FY 2012 Budget Process

Neighborhood Group
Presentation
May 2011
Trends
•Declining State Aid
•Free Cash Reserve used to keep property
taxes artificially low is no
longer available
•Increase in Fixed Costs i.e. Health Insurance
•Loss of Positions
•Increased Net School Spending
•Increased Reserves
Declining State Aid
Net State Aid (Excluding School Building Assistance)

$140,000,000

$120,000,000
121,658,718
111,660,607
$100,000,000 109,418,078

$80,000,000

$60,000,000

$40,000,000 26,030,842
29,455,054
11,440,903
$20,000,000

$0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Cherry Sheets

Net All Other Chapter 70

Property Taxes
Levy Analysis (Base Year 2000)

$120,000,000 20,000,000
Tax Policy
Implemented
$100,000,000
15,000,000
$80,000,000
10,000,000
$60,000,000
5,000,000
$40,000,000

$20,000,000
0

$0 (5,000,000)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Base Levy New Growth Free Cash

Property Taxes
Average SFH Tax Bill 2000-2011 (gap in bills indicated)

$4,400
$4,200
$4,000
$3,800
$3,600
$3,400
$3,200 $1,310
$3,000
$1,167
$2,800
$2,600
$2,400 $841
$2,200 $681
$2,000
$1,800
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Lowell Massachusetts
Health Trust Expenditures
Total Expenses From Trust Fund

$60,000,000

$50,000,000

$40,000,000

$30,000,000

$20,000,000

$10,000,000

$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Positions Lost

Decreased Headcount

1020
1000
980
960
940
920
900
880
860
840
820
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Net School Spending
Required v. Actual Net School Spending

160,000,000

150,000,000

140,000,000

130,000,000

120,000,000

110,000,000

100,000,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 (Budget)

School City Requirement

Reserves Balance
Lowell Reserves 2001-2011

$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0
($5,000,000)2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Free Cash Stabilization Funds Chapter 17 Reserve Excess Levy Capacity

Personnel Decisions
• Voluntary layoff incentive programs resulted in
fewer involuntary layoffs
• City staff, both union and non-union, made
significant concessions in 2009 and 2010
• Took steps to move employees out of more
expensive healthcare plans
• Secured grants to retain Public Safety staffing
• Adopted Chapter 32B, Section 18A
Management Decisions
• Elected not to fill most vacancies since 2008
– Results in decreased benefit costs in addition to salary
savings
• Executed long-term fixed price contracts for both
electricity and gas which have saved the City
hundreds of thousands of dollars
• Adopted conservative borrowing practices
• Implemented energy conservation measures
• Reorganized departments to increase efficiency with
no increase in costs
Management Decisions
• Renegotiated our solid waste program
• Negotiated ambulance cost reimbursement
• Renegotiated both the Lowell Spinners and tow
contracts
• Transferred the Tsongas Arena to UMass Lowell
• Purchased our streetlights
• Adopted the local option hotel and meal taxes
• Extended the pension liability deadline to 2034 in
order to smooth out substantial losses
Data-Driven Decision Making
• Implementation of lien process for better code
enforcement
• Contracting out of Cemetery Maintenance =
$800,000 to $1,000,000 over three years
• Overtime cost controls
• Increased trash enforcement without adding to
payroll
• Projected sick time usage reduction by an
average of 1 day per employee
2012 Outlook
• State Aid
– $7.1 million increase in Chapter 70 Aid, all goes to schools
– $1.5 million loss in Unrestricted Aid, all absorbed by non-
school accounts
• Snow & Ice Deficit
– $2.8 million
• Health Insurance ($300,000 net total non-school
increase)
– Only 5% rate increase ($1.3 million)
– $1 million in net additional savings from agreement with
unions
2012 Outlook
• Energy Savings
– Minor, eaten up by increase in gasoline/diesel
costs
• Tax Growth
– Appleton Mills/Hamilton Canal progressing
• Cemetery
– Estimated savings $300,000
 Budget Process
Late Jan/Early April May June
February
House Senate Conference
Gov submits budget Budget Budget Committee

January
January-March April
June
Dept Heads work to develop Dept Heads
workload indicators and Submit City Council
departmental budgets Budget Deliberates and
Requests Passes Budget

May/June
City Manager
Reviews Budget
and Works on
Document
Budget Document Evolution
• 2007 Budget – 63 pages; no overview to educate or provide
context; line items and amounts for each department
• 2008-2010 Budgets – 130+ pages; financial overview; revenue
and expenditure detail; line items and amounts for each
department; financial policies and forecasts; glossary; capital
plan
• 2011 Budget – added departmental descriptions and
organizational charts
• 2012 Budget – more detailed information about individual
departments and how they fit in the larger picture;
achievements; output measures; related strategic goals
progress
From This…
To This
The Challenge

The $1.6 Million Question

“Why Can’t We Just Cut the Budget?”

The Challenge

“No Problem…$282M is a Large

Budget.”
The Challenge
Total Appropriations & Costs

$281,942,707

* Following Pie Charts Based on FY ’10

But…
We can’t cut state assessments or
deficits to be raised.

$267,423,993
But…
We have an obligation to give
abatements/exemptions to deserving
taxpayers.

$266,024,467
But…
Schools must be a priority.

$134,895,375
But…
Debt service is fixed. We can’t default
on our bonds.

$115,315,064
But…
Health insurance, pensions and other
fixed benefits resist cuts.

$70,419,246
But…
GLTHS is a fixed assessment.

$64,778,837
But…
Public safety is a priority and grants
prevent police/fire layoffs.
$29,296,788
But…
Trash, streetlights, snow removal are
necessary services.
$21,961,788
But…
There is a price to layoffs…higher
unemployment costs as well as an
impact to services. $7,139,904
But…
Veterans benefits are fixed.

$6,589,904
But…
Heat, electricity and gasoline costs
have been minimized.
$4,818,304
What do we have left?

$4.8 Million
How Much Did We Need?
$1.6 Million

1/3 of the remaining $4.8 Million!

Can we do that?
How is this “discretionary” money spent?
Asphalt supplies, telephone service, mailing
tax and utility bills, collection of those bills,
traffic signal maintenance, pavement
marking, street sweeping, software
licenses, our web site, and many other
“invisible” services.
To Cut $1.6 Million
No Easy Options
• Personnel decisions
• Essential services
• Employee concessions
• Education
On a Positive Note
 Bond Rating – Long Term A1 Rating, enhanced
Aa2 and Stable Outlook
“The City’s effective management team
continues to implement cost-saving strategies
and prudent expenditure reductions to
produce balanced operations”
–Moody’s, Dec. 2010
On a Positive Note
DOR Letter to Remove Audit Requirement
“Lowell has done a remarkable job during
difficult financial times over the past few years
to improve their situation… various internal
controls instituted by your office…have placed
Lowell in a position to weather the difficulties
that you face in this business”
–G. Perry, Dir. of Accts.,Dept. of Revenue, Feb.
2011
Summary

Leaner, Right-Sized and Well-

Positioned Government