GloucesterTimes.com, Gloucester, MA

September 2, 2013

City eyes another $3M in 'free cash'

By Ray Lamont
Staff Writer

---- — A memo from city auditor Kenny Costa to City Councilor Bruce Tobey and shared with other councilors over the weekend shows that the city, which rang up $4.8 million in surplus revenues for fiscal 2012, is projecting its fiscal 2013 “free cash” to come in at more than $3 million as well.

Saying he was responding to a formal June 24 request voted by the council for a briefing “after July 15” — and emphasizing that his figures were preliminary and would remain so until certified by the state’s Department of revenue — Costa noted that the city’s General Fund revenues exceeded the amount budgeted for fiscal 2013 by $1.1 million, with “unexpended appropriations” in that year’s budget exceeding another $2 million as well.

“We’re estimating approximately $2,200,000 in unexpended appropriations to the General Fund,” Costa said, referring to money that had been budgeted but not spent during the 2013 fiscal year that ended July 1.

“Most notable,” Costa’s memo reads, “the Charter School state assessment unexpended appropriations totaled approximately $1,724,000, Department of Public Works unexpended appropriations totaled approximately $260,000, Police and Fire Department unexpended appropriations totaled approximately $130,000 and Gloucester Public School Department unexpended appropriations totaled approximately $70,000.”

In an email to Tobey that accompanied his more formal memo, Costa also noted that the city’s wind turbine metering credit, local meal tax revenues, building permit revenues and beach parking dollars all exceeded their budgeted figures, boosting the city’s projected free cash account.

“We collected wind turbine revenues of $101,889 vs. a budget $0 in FY2013,” Costa wrote. “We collected approximately $513,000 in Local Meal Tax Revenue vs. a budget of $400,000. We collected approximately $551,000 in building permit revenue vs. a budget of $412,000.”

City officials had, at the November launch of the wind turbine project, said they anticipated up to $200,000 in revenue from the project during the 2013 fiscal year, with the city’s share of the turbine credits estimated to total some $400,000 annually. Budgeting for the 2013 fiscal year, however, would have been carried out in March-June of 2012, still months before the turbines arrived and were installed in Blackburn Industrial Park.

“Daily parking fees at the beaches look strong as well,” Costa indicated, noting that the city collected approximately $1.7 million while having budgeted for revenues of $1.4 million.

“The heat wave during the end of June helped tremendously,” Costa wrote. Beach parking budgets annually span two fiscal years, given that June 30 marks the end of one fiscal year and July 1 the start of another.

“I remember at the beginning of June being concerned whether we would reach the budgeted amount,” Costa write. “I’m relieved that we reached the budgeted amount.”

The city’s free cash status has spurred debate among city officials and some past councilors in recent years.

While Mayor Carolyn Kirk has cited the free cash figures as a sign of the city’s fiscal stability — and noted that the extensive free cash accounts have helped the city maintain steady bond ratings — others, including Tobey, a current councilor-at-large, a former mayor who served nine years, and a former council president and School Committee member, have viewed the flush free cash coffers as signs that Kirk has built up the accounts by deliberately “underbudgeting” city services, including the Fire and School Department.

“A prudent administration needs to thread a needle, estimating revenues conservatively and not understating projected expenses, but not overdoing it,” Tobey said in a weekend emial to the Times. “Generating modest free cash is a good thing, say 1 percent to maybe even 1.5 percent per year. But we’re way beyond that, have been for too many years, and here we go again.

“Deficits are obviously bad in local government, but so are excessive recurring surpluses (and because they are recurring, by definition they are not one-time monies),” he added. “We’re supposed to provide services, not overblown profits, and we’re falling short, consistently cooking the books by starving critical services like fire protection and education.”

Kirk reiterated her stand in a statement to the Times Sunday.

“The auditor’s memo describes an exceptionally well-managed city,” she said. “Once the free cash figures are official, the administration will propose that at least $1.5 million go into the rainy day fund.

“Part of this amount is reimbursement for rainy day money that went into the fiscal 2014 school operating budget (approximately $600,000) because of the timing of the charter school transactions,” Kirk added. “The other purpose is to continue to build our reserves and protect the bond rating.

With the balance of any free cash,” she said, “we will consider targeted cash investments that will help keep our borrowing levels manageable.”

While the books on 2013 essentially closed June 30, with leftover bills and receipts trickling in after that, the state’s Department of Revenue has traditionally not certified or released communities’ full free cash certifications until late October or early November. And Costa is careful to note throughout his memo and email exchange that the 2013 figures remain “a moving target.”

“This is a ‘free cash’ estimate that may fluctuate up or down and this is not official,” he notes.

“...Grant reimbursements play a huge factor into the free cash estimate,” he added in his email. “I’m waiting on multiple grant reimbursements. Most notably is the FEMA reimbursement from blizzard Nemo. I’m hopeful that we’ll receive the reimbursement in the next month or so.”

In the meantime, Costa said he was reticent to share the numbers so soon.

“The mayor has asked me a few times this month and many times in the past regarding the free cash estimate amount,” Costa wrote in an email addressed to Tobey last week. “My answer is always $1. I prefer to have the official letter in hand first.”

Times Editor Ray Lamont can be reached at 978-283-7000, x3432, or at rlamont@gloucestertimes.com.