On city finances and planning

 At the April 9 meeting of the City Council: 

Toomey makes request under suspension for a five point plan on school building finances needs and renovations.

— Marco Cartolano (@marco_cartolano) April 10, 2024

While it appears to be deleted, Councilor Toomey later clarified on Twitter that she was speaking of amending the city's five point financial plan. 

The City Council adopted a five point financial plan on October 24, 2006 as a response to the following item: 

Communication of the City Manager relative to a comprehensive fiscal policy strategy relative to the City Council's requests for financial forecasts, quarterly reports, a five point plan to improve Worcester's bond rating, and a funding strategy for the construction of North High School, including the following elements:

1) Report of the City Manager on five year forecast and fiscal policies

2) FY 2007 Budgeted Free Cash Resolution plan

3) FY 2007 Quarterly Report

Be it further recommended that the accompanying order be adopted by the Worcester City Council to effectuate this comprehensive fiscal policy strategy.

A piece in the Telegram & Gazette of that week gives some insight into why this was seen as necessary: 

A report to be submitted to the City Council tonight shows that all three of the key financial rating services — Moody’s Investor Services, Standard & Poor’s and Fitch Ratings — opted to keep Worcester’s ratings at their current level for the upcoming sale of general obligation bonds.

However, as City Manager Michael V. O’Brien points out, all three rating services also expressed concern about some fiscal management trends, most notably the erosion in the city’s reserve funds. Particularly worrisome was the recent one-year decline of more than $7.2 million, a 43 percent drop. That sharp downward trend prompted Moody’s to conclude that, because of significant draws on free cash, the city’s finances would “remain weakened in the medium-term, despite plans for modest reserve replenishment in Fiscal 2007.”

Also troubling to the rating agencies is the overall debt level, which Fitch Ratings estimated at an above-average $2,530 per capita — reflecting in part the city’s decision in 1998 to borrow to fund its pension liability.

You can find that report here. In it, then City Manager O'Brien lays out the following five principles: 

1. five year financial forecasts (including most recent, current, and three years of forecasts)
2. quarterly budget status updates (by department of the current year)
3. borrowing cap (set as a percentage of city side revenues)
4. five year capital improvement plan
5. reserve policies (both short and long term)

The last specifically mentioned North High, for which O'Brien said he intended to "create a dedicated reserve fund and revenue stream to fund the construction of North High." 

Here's the thing about Councilor Toomey's motion, though: while that fund still exists, the five point financial plan does not. As outlined in the current year city budget, the plan, first, was amended in 2012 to include OPEB saving, and then was replaced in March of 2017 with the "Long Term Financial Plan," which has six points. You can find that memo here. Those points* are:

1. Create a new High School Construction Stabilization account for South and Doherty High
2. Base the city's borrowing amount on its ability to pay
3. Increase reserve level targets on 10 percent of budget
4. Create an irrevocable OPEB trust and a new city commission to manage it. Require an annual report on the city's liability
5. Apply excess new growth to create tax relief.
6. Enhance financial reporting and transparency.

Now, I don't want to get too far afield here, but I do want to say: it tells us something about the vision of the municipal government that these are the city's principles. The focus is on stabilization-reserves-trusts and then we don't spend money. There's not a lot of room in here for a budget that considers if it's meeting the needs of those who live here.

I go through all of the above, however, to note this: this is a big thing. How we as a city spend our money deserves more attention than an item under suspension that maybe amends one bit. If the Council is going to discuss this, give it the space it deserves. 

And more importantly, isn't it time for the city to consider all of the principles again? Rather than jam in school facilities, shouldn't the city look at if these are their fiscal priorities? At the very least, we know the city is looking at ALL facilities, so that needs inclusion. But is this what we want to do with new growth? Are the reserves what they should be? Are we using levy capacity in the best interest of those who live here?

Are we spending money in alignment with our values?

__________________________________________-

* Interestingly, those are not the same as how they are related in this year's budget, which is:

 Created a new High School Construction stabilization account for the construction of two (2) high school replacement projects, South High Community School and Doherty Memorial High School. 

 Increased the General Fund reserve level target from 5% to 10% of General Fund revenues. 

 Updated the City’s annual tax levy supported debt from a fixed amount (adjusted for inflation) to subsequent debt issues being tied to debt service coverage (8‐10% of the operating budget). 

 Established an OPEB Trust Fund and Commission consistent with the Governmental Accounting Standards Board (GASB) promulgation GASB 45. 

 Memorialized the budgetary assumptions and methodology. 

 Recommended a practice where any Proposition 2 ½ new growth above the budget estimate shall be added to the unused levy capacity at the time of the tax rate recap. 

 Enhanced financial reporting and transparency. 

…which is also somehow seven?