MAYOR DANIEL M. KNAPIK
WESTFIELD – Mayor Daniel M. Knapik began his tenure in office during one of the financially bleakest times in recent history, but conservative money management practices over the past four years have positioned the city for future financial stability
There are some, including several City Council members, who disagree with Knapik’s financial practices during his tenure in the corner office, but at least two professional assessment companies support his approach.
Both Moody’s and Standard & Poor, credit-rating companies which assess the city’s ability to meet its debt obligations, have upgraded the city’s bond rating during Knapik’s tenure.The city received a credit rating upgrade from Standard & Poor’s Ratings Service last month, raising it two notches from ‘A+’ to ‘AA’ which will lower interest, reducing the cost of financing bonds. The agency cited the city’s financial liquidity, strong financial management practices, and rapidly amortizing debt as underlying factors for the upgrade.
In 2011, the city was upgraded by Moody’s Investors Services. This was reaffirmed in 2013, when the city was given an A-1 rating and a MIG-1 short-term rating (the highest rate that a city can get for short term borrowing) resulting in a capability to borrow at a very low rate.
Additionally, the city was recently approved by the Municipal Finance Oversight Board to sell its bonds through the Commonwealth’s Aa1 rating from Moody’s, thus allowing for interest savings on an upcoming bond issue.
Knapik said the S& P assessors questioned the level of the city’s reserve funds, stabilization and free cash, which are presently at $7,487,256.90, inquiring why it is not higher. Knapik said that reserve funds were $6,494,275.90 when he took office in 2010 and have increased since he has been in office. He said he has used cash for over 3 million dollars in capital investments and one time allocations.
“S&P accepted our explanation that this is a prudent use of free cash for one-time expenses,” Knapik said. The city has funded $671,000 for the design of the new senior center, used $90,000 to rehabilitate the athletic field at the North Middle School, $400,000 to demolish buildings downtown, $600,000 for paving, $500,000 to refurbish the Thomas Street parking lot, $500,000 to rehabilitate the Chapman Playground, 600,000 to finance the school feasibility study, and over 400,000 has been appropriated for equipment at Voc-Tec and deferred maintenance for the school department in the last four years.
“We cashed our way along the way to avoid debt and interest payments,” Knapik said. “We’re already at the highest bond rating we’ve ever had in the city’s recent history. I hope to have an S&P AAA rating by the spring of 2016. S&P told us we’d have to build our cash reserves.”
Last week the city sold a bundle of bonds for $51 million; about $7 million of that amount was contained in Water Resource Department and Westfield Gas & Electric Department bonds. Knapik said the city’s portion of the bond bundle is conversion from short term borrowing.
“We took the accumulation of BANS (Bond Anticipation Notes) for projects we’ve completed over the past couple of years,” Knapik said. “These were bonds already approved by the City Council.”
Knapik said the city typically finances a project on short-term borrowing, then sells a bond when the exact cost of that project is known when the project is completed. This can take up to two years to move from short term borrowing to a long-term bond sale. The recent sale will result in a $4.3 million dollar premium to be paid to the city, a $563,000 premium to be paid to the Gas & Electric Department and a $125,000 premium to be paid to the Water Resource Department, prorated according to the percentage of borrowing from each department. Additionally, the interest rate is lower than projected, resulting in significant long-term savings.
The resulting premium of 4.3 million dollars will be available to the city in the fall of 2014 when free cash is certified.
“Over the last four years we have generally yielded free cash numbers in the area of 2.5 to 3 million dollars per year,” said Knapik. “So for next fall I would project that our free cash number could be at least 7 million dollars which would be approximately the amount of money we have in reserve today.
“Presently, I am projecting that by the end of 2014 the city will have in reserve approximately 13 million dollars,” he said. “This has occurred in a time that we have seen a reduction of over 5 million dollars in state and federal aid since 2009. That by far will help the city with its future obligations. So I would imagine that we could have a robust discussion in the future about using some of that reserve for an increase in road paving and additional property tax relief. That is a good problem to have.”
Knapik is also addressing another major financial liability – other post employment benefits (OPEB) – by establishing an employee OPEB group composed of city management and union representatives to propose solutions to that growing liability.
“I have asked that group to provide recommendations for a long-term solution to the OPEB liability,” he said. “They have been given a September 2014 deadline. We need concrete solutions.”
OPEB is the result of the state allowing retirees to continue to receive medical insurance coverage after only ten years of service. OPEB is different than the required retirement contributions for city employees. The state Public Employee Retirement Administration Commission (PERAC) sets the annual payment the city has to make for retirement costs. The current FY 2014 payment was $7.98 million and the number of the 2015 fiscal year is $8,538,431, a 6 percent increase.
Knapik said there are a number of new projects on the horizon including construction of a Council on Aging senior center this fall, rehabilitation of the South Middle School athletic fields this summer and construction of a spray park at Sadie Knox Playground being financed by a $200,000 state grant and $50,000 of Community Preservation Act funds.
Also in progress is design of the expansion of the Little River Road Fire Department substation. The expansion project is being financed through the Fire Department’s ambulance fund and will be advertised for architectural services in the near future.
“I have authorized a contract to get us to 25 percent design for the station expansion which will enable the Fire Department to position full paramedic (EMS) services, as well as an engine company – the same arrangement that we have at the northside station,” Knapik said. “This upgrade should have been done a long time ago based on the call volume we’ve seen for years, and they are only increasing.”
Construction could begin in the spring of 2016, estimated today at 2.3 million dollars. The design work will be paid through the ambulance fund.
Knapik said the Gaslight District construction contract will be opened and reviewed on April 10 and that work for reconfiguration of the North Elm Street and Notre Dame Street intersection project will be advertised this spring with work set to begin after the Pochassic Street (Drug Store Hill) Bridge is opened. Dedicated left turn lanes will be added to North Elm Street to improve traffic flow through the intersection.
“How does it look today compared to 2010 when I came into office? It’s a lot better now,” Knapik said. “Back then it was looking pretty bleak.”
