City Reports Strong Financial News in Free Cash, Water/Sewer Surpluses

The City reported this week surpluses that they said showed a very strong financial landscape in what was widely said to be the community’s most challenging fiscal year. Chief Finance Officer Eric Demas and Mayor Carlo DeMaria said the state had certified $14.31 million in Free Cash this year, which was a substantial increase over the $10 million that had been the norm in prior years.

“It’s very positive,” said Demas. “It really confirms the City’s on a very solid financial path moving forward…We’re right on schedule with where we anticipated being and things actually came out a little better than anticipated because we take a conservative approach. We are subject to the winds of the economy and fortunately the economy is doing very well.”

Mayor Carlo DeMaria said sound fiscal management carried the Administration through what they believed would be the most difficult year financially prior to the opening of the casino.

“I am pleased to report that free cash is over $14 million,” said DeMaria. “Our diligent and conservative approach to revenue forecasting, our sound fiscal management of expenditures, and our financial reserve policies have served us well and have allowed us to retain our secure financial position and an AA+ bond rating with Standard and Poor.”

Demas said some strong fiscal management helped them to bring in more Free Cash than normal, in particular the return of $3.2 million from the School Department.

“We have typically gotten around $10 million in Free Cash and we tried to match what we got last year which is around $10 million,” he said. “There were a couple things unexpected. Obviously, the $3.2 million returned by the School Department was the largest reason for the increase. Then there was an increase in Building Permits, which we saw continuing to grow, and they came in significantly higher again.”

Demas said that Licensing and Permitting was expected to be at $1 million, but actually came in at $1.8 million – nearly double what was expected. “That is good because it shows that Everett continues to thrive with development,” he said. “Additionally, our meals and room taxes continued to thrive also. That came in $200,000 more than anticipated. We’re on a very positive trajectory.”

The Water and Sewer Enterprise Fund also showed a surplus of $3.9 million, which was slightly higher than normal. That was due to more water usage by Encore during the final stages of construction, Demas said. “They weren’t open except for eight days during the fiscal year, but once they moved into the tail end of construction, they started using more water,” he said. “It was more than what we anticipated for water revenues. Water usage in Everett is trending downward. Based on that, we made conservative predictions, and everything with Encore was still uncertain last year…” He said they will also use some efficiencies in the Enterprise Fund – valued at $600,000 – to supplement the rates and provide a subsidy against the ever-increasing MWRA water and sewer rates. Everett has the third lowest rates for water and sewer in all of the 32 MWRA communities, he noted. As part of the FY2019 budget process, Mayor DeMaria continued abiding by conservative Financial Reserve Policies, which sets forth specific use of Free Cash as a funding source for the City’s reserve accounts. These policies state that 50 percent of the certified Free Cash can be appropriated to various reserve accounts, including the Stabilization Fund, the City’s Other Post-Employment Benefits Liability (OPEB) Trust Fund, and the Capital Improvement account. Fifteen percent will go into Stabilization, 15 percent into the OPEB Fund, and 20 percent will go toward Capital Improvement. The City is waiting on several other numbers to come in, including the first look at hotel excise tax and meals taxes from Encore in the coming weeks. Mayor DeMaria and his financial team are expecting to announce next week more information on what they plan to propose for the recent Encore mitigation payment.

“Additionally, our meals and room taxes continued to thrive also. That came in $200,000 more than anticipated. We’re on a very positive trajectory.” The Water and Sewer Enterprise Fund also showed a surplus of $3.9 million, which was slightly higher than normal. That was due to more water usage by Encore during the final stages of construction, Demas said. “They weren’t open except for eight days during the fiscal year, but once they moved into the tail end of construction, they started using more water,” he said. “It was more than what we anticipated for water revenues. Water usage in Everett is trending downward. Based on that, we made conservative predictions, and everything with Encore was still uncertain last year…” He said they will also use some efficiencies in the Enterprise Fund – valued at $600,000 – to supplement the rates and provide a subsidy against the ever-increasing MWRA water and sewer rates. Everett has the third lowest rates for water and sewer in all of the 32 MWRA communities, he noted. As part of the FY2019 budget process, Mayor DeMaria continued abiding by conservative Financial Reserve Policies, which sets forth specific use of Free Cash as a funding source for the City’s reserve accounts. These policies state that 50 percent of the certified Free Cash can be appropriated to various reserve accounts, including the Stabilization Fund, the City’s Other Post-Employment Benefits Liability (OPEB) Trust Fund, and the Capital Improvement account. Fifteen percent will go into Stabilization, 15 percent into the OPEB Fund, and 20 percent will go toward Capital Improvement. The City is waiting on several other numbers to come in, including the first look at hotel excise tax and meals taxes from Encore in the coming weeks. Mayor DeMaria and his financial team are expecting to announce next week more information on what they plan to propose for the recent Encore mitigation payment.

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