Significance of city reserves
What city officials have been telling us would happen became official last week, as Mayor Scott Avedisian released the audit for the fiscal year ending June 30, 2013.
The report is later than usual, but the outcome was as rosy as forecast: Both the city and schools ended the year with healthy surpluses.
The city surplus of $3.6 million boosted the unassigned fund balance, or reserves, to $11.8 million.
The school surplus of $4.1 million, which the department had predicted soon after closing the fiscal year, flowed back to the department. Unlike the city, schools don’t carry a reserve or “rainy day account.” The funds have already been partially used to restore programs cut from the current budget. In addition, School Business Affairs Director Anthony Ferrucci anticipates residual funds will help offset a projected $900,000 increase in pension payments. So, in other words, there won’t be any left over fluff to help offset increases in the upcoming budget.
There are some encouraging trends in the numbers.
Generally, on the city side of the budget, the city spent less than what had been budgeted and collected more in tax revenues than projected. Mayor Avedisian took the improved tax payments as an indication of an improving economy.
We hope he is right.
On the spending side of the ledger, public works produced major savings over what was budgeted – a feat that will prove difficult to replicate this year with its succession of snowstorms. A major boost to the city was a federal grant that will underwrite the salary and benefit costs of 17 additional firefighters for the next three years. The added personnel have enabled the department to reduce overtime costs.
It’s too soon to know whether the financial performance of the past fiscal year will have a bearing on the forthcoming year. Certainly it doesn’t hurt. Unlike prior years, the current budget doesn’t hinge on a draw down from reserves, meaning the city doesn’t enter the budgeting cycle with a structural deficit.
That’s a big plus.
But holding the line on spending and taxes is difficult in a down economy. Unlike the boom years, when one box store after another opened on Route 2 and business was booming, the city tax base is virtually static. New sources of tax revenue or, for that matter, state aid, are not there to cushion increases.
That said, the fact that city reserves stand at a high for the 14 years Avedisian has been mayor, is significant. Avedisian recognizes the value of a strong financial footing, although some of the rating agencies think the city could be doing more. This is a balancing act between what the community can afford and what would be the ideal.
Mayor Avedisian has done a good job. The reserve fund is healthy. Warwick residents have reason to be proud that the city is on a firm financial footing and being efficiently managed. But it hasn’t come easily.