I'm not surprised.
City faces $2 million shortfall
Building and turbine revenue down; salary, benefit costs rising
BY RAY LAMONT
Gloucester officials working on the city’s fiscal 2018 budget proposal are grappling with a revenue gap of up to $2 million, fueled by outside and contracted cost hikes and lagging revenues.
Chief Administrative Officer James Destino has been heading up development of Mayor Sefatia Romeo Theken’s budget proposal with John Dunn, the city treasurer and chief financial officer. They have been working with department heads to scale back expenses for the fiscal year that begins July 1. The mayor is slated to deliver a finished fiscal 2018 budget to the City Council in early May.
Destino said the budget equation is already threatening delays in capital projects. He said the city will be “asking for some reduction from the schools, though we don’t yet know what amount.” The School Committee hosted its annual public budget hearing Thursday night and affirmed its proposed $41.2 million fiscal 2018 spending plan, seeking $1.1 million — a 2.79 percent increase — over this year.
See BUDGET, Page 2
BUDGET: Building and turbine revenue down; salary, benefit costs up
. Continued from Page 1 Destino emphasized that the city is not looking to lay off personnel, but is “looking at a lot of options,” including potentially offering early retirement packages.
According to Destino, Dunn, and Building Inspector William Sanborn, the city’s latest budgeting is being crunched on the expense side by some familiar cost concerns. One is as an 8.1 percent healthinsurance hike under the Neighborhood Health plan, the state’s Group Insurance Commission plan that covers the majority of city workers.
Mandated spending increases include an increase in debt service, spurred by first-year payments on the $39 million West Parish Elementary School, and contracted pay raises. The city is still negotiating with the unions representing its firefighters, police patrol officers, and police superior officers. Unlike City Hall , the School Committee has built contingency money into its budget to cover potential raises for teachers, as that contract is still under negotiation after expiring last August.
But the annual jumps in covering contract costs and health care — the city’s $105.1 million spending plan for this fiscal year included a health cost hike of 6 percent, or $563,000 — are being squeezed by revenue shortfalls.
— Lagging revenues from the city’s shared wind turbines in Blackburn Industrial Park. Budgeted to take in $326,439, the same as they yielded in fiscal 2016, the turbines had netted just $147,157.66 as of Jan. 19, with just four monthly reporting periods to go, according to Dunn.
— A decline in building and other construction permit revenues. The city budgeted to reel in $926,000 — up from the previous year’s $881,000— with $575,000 anticipated from building permits alone. But the city is seeing a slowdown in building and in revenue, said Sanborn, who said he and other city officials are still working out specific numbers. This is the first time in the last three years the city has not drawn permit revenue from construction of the new Beauport Hotel Gloucester, which opened last June, or the Gonzaga Retreat House at Eastern Point, which underwent a major renovation carried out by Windover Construction, Sanborn noted.
“We usually have a couple of million-dollar houses being built, but that hasn’t been the case this year either,” Sanborn said.
— For the first time in two decades, the city will not be receiving a check for up to $1.5 million in reimbursement from the Massachusetts School Building Authority for the renovation and construction on Gloucester High School in 1996.
“We knew that was coming,” Destino said. “But it is still revenue we had been getting that we are not getting now.”
The end of the 1996 GHS project reimbursement ironically comes as the city picks up its first debt service bill from the $39 million West Parish Elementary School, adding a projected $553,420 to that budget line item.
The city is paying $14.6 million in debt service this year, and carries a total long-term debt of $164.1 million, Dunn’s figures show.
“There are some things we will cover and will not compromise on. Those are our debt obligations, and our (contracted) obligations to our employees,” Destino said. “But, no matter what we do, this is a very tight year, for a lot of different reasons.”
Dunn noted that the lag in wind turbine revenues has been due to one of the giant windmills being shut down for a time for maintenance and repair. Another has been because winds have proven diminished compared to previous years — “and there’s nothing we can do about that,” he said.
City Councilor Scott Memhard, who heads the council’s Budget and Finance Subcommittee, said the 2018 fiscal year looms “as a fluke,” especially on the revenue side. “You get to count on these things you think you can bank on,” he said, “but when they come up short, it poses some real challenges.”
Both he and Councilor Joe Ciolino, who also sits on the budget subcommittee, noted the city is in line for major new growth revenue projects in the year and years ahead. Those include the pending development of the $67 million Fuller School project by the Cape Ann YMCA, Windover Construction Sam Park & Company, and the $6 million Happy Valley medicinal marijuana production facility and dispensary in Blackburn Industrial Park.
“But those aren’t going to help us right now,” Ciolino said.
In the short term, Ciolino said the city could draw extensively from its stabilization fund, or put some expense items on hold until more revenue becomes available through potential free cash later in the year.
That, however, is something Destino and the mayor have opposed, “and it’s not good fiscal policy,” Ciolino conceded. “We did that for a time, but we have gotten away from that, and we should.”
Destino said he and Dunn continue to discuss options during ongoing, daily budget meetings that have intensified this week.
“It might not be pretty,”Destino said, “but we will get through it.”
Staff writer Ray Lamont can be reached at 978675-2705, or via email at [email protected] com.