come to light to deviate from it,” he said. “It can only grow from where we are.”
Assuming the school surplus is on target, the collective city surplus for the last year would be close to $6 million.
The city news had some members of the City Council pleased but curious.
“I have questions. I would like to see more detail where it came from,” said Ward 5 Councilman Edgar Ladouceur.
“Why wasn’t the surplus known at the beginning of the year? How is it that it wasn’t detected?” he asked.
Ward 4 Councilman Joseph Solomon said from the information released by the administration it would appear the city “was accurate on the expenditure side.”
“I’ve asked to see the numbers,” he said.
Both Solomon and Ladouceur had questions looking forward.
Fire Department overtime costs have traditionally exceeded budget and that, again, was an issue last year. However, with federal funds paying much of the costs over three years, the department has added 17 personnel.
Looking at monthly financial reports provided to the council, Ladouceur said he is concerned by what appears to be a trend to over-budget expenditures for fire overtime.
Solomon said that is of concern to him, too.
“It’s on the radar screen,” he said. “I’m giving the chief the opportunity for the new employees to kick in.”
Avedisian didn’t see anything of alarm at this time. He said department budgets are tracking as projected. In addition, he’s optimistic about revenues, especially after implementation of a lock box system for tax payments. Under the system, payments are immediately deposited, thereby increasing cash flow and enabling the city to earn interest on reserves. He said chief of staff Mark Carruolo is also working with the city’s software provider on revisions for issuing and processing tax payments that should streamline the system.
Avedisian said it is too early to know where the increased unassigned fund balance will have a positive impact on the city’s bond rating. Improved rates would have the effect of lowering bonding costs.
While the bond rating agencies typically want to see municipal reserves equal to 10 percent of their operating budget, Avedisian said, “We’re never going to be 10 percent. That would be hard to justify.” The city budget is $283 million, meaning reserves would need to be $28 million.
Looking at it another way, however, Avedisian concluded the city isn’t that far off from the 10 percent threshold.
He pointed out that when the $156 million school allocation is stripped from the budget, the city’s budget is $127 million.
Based on that amount, he said, “it [reserves] should be $12 million, so it’s [$10.6 million] pretty good.”
Ferrucci said he would have a report on the school surplus for the School Committee at their November meeting.