NORTH ADAMS, Mass. — The Finance Committee will take its first review of the mayor's $40 million budget proposal next Thursday. 

 

The draft spending plan for fiscal 2018 is up $474,449, or about 1 percent, at $39,929,132. 

 

But that budget released Friday is already in the red because the city was notified Tuesday that it was getting $80,000 more in state revenues but the assessments went up $130,000 in the House budget. 

 

"We took a $50,000 step backwards just like that," Mayor Richard Alcombright told the City Council on Tuesday, snapping his fingers. "The budget I'm giving you tonight is $50,000 out of balance and we're going to have to figure that out as we go through the budget process."

 

He estimated that the city has lost $25 million to $26 million over the past decade from cuts in state aid that's continued to put pressure on local appropriations to fund the annual budget. As state aid goes down, tax rates to up even as budgets are basically level funded, he said.

 

"This budget we're bringing in tonight is 1 percent above last year ... we'd be god in the private sector, but we can't find revenues to keep pace with that," Alcombright said. "We've got a one percent increase in the budget and probably looking at a 4 percent increase in taxes."

 

The increases are for health insurance, pensions, schools the Office of Community Development (for a planner) and the reinstatement of two positions in Wire & Alarm and Inspection Services. The mayor in his communication to the council, said there is a reduction in transfer station revenue and net state aid. He expects to know more on the revenue side after a tax title auction in May. 

 

The total budget, including state assessments and abatements, is $43,066,586. Total receipts from the state — such as Chapter 70 education aid, veterans benefit reimbursements, and unrestricted aid — is now $19.2 million, up $81,000 over the governor's budget.

 

But charges — including retired teachers health insurance, regional transit and school charter and sending tuition — is $2.8 million, up $130,488 over the governor's budget. 

 

For the rest of the budget, about $7 million is raised through local receipts (water, sewer, excise, meals, etc.) and $17 million through real estate taxes. 

 

"The last five years, we've averaged 1.3 percent increase in our budgets yet our taxes go up 2 1/2, 3 1/2, 4 percent   and the reason for that is because we don't have any other strong revenue sources," Alcombright said. "It's very, very difficult to manage. 

 

The Finance Committee will review revenues, general government, capital, debt and unclassifed on Thursday; further meetings are set for April 26 (public services & safety); May 4 (general wrap up). A meeting will be scheduled for the school budgets and the final presentation with the compensation and classification plan is set for May 23 with budget adoption on June 13.

 

The council also heard from the city's independent auditor, Thomas Scanlon of Scanlon & Associates LLC, a municipal auditor and certified accounting firm out of South Deerfield, who noted marked improvement in financial processes. 

 

"Going back a few years, it wasn't as pretty as it is today ... the financial team has done a lot of work on processes and procedures," he said. "I think this is the third year the city has had free cash. The procedures and processes are working and I can't say enough about the course you're talking ... you went from a negative outlook to a stable outlook."

 

The audit for 2016 had no substantial findings and only one comment. Scanlon said the city has a "nice mix" of free cash unlike in previous years when it came primarily from debt turnback or refinances.  

 

However, there is more work required in public services like water and transfer station because the budgets are not matching with revenues. And the comment recommended tighter review of deficit accounts at the end of the year, those appear to be largely from delayed grant revenues. He also warned the city is getting close to its levy ceiling, which will affect its ability to raise revenues.

 

"Standard & Poor's is pretty tough on their rating for you to get that negative outlook taken off, that means a lot, too.  so you're going in the right direction," Scanlon said, adding that the financial team's work on generating free cash without dipping into fund balances "is what drove your ratings from A-minus to A."

 

"I can't say enough about your financial team."

 

Standard & Poor's recently raised the city's global rating and revised its outlook from negative to stable "based on improving reserves, stronger budgetary performance, and increasing property values," according to its summary. 

 

The ratings researcher pointed to its increased general fund balance, up to $2.5 million from $608,000 in 2013, and strong external liquidity. It did note, however, the city's weak economy and budget flexibility.