This week we finally met the Mayor - our subject was city finance. Once again, let me summarize that we are quite lucky that we have so many competent people working for us - and willing to share information about what they do. We started off with Mayor Higgins describing the budget, where money goes and where it comes from. Karen Bellavance-Grace, the Mayor's assistant, who is organizing City School had given us a municipal finance crossword puzzle to work on for homework. It was quite hard, though the words aren't that difficult to recognize now that we have the answers e.g. bond, tax rate, levy, audit. Karen also often sends us some links to city departments so we can either learn or look into the subject of a City School class ahead of time. Most of the city websites are not polished, but they are quite full of information. (I am often pasting such links into this blog because they will be useful for you for further study - not just because it's fun to link to odd stuff.)
Proposition 2 1/2
Basically, almost everything in the Northampton City Budget depends upon Property Tax. Mayor Higgins gave us her Power-Point printout that illustrates the budget. We learned about Proposition 2 1/2 and we found out that 2 1/2 is a magic awful number. This all started with the tax revolt in California (they passed the aptly named Proposition 13 in 1978) and voter referendums. Massachusetts version is proposition 2 1/2. It basically limits property tax increases to 2.5%, but there's more to it. To give you an idea, before 2 1/2 arrived, taxes brought in $12M. When it kicked in back in 1982, taxes were reset to $10M. It wasn't until 1987 that taxes got back to their 1981 level. The city must vote for a tax override to go beyond a 2.5% increase. The city has only done this to fund school building projects and the new fire station. It wasn't until last year that the city voted for a general override. This is something that neighboring towns like Amherst have just voted to do (tonight). 2 1/2 sounds simple, but it isn't quite. It is also notorious for binding the hands of government. Basically if the city comes up short, they must cut services and/or lay off people because they cannot simply raise taxes.
Because revenue is limited, everything goes back to 2 1/2.
To figure out the income for the city of Northampton, you add the following:
- $36M - last year's levy
- $1.1M - personal property tax
- $900K - the 2.5% increase
- $300K - an estimate for new growth (new buildings or additions)
- $1.2M - exclusion overrides for the school project and fire station debt
- $2M more - last year local voters passed the general override required by 2 1/2
There are other revenues:
- $6.3M - Smith Vocational School tuition for out of city residents
- $2M - auto and boat excise taxes
- $900K - fines and forfeits (mainly parking tickets)
- $400K in other income
- $377K in hotel taxes
- $300K interest on tax titles and Payments In Lieu of Taxes (PILOT)
- $8.5M - state school aid
- $1M - school choice income
- $3M - school construction aid
- $4.3M - general government aid including lottery and state PILOT
- $400K federal reimbursements for things like Medicaid services
- $3M - revenue from providing services to enterprise funds like sewer, water, and sold waste which are all run as a self-sufficient enterprises
- $165K - money from the local cable company
- $25K - CPA funds and fees that pay city salaries.
Unfortunately, due to the lousy economy new building is down, interest is down, probably fewer expensive new cars are being purchased - so auto excise tax is down. You probably have an idea that costs are only going up and so on. (Figures here are approximate. I hope they add up correctly.)
Thus the budget is born. $91,000,000. 71% of revenue comes from local sources - people like me, 24% from the state, and 0.6% Federal. More detailed Northampton finance information can be found here.
Like the revenue, most of the expenditures are fixed. The state was doing better 20 years ago, but now things are always tight. Costs are climbing every year, there are cuts, cuts, and more cuts. So spending for the most part is non-discretionary. Not much waste here.
In broad strokes, here's the budget:
- 73% - salaries and benefits
- 18% - maintenance
- 8% - debt
- 61% - education
- 19% - public safety
- 8% - public works
- 8% - government
- 3% - culture and recreation
- 1% - human services
Our city finance director Chris Pile organized our most efficient class yet. Tonight's class was about City Finance and that's what we got plenty of. I'm not going to give each player a fair amount of time here. I'll mostly introduce some of the roles in city fiance. The Mayor led our parade, since she produces the budget which must be approved by City Council.
We heard from Joe Cross who along with the City Assessor assesses the value of residential, business, industrial, and personal property taxes. Assessment is done using standard rules and the last full year of sales data among other things. Northampton has 12,000 parcels of land and is worth $32 Billion! The average assessment is $303K. The average tax bill is $4K. Our tax rate is $12.64. The tax rate fluctuates from year to year to match the tax increases and the change in property values.
Now if the town is really worth $32 Billion why would anyone complain about the measly little $41 Million tax bill.
The City of Northampton has a Tax Collector who basically bills everybody for just about everything. We heard from the collector Melissa Lampron. She sends out 25,000 excise tax bills for all our cars (22,000) and our boats. The collector collects any bills. This is one of the various separation of powers required by the Massachusetts State Department of Revenue. They bill car dealers for licenses; they collect Smith Vocational High School tuition from other school districts, Water and Sewer bills, Tax bills; you name it.
Additionally, the collector fulfills the role of a collection agency that you might fear if you do not pay a bill. She will issue a Municipal Lien certificate and bill for outstanding parking fines and tell DMV to mark or lock your license renewals or release them if you are now up to date and paid up. (By the way, if you are an out-of-stater you can get away without paying your bill, but if you live in certain states like New York, then you cannot. Also, do not park your junk heap in our town if you can't bother to put a quarter in the parking meter. Hey! And also the usual parking ticket is $10 and not your out-of-town city slicker price. How dare you not pay! Aren't you ashamed now? Not paying for parking while on your big expensive vacation in our sweet little story-book city where they even forgive your first ticket - or so I heard - but maybe just for residents.)
