Yuku free message boards

Published: April 10, 2008 06:34 am ShareThis PrintThis

Gloucester: State of the City: Grim, says Kirk
By Richard Gaines
Staff writer

The Gloucester that Mayor Carolyn Kirk pictured yesterday is a city in a dire, unsustainable condition, its own flaws and chronic failings - including a $1 million discrepancy in the books - compounded by higher-level policies that have a general chronically weakening effect.

While recovery is possible, purging the ills will not come easily or quickly, the new mayor made clear repeatedly during what she described as the "first annual" State of the City address.

The presentation, distilled from findings in her first 100 days as mayor, redeems the campaign promise on which she anchored her appeal to voters last year - to provide the analytical basis for fiscal and policy decisions that the city had sorely been missing.

"It will take at least two years to turn the corner," Kirk said in a midday interview, after she delivered her findings privately to the municipal work force yesterday morning and before the 7 p.m. public report.

The Fuller School auditorium was about one-third filled for the evening's 90-minute PowerPoint presentation. Reaction from the crowd of more than 200 was positive, especially to Kirk's commitment to "put the cards on the table," in the phrase of Alphonse Swekla, the retired city councilor and school administrator.

"She did an awesome job," commented developer Michael Carrigan.

Former Mayor William Rafter lauded "a willingness at transparency," and Web and business consultant Peter Van Ness said, "it's great to know where the city stands."

Kirk said the immediate challenge is resolving questions about past practices and curtailing "deficit spending" in the budget she inherited, then crafting a "turnaround" budget for fiscal 2009, which begins July 1, before beginning the "comeback" in fiscal 2010.

Kirk announced a $800,000 shortfall in the budget cycle that ends June 30.

After receiving the 80 pages and screen printout in Washington, where he was on business, Council President Bruce Tobey praised Kirk's "just the facts, ma'am" approach.

No layoffs were announced, but in her presentation she identified a $2.5 million shortfall in the coming municipal budget for fiscal 2009, and identified layoffs as a last resort to close the gap.

The immediate challenge, Kirk said, is bringing order out of a fiscal chaos so extreme the city is believed by the state to have been illegally "deficit spending" for the past six years, is under orders to hire auditing specialists to reconcile a $1 million "variance" in the books for fiscal 2007, can expect an "adverse opinion" from its independent auditors and faces a "strong likelihood" of a bond-rating downgrade.

"The good news is that I don't think it can get any worse," she proclaimed to applause.

She was also applauded when she said making the case for structural relief was "why I want to go before Congress."

Sen. John Kerry, D-Mass., has agreed to find an appropriate meeting for Kirk to bring a condensed version of her message to the U.S. Senate.

She thanked Congressman John Tierney, D-Salem, for assigning a staff member to the presentation.

Absent relief from Washington or Boston, which she indicated she does not expect, Kirk asked residents to gird for long-term austerity, and emphasized the need to jump-start the economy, especially around the waterfront.

She castigated the state for "taking more" and "giving less." The differential loss for next year, Kirk said, is calculated to be $319,272.

This analysis reprises her initial work on the inequities in the state school aid formula. Made in 2004 during her first term on the School Committee, Kirk's "lemon list" report became her political signature and remains definitive.

At its core is proof that Gloucester is one of about 100 communities that have yet to be restored to 2002 levels of state aid.

Yesterday, she expanded on the theme in an explanation of the flaws in Proposition 21/2, which allows property tax growth in late-developing suburbs but limits tax growth in older cities like Gloucester.

She also chided the Legislature for refusing to cede to municipalities local taxing flexibility.

"Expectations of the community need to be realigned," Kirk wrote. "The city is doing less with less."

With basic city government costs - for health insurance, sand, salt, macadam, building materials and energy - climbing more rapidly than revenues and without tax policy flexibility, she projected that march-in-place budgets will continue to outpace revenues for the foreseeable future.

Kirk previously announced an agreement with federal and state environmental enforcers to consider easing deadlines on more than $150 million in mandated infrastructure projects to cushion the burden.

Yesterday, she noted that the city's capital debt burden is finally nearing 12 percent of revenue, the maximum level considered prudent by Moody's, the bond-rating agency, and the state Department of Revenue.

Much of the material in her report was not new, but her announcement that the auditors "can't account for about $1 million in deposits" in the books for fiscal 2007, which ended last June, was a revelation.

The discrepancy puts in jeopardy state aid payments and even the approval of next year's tax rates, though Kirk said, "Gloucester is not a candidate for receivership according to the Department of Revenue."

She told the Times solving the "mystery" has become the city's highest priority.

"The $1 million variance is too big to ignore," she told the Fuller audience, which responded with applause.

The discrepancy could be "related" to the Unifund municipal financial software system which was purchased in 2005 and has frustrated auditors and financial officials ever since, but the mayor added, "Nothing has been ruled out."

The inability to reconcile the '07 books - and understand the $1 million discrepancy - is having a rippling effect on the city's finances and reputation.

"Fiscal 2007 needs to be rebuilt from scratch," she wrote. "An outside firm will be brought in to reconstruct and perform the auditing function."

She said the stabilization fund, a prime indicator for Moody's bond-raters, would likely be drawn down to finance the re-review of the '07 books. Also related to the $1 million discrepancy is the likely finding of "an adverse opinion" by the independent auditors.

According to the Dictionary of Finance and Investment Terms, an adverse opinion implies the financial statements "do not accurately" show the financial condition or operating results, and "investors should be extremely cautious about investing in any company with an adverse opinion from its auditors."

The taint from such a finding combined with the city's tenuous hold on the A2 rating which Moody's reaffirmed last year but with a negative outlook has created the "strong likelihood the rating will be downgraded," wrote Cinder McNerney, the city's financial adviser and managing director of First Southwest Co. in Boston.

As a coda to her presentation, Kirk announced her intention to create a Charter Commission to modify the form of government. She said she favored a four-year term for the mayor rather than the present two years and staggered terms for the council and School Committee.

She announced community meetings on the State of the City for Lanesville, at the community center, on Monday, April 14; Annisquam in the Village Church Hall, on Thursday, April 17; and Magnolia, at the library, on April 24. All meetings will begin at 7 p.m.

She promised quarterly progress reports.

State Rep. Anthony Verga and his challengers for his seat at the Statehouse, Astrid afKlinteberg and Ann-Margaret Ferrante, all praised Kirk for the detailed effort to define the city's challenges.

Richard Gaines may be contacted at rgaines@gloucestertimes.com.