Mayor: “State Confirms $3.5 Million in Free Cash”

November 2, 2011
By

Mayor Carlo DeMaria Jr. was very pleased to hear from the Department of Revenue and their certification of the city’s $3.5 Million in Free Cash.  With the good news from the State, the Mayor is continuing to face the challenge of shrinking the fixed costs of the city, costs that drive the largest portion of the City’s budget.  The Mayor was quick to note that the certified number puts Everett back on track financially and strengthens his cause for even tougher fiscal policies.

“We are not out of the woods,” states Mayor DeMaria, “this is still a tough time since there are a good amount of people out of work, both here in the state and across the country.  What this does is shows that we are on the right track and ultimately, we can continue our work to generate growth.”

The Department of Revenue defines Free Cash as:

“Remaining,  unrestricted funds from  operations of the previous fiscal year including unexpended free cash from the previous year, actual receipts in excess of revenue estimates… and unspent amounts in deficits reduce the amount that can be certified as free cash.”

Mayor DeMaria explains further, describing Free Cash as the ultimate year-end indicator of the Administration’s fiscal policies and directives, including being diligent in collecting taxes, especially years of back taxes.  Additionally, the certification shows that the Administration has maintained the goal of reducing municipal spending.

A key factor in this year’s certification rests in the mid year cut the Mayor instituted this past January.  All City departments, excluding the school system, were required to reduce 5% from their fiscal year 2011 budgets.  With the cut the Mayor was able to save an additional $1 Million.

“We are at an incredible time right now,” states Mayor DeMaria, “we’ve maintained our operational costs, our services and our ability to help our residents.  I give a lot of credit to our Department Heads and staff, many of whom have shared a number of creative ideas to improve our operations without costing the City additional monies.”

As the Mayor works toward conservatively maintaining the city’s budget, the certification of free cash is a welcome addition.  The Mayor was quick to note that the savings could be used for multiple purposes, including additional aid for schools, necessary infrastructure repairs, or to offset the tax rate.

“While this is a good indicator of how we are doing financially,” states Mayor DeMaria, “we also have to think of the best way to put our money to use.  I’ll work with our financial team on a presentation to the City Council, we’re looking at a good reduction in taxes for next year and with an additional appropriation from free cash, we can help reduce taxes even further.”

Mayor Looks to Fix a Bigger Challenge

With the Free Cash certification, the Mayor will continue his push on reducing the City’s fixed costs.  Over the last four years, the City has continued to face the burden of increased health care costs, increased pension costs, increased debt costs and the costs incurred from Water and Sewer expenditures.   The Mayor is quick to point out that with the many fixed costs, the challenge is greater, but also manageable when a long-term plan is in place.

“It’s amazing how much of our budget is fixed costs,” says Mayor DeMaria, “like any other business it’s part of the cost of doing business and it’s not as easy to repair since we can’t just cut them out of the budget.  We’re focusing on what we can do now, to slowly ease the burden.  This is part of our long-term strategy.”

Starting in 2009, with debt re-financing the Mayor continues to work to tackle many of the growing fixed costs, which consumes roughly 50% of the City’s budget.   Earlier this year the State passed legislation, which allows cities and towns more control over healthcare costs.  Recently the City Council accepted the Mayor’s proposal to accept the legislation allowing the administration to begin negotiations with the city’s unions to modify the employee’s health care plans.  The Mayor expects the city can save close to $1.7 million per year in healthcare expenses.

“If you look at healthcare alone,” adds Mayor DeMaria, “over ten years we can potentially save close to $10 Million, that’s a huge savings for the City.”  The administration is also working with the State Legislature on many efforts to reform the pension program, another cost which increases every year.  While the Mayor does not want to affect the City’s retirees, he is looking for ways to ease the burden while the City is working through tough economic times.

Keeping an eye to the future, the Mayor is also looking to the new Water and Sewer Enterprise fund to start to offset the department’s portion of fixed costs.  The City recently adopted the fund as a means to separate the Water and Sewer revenue and expenditures.  From a city accounting point of view, the Water and Sewer departments will be self-funding, where total water receipts will set the department’s budget.

“We’re not inventing a new system,” states Mayor DeMaria, “we’re merely finding a successful model from other cities and making it work here.  If the enterprise fund in the water department works, then we can look to make it work in other areas, saving the City even more down the line.”