Starting July 1, the city of Peabody is on track to spend just over $146 million for Fiscal 2014, following approval of the new budget plan this week by the City Council.
The increase from the current year’s budget is $5.46 million in total or 3.8 percent, but that number is somewhat misleading, according to city finance officials. That’s because $2.2 million for retired teachers’ health benefits will be reallocated from state and county assessments into the city’s operating budget.
Finance Director Patricia Schaffer explained that, due to the city dropping Blue Cross Blue Shield and joining the state Group Insurance Commission last year, the city was required to place all its retirees into the same employee pool. The city was billed roughly the same amount in FY 2013 for its retirees’ health benefits.
City BudgetFiscal Year 2012 2013 2014 Budget $137,642,096 $140,571,061 $146,036,794
In reality, says Mayor Ted Bettencourt, he’s only asking for a 2.6 percent or $3.77 million increase in spending, and that will mainly cover contractual pay raises, a 3 percent hike on health insurance costs, higher water and sewer assessments and the city’s first payment on the new regional vocational school in Danvers.
"I strongly believe this proposed budget is financially responsible to our taxpayers as well as continuing the necessary important services we provide to our residents," said Bettencourt.
He said department heads complied with his directive to level fund where possible, and in general, department increases are only in education (1.96 percent), police (2.1 percent) and fire (2.7 percent).
The salary raises contained in the budget allow for 2 percent increases for Fiscal 2013 and Fiscal 2014. Bettencourt said 74 percent of the total budget increase or $4.05 million) was related to salaries.
Bettencourt is also seeking to create two new city jobs -- a facilities manager and an additional park maintenance person -- along with several positions added in the school budget.
The facilities manager is a proposal that former Mayor Michael Bonfanti and the City Council and School Committee clashed over a few times during his tenure in office. This time, however, Bettencourt says the city could stand to lose significant reimbursement points from the state on the new middle school if that job doesn't exist.
Peabody was approved for an additional 1.47 percent (or $1.2 million) in reimbursement from the MSBA with the commitment to develop a comprehensive maintenance plan for the new school. He said the MSBA questioned why the city didn't have a facilities manager already and was assured it would be addressed in the budget.
That person, among other duties, would oversee capital needs and the status of all city and school buildings. The City Council will now need to approve an ordinance to authorize the position that is funded by the budget and Bettencourt needs to gain approval from the School Committee for it to relinquish control of the maintenance of school buildings.Budget Area Fiscal 2014 Increase Education $65,437,793 1,260,000 Employee Benefits $23,605,545 1,895,568 Public Works $21,995,262 $984,939 Public Safety $17,887,777 $427,604 Debt Service $6,294,000 $300,000 General Government $5,178,543 $279,538 Culture & Recreation $3,298,960 $172,955 Human Services $2,338,914 $140,529
Bettencourt also pointed out that the city has saved $1 million in the past six months since employees have enrolled in plans under the GIC and the city is on track to save another $1 million in the next six months. He said if the city stayed with BCBS, it would have been a 7 percent cost increase rather than just 3 percent.
As for the school budget, Superintendent Joe Mastrocola explained that the $65.44 million will allow for a boost in necessary services while also expanding some key programs and not require any reductions in jobs.
That includes retaining teachers and library aides added last year, boosting textbook supplies and materials and hiring for several new positions, such as two English Language Learners teachers, an integrated special education teacher and aide and a half-time district math coordinator.
On the revenue side, state aid may increase somewhat, but state charges associated with education are expected to increase as well. Local revenues remain stagnant, and therefore property taxes will continue to increase and pay for an even greater share of the budget.
Property taxes will account for 62 percent of all revenues, and with property values remaining stable, tax bills are projected to increase for the average residential homeowner by $59.
New growth in both the residential and commercial tax base is expected to generate $$890,000 in new taxes and Bettencourt has committed to spending $1 million from the city's free cash account to avoid a greater tax hike.
In time-honored fashion, at least one city councilor made an impassioned argument to consider dipping further into the cash reserves.
Last year, it was Councilor-at-Large Anne Manning-Martin who argued for spending more reserves to alleviate the burden on homeowners, many of whom are still struggling financially as the economy lumbers into recovery mode. For many years, Jim Liacos made that plea to Bonfanti.
This time it was Councilor-at-Large Dave Gravel, who pointed to the package of tax increases all Bay State residents will likely face once state lawmakers agree on a new budget, along with other changes in federal taxes. That includes a higher gas tax, taxes on professional services for businesses, an Internet sales tax and higher FICA taxes.
Gravel said "the average person" in Peabody would feel the local property tax increase on top of FICA, more in gas taxes and any taxes businesses pass on to their customers with higher prices.
"It’s like they’re getting hit from all angles... Couldn’t this be the year, perhaps, we’re going to dip deep into the reserves to allow ourselves the ability to not tax the citizens more?" he said.
Bettencourt said after the meeting that Gravel made a compelling argument and that consideration was part of budget deliberations with his finance team.
He said he wasn't comfortable depleting the reserves further especially with some larger capital projects on the horizon, as payments come due for the megavoke and a strong bond rating is key to financing the upcoming middle school project.
Under the approved budget plan, the city has $11.2 million in hand from free cash. If Bettencourt did agree to ensure no property tax hikes next year, that would mean another $2.8 million from reserves to offset the revenue needed for the budget.
The votes for the budget on Wednesday and Thursday were unanimous with Ward 3 City Councilor Rico Mello, who routinely votes against the budget, absent from both meetings.