Mayor to balance $288.8M budget with reserves, 23-cent tax increase
Faced with declining commercial tax revenues, increases in debt and pension expenses and an objective to sustain financial stability going forward, Mayor Scott Avedisian unveiled a $288.8 million budget yesterday that will slightly increase taxes and, for the first time in recent years, dip into city reserves.
Avedisian is calling for spending $3.6 million from the city’s reserves of $11.8 million. The mayor said yesterday his recommendation didn’t come easily.
“I thought long and hard about taking more out of the surplus in order to have no tax increase at all,” Avedisian writes in his budget message.
He goes on to say in the end, his fiscal advisors convinced him “the 23-cent [residential property tax increase] was the fiscally prudent thing to do to ensure the continued fiscal health of our community.” That increase, if approved by the City Council, would result in a $43.85 increase in the tax bill of a home valued at $190,647.
While use of reserves can relieve the pain of taxes in the short term, it can create a structural deficit that places increased burden on successive budgets.
The mayor said he wrestled with that issue, but concluded that a projected surplus of $1.2 million in the current year plus stabilization of commercial tax revenues, as well as their growth with new development, would ease the burden. In addition, he pointed out that an $800,000 appropriation in the proposed budget would not be a recurring expense. That money is to provide a $1,000 bonus to every full-time Warwick employee as of July 1, 2013. The bonus comes during a three-year no salary increase contracts with city employees that ends as of June 2015. As the money is considered a bonus, it does not affect the salary schedule on which cost of living adjustments is based for retiree pension benefits. The result has been a reduction in the city’s unfunded pension liability.
The budget juggling didn’t come without disappointment to some department directors and is certain to be the topic of hearings starting May 29 at 5:30 and continuing the following day – a Friday – at the same time. The final hearing is scheduled for Saturday, May 31 starting at 8:30 a.m. All the meetings are in City Council Chambers.
That final meeting may be the most contentious, as the mayor’s plan for the city to level fund schools for another year at $119 million is expected to come under fire. Avedisian is recommending a $158.5 million school budget. That amount is a $1.3 million increase from current expenditures representing projected increases in state and other sources of funding.
Nonetheless, it is a stretch from the $159.7 million approved by the School Committee.
City department directors other than schools requested an additional $7 million in funding that the administration cut dramatically. The mayor budgets $40.4 million for public safety, an increase of $1.6 million that will be used to fund a portion of the salaries of four police officers now paid under a federal grant, which is expiring, and increase the overtime budgets for both fire and police.
Despite a proposed increase in taxes, the city will actually collect less in revenues than was projected for the current year. The reason is a decline in commercial property valuations resulting from settlements and court cases coming out of the statistical revaluation completed two years ago. Avedisian couldn’t say the number of valuations contested following the revaluation completed by Vision Appraisals, but the outcome is a $2 million reduction in commercial tax revenues.
The mayor is thinking with the next valuation that the residential and commercial aspects of the program should be bid separately.
Avedisian said debt expenses would increase $791,763 to fund bonds for school and city building improvements and construction of the Potowomut fire station and a new Mill Creek bridge on Tidewater Drive.
Avedisian praised his staff for the preparation of the budget, noting that this is the first budget in many years where Diane Brennan, financial reporting analyst, was not involved. Brennan, who worked in the finance office and closely with the City Council, has retired.
Avedisian was asked if there was anything “new” in the budget in terms of programs or innovative services.
“We didn’t allow for any fun,” City Finance Director Ernest Zmyslinski quickly chimed.
After a pause, the mayor said he left $450,000 in the public works budget for the repaving of roads. He also left contributive support for non-profits unchanged from the current budget.
Overall, the budget is a $6.8 million increase from the current year. The proposed tax rates are $20.02 for residential and $30.03 and $40.04 for commercial and industrial, respectively. The motor vehicle tax rate of $34.60 is unchanged, as is the $2,000 exemption.