Working in uncharted territory, the City Finance Department and Mayor Carlo DeMaria submitted a “continuing appropriation” budget late last week that – in the absence of any certain financial information from the state and federal government – significantly reduces personnel and some services at City Hall. City Chief Financial Officer Eric Demas said the budget is not a traditional budget, but a spending plan for July – and that there likely would be similar plans for August and September as well. It does, he said, contain significant cost reductions that have resulted in layoffs.
“We’re taking a very controlled, balanced and conservative approach to make sure the budget is a fiscally responsible as possible – tough times and tough decisions,” he said.
“We tried to reduce spending that has the least impact on delivering services to residents,” he continued. “This is the approach we are going to take until we have a better picture of our revenue situation…It’s the Mayor’s intention to bring back people that, unfortunately, have been laid off, but his focus right now is on taxes and delivering services to residents and that has to be the primary focus.”
Tough discussions have gone on for the last several weeks with the municipal unions and with other workers at City Hall and within City departments. There have been reductions in personnel, and there have been people that have gone from full-time to part-time. Likewise, they have used a strategy of filling vacant positions with workers whose positions have been cut elsewhere in the budget document. Department heads have taken 10 percent cuts in pay, and others have simply had their pay reduced. In March, there had already been a non-essential spending freeze put on all departments by Mayor DeMaria to help things out now, Demas said. A lot of the reductions in staffing come in areas that are yet to be opened from COVID-19. That includes the Public Library, the Connolly Senior Center, and the City Wellness/Fitness Center.
Many of the vacant positions that were in the budget last year – which could not be used for others – were not carried forward and were eliminated. Several part-time workers were laid off, and there were under 10 full-time workers cut, Demas said. “Even though a continuing appropriation is an administrative nightmare, we thought it was the most prudent course of action until we get more information,” he said.
“To delay reducing expenditures – that would make things tougher for us potentially later on or when we close out next June 30,” he said. “The focus, again, was to make reductions without impacting direct services to residents…a lot of it is in personnel. The majority of municipal expenditures are payroll.” Some areas were unavoidable in spending increases. That included the Police Patrolmen’s Union that had negotiated salary increases last year, and those went through and were upheld. It also included, by City Charter, a mandated increase in the Mayor’s Salary from $165,000 to $185,000 per year. However, the mayor did decide to voluntarily give up his $12,500 vehicle stipend that was put in place last year. Demas said there will be a traditional budget, but what is hampering that process – which usually takes place in May and June and concludes by June 30 – is having state aid information. The City Budget, like most, is heavily dependent on state aid. The state has not given any clue to what its state aid budget might be, so no municipality knows what the cuts are going to be if any. That hesitancy at the state level is dictated by what is happening in the federal government, whether or not there will be a rescue bill passed by Congress and President Donald Trump for cities and towns. There is also some unknown locally as Mayor DeMaria allowed as many accommodations as possible for residents and businesses to delay taxes and fees during the pandemic to June 30. Demas said by next week, they’ll have a good idea locally what the revenues are – how many people paid their taxes, excise and personal property and how many did not. Federally, he said he has heard that in late July the U.S. Senate might be taking action that includes aid to cities and towns with revenue shortfalls attributed to COVID-19. Once those pieces are in place, or not, it would produce a clearer path to where the City is headed financially. “By that time, hopefully we’ll be given some clear direction from the state,” he said. “We’ll have to produce another continuing appropriation for at least August and probably September…We should be submitting something to the City Council at least by mid-September to be able to go through the traditional budget process and then have something in place by October 1. It is an administrative nightmare, but it is our job and what we have to do to be responsible.” The City has already reduced debt costs significantly by being creative in its borrowing. Seizing on a federal program, DeMaria and Demas decided to use short-term borrowing to pay for essential capital improvement programs (CIP). Normally, the City would make a long-term borrowing around April 1 for the CIP projects – which include parks, infrastructure and City building improvements. This year, they used guidance from the Federal Reserve to do short-term borrowing, and were able to get one of the lowest short-term rates in the state (0.87 percent). That significantly reduced costs to the City via debt payments – freeing up more cash to spend on direct services. Demas did address a rumor within the City workforce that the cuts were a result of Mayor DeMaria’s vision for a virtual City Hall – more of a philosophical cut than a true revenue shortfall cut. Demas said that is not the case at all. “It is the mayor’s long-term goal to have more of a virtual City Hall, but we’re not making long-term decisions,” he said. Overall, the approach is more conservative than other cities and towns around Everett. Chelsea and Revere, for instance, have passed traditional budgets based on estimates of state aid and local revenues. Some have argued those estimates are too optimistic, or too dire. For Everett, Demas said they weren’t willing to make guesses on the finances, but wanted to move ahead with only what they knew – particularly given the casino is in a state of uncertainty right now in that they have been closed and no one is sure what kind of business they will re-kindle after their July 12 opening. “I know other cities and towns have passed annual budgets, but every municipality is different and complex,” he said. “I am a data driven person and we need more data to make more informed decisions,” said Demas. “A lot of municipalities didn’t want to continue appropriations because it is an administrative nightmare, but it is what we had to do.”