Dear Chairman Keefe:
I am writing to respond to the inquiry you posed at Thursday evening’s City Council meeting challenging me to rationalize my decision to levy an increase of 1.25% in property taxes for Fiscal Year 2015.
As you explained on Thursday night, the City has a certified free cash balance of $6,241,170 and a Stabilization fund balance of $6,217,074. Over the past several years, the City Council and my Administration have worked together to build these accounts from a precarious position where the City’s reserves constituted less than 1% of our annual budget to today’s more comfortable level.
My reasoning for proposing the 1.25% levy increase can be summed up simply in two parts. First, the existing FY 2015 budget is short approximately $3.5 million. Second, the certified free cash balance of $6,000,000 does not represent a recurring revenue source. With deficits forecasted for FY 2016 and beyond, we must not squander non-recurring money on operating obligations.
FY 2014 Operating Shortages
In June, the City Council voted to cut approximately $3.6 million from my proposed budget. The lion’s share of those cuts came from 2 accounts- the employee health insurance line item and the Purchase of Services account for the Landfill. These cuts, while they make our budget look like it stands in a position of surplus, are really just a gimmick intended to provide residents with a false sense of security. The obligations these funds represented remains due.
As you are aware, I presented a request to restore $1,600,000 to the Health Insurance line item and $230,000 to the Sanitary Landfill accounts at last evening’s meeting. The health insurance
request, if not acted upon, jeopardizes the City’s compliance with our health insurance trust rules. The financial team charged with managing the Trust has strongly urged me to restore the full amount cut by the City Council. At this time, I am proposing we restore half the cut and revisit as we wind down the fiscal year and understand better our claims. The Sanitary Landfill account is short funds for trash hauling. This account, which was cut $50,000 by the Department, then by another $100,000 in my budget review, now stands $350,000 below FY 14 levels.
Stabilization, Free Cash & Bond Premium
The Stabilization fund remains our community’s primary emergency savings account, for lack of a better term. I view that balance as a resource of last resort. Unfortunately, as recently as this past June, as we built the Fiscal Year 2015 budget, I found it necessary to propose a withdrawal from that account in order to present a balanced budget that funded most of the City’s anticipated FY 2015 activities. Thus, we are only six months removed from such a circumstance.
The City was fortunate to close FY 2014 with $6,241,170 in certified free cash. This represents the largest certification in the past decade or more. Certified free cash is made up of three primary components- one, unexpended departmental budgeted funds; two, receipts above estimates; and third, the much discussed $3.7 million premium realized on our April 2014 bond sale.
If we were to subtract the $3.7 million premium from the certified free cash balance, regular operations resulted in a more modest, if healthy, $2,523,173. Together, we should be proud of that number. Not coincidentally, I had programmed $2,140,000 in stabilization funds into the FY 15 budget submission in May to make the budget balance. Certified free cash would have allowed us to replenish our stabilization draw and left us with about $400,000. Of course, that budget had been built on a 2.5% levy increase.
Going into the tax setting process, having heard the concerns of the City Council in June, and based upon the better-than-expected certified free cash, I determined the most fiscally prudent route for FY 15 and beyond is to raise the levy by 1.25% rather than the full 2.5% allowed.
Now, I stand accused of refusing to negotiate with the City Council. Personally, I am disappointed by this reaction. Together, over the past five years, we have finally put our community in a position where we should be celebrating our financial successes. Instead, some Councilors have lost sight of the bigger picture.
I know that my recommendation is not politically expedient nor does it provide solace to property owners who have dealt with years of property tax increases; but it speaks the truth about where our City stands. State and federal assistance, as a proportion of our City’s budget, has taken a nosedive since 2008. The burden has fallen on local taxpayers. Short a miracle turnaround in the political climate in Washington or Boston, or a huge development in Westfield, our budget is going to remain incredibly tight, with or without property tax increases. I have done my absolute best to control costs operationally while putting out fire-after-fire (figuratively) as buildings and equipment deteriorated.
While we have accomplished an incredible amount in this past decade, there is still so much left to be done. Each Spring I hear concerns about the conditions of our roads or our parks. Some
pontificate on our long-term liabilities. This bond premium, to me, provides us with an opportunity to address some of those issues. If we were to squander it for one-time property tax relief, rather than prudently invest in future cost-avoidance, our community will be worse off.
When I ran for office, I promised to keep my focus on Westfield’s future. I also promised to speak frankly on budgetary matters. I am comfortable with my position on this matter and believe it to be the most responsible path forward. If the majority of the City Council disagrees, I am prepared to deal with the consequences. All I ask is for the City Council to fulfill its responsibility and take a vote to set the tax rate.
Sincerely,
Daniel M. Knapik
Mayor