In 2009, the collector collected $36M in revenue and had about $257K uncollected. The city collects taxes on 10,000 residential parcels.
Joyce Karpinski is the Northampton City Auditor. She spoke with us about what her department does. From The Auditor's website:
The Auditor's office provides payroll, accounts payable, purchasing and accounting services for all of the city's departments. They keep a complete and accurate set of general ledger and budgetary accounts. Additionally, accounts are maintained in nine separate funds including enterprise funds, capital projects funds and special revenue funds.The auditor reconciles with the Treasurer and Collector, does city payroll which comes in the form of warrants that are signed by the finance director or mayor and given to the Treasurer to release. She does W-2s. She pays 500 invoices a week (fortunately, their present software won't let her pay more than that.) She arranges an annual outside audit and makes sure that bids and contracts follow proper procedures. There are many other auditor duties.
George Zimmerman is the Northampton City Treasurer. He said that he basically runs the city checkbook. The Treasurer makes no budget decisions.
The Treasurer moves money around. He wheels and deals with bank accounts and invests money. (I meant to ask, but I assume the money invested is in short and long term funds for good reason, like our rainy day funds, as opposed to simply trying to strike it rich for the city.) Unfortunately interest rates went down over the past 5 years from 5% to about 1%. The Treasurer also disburses money and borrows money when told to do so. He controls 32 accounts and 150 sub-accounts at 8 banks.
About $100M will come into the city this year or about $2M a week (if it could only be thus.)
The City of Northampton has an A+ bond rating. To me this is good and sounds appropriate. (Of course, the USA has a higher rating despite the state of the current economy, and the ratings agencies themselves rated highly many of those banks and finanical companies that got bailed out. I don't rate the rating agencies highly one bit. Who can trust people who came up with a scale that goes from AAA to A to BBB to B to CCC to C and down to D not to mention all the combinations in-between?)
At City School we took a break (actually a little earlier, but you deserve one now). We were meeting at Smith Voc in their restaurant. The little bakers (students) were kind enough to leave us cookies and coffee that they prepared. We were meeting at 6pm, so they were not around. The Oliver Smith Restaurant is open Tuesdays, Thursdays, and fridays for lunch (10:45 to 12:15pm). Call if you need information 413-587-1414 ext. 3522.
Soothing break below. Sand drawing, what could be more soothing?
OK, the break is over! Back to Class!
Northampton Public School Finance
Now that we are almost worn out, I will rush through some of the important stuff, namely the school budget. It is prepared by the Northampton Public Schools Business Manager. Her name is Susan Wright, and together with the Superintendent (and others) she prepares the budget. She handed out a 40 page budget to us for fiscal year 2010 and went through some highlights. I am not going to do that with you. I'm just going to give you a link to it. As you have learned before, the city council appropriates, but the school committee allocates. The city is assuming a level services budget - same level of service. (Unfortunately, your country and state have other priorities more important that the education of our young and are likely to cut something.)
The budget is about $28M plus about $10M in (school building) debt and health insurance and city services. We spend about $10K per student here in Northampton, while Amherst spends about $13K.
One thing I learned (and as always there is a highlight even when looking at the budget) is that just like the PTO does fund raisers and sells cookies to fund a class trip, city agencies are continually writing and managing grants to pay for things. They simply do not get all the money they need. They expect to receive $1.7M in grants in FY10 (fiscal year 2010). This means that they have to apply for the grants, win the grants, and administer the grants. This means that someone must be employed to hand all this. In some cases for city agencies, they share people who do this or allocate a 1/2 an employee. But it happens here and elsewhere. My daughter's teacher sometimes writes her own grants and has been awarded NEF money in the past. Fortunately there is less paperwork for her, but also less money at stake.
Smith Voc Business Manager
Our host (we were eating her school's cookies after all) Nancy Roberts is the Smith Voc. Business Manager. She spoke to us about the budget. Smith Vocational High School, as you learned here, is another school district within Northampton. It has a budget of $7.5M, $4.5M of which comes from tuition to cover students from other school districts. There are 450 students and 45 "sending districts". The Business Manager handles various revolving accounts (like the monies taken in by the restaurant) and school finances. Smith Voc. needs to equip their shops with modern equipment, so their students have up-to-date skills so they can get jobs after they graduate. They have a grant writer (see I told you.) They also have 2.7 clerks (we puzzled over that one.) and a Bursar.
It costs about $17K per student to educate their kids annually. They bill other districts four times a year for tuition which is about $14K. They have small class size (partially due to safety reasons) and expensive teaching equipment (thingy to straighten the frame of your car and a shop to paint a car.) They provide special school buses which are only allowed to drive students to job sites. They share a social worker (4o%) and project and contract bidding with Northampton Public Schools.
Their budget goes to 76% Instruction, 14% Maintenance, 2% Student services, 1% Other. (Sorry these numbers don't quite add up to 100%.) They own land can can sell it, but the money would only go into their stabilization fund. The city covers capital costs.
We learned that at Smith Voc on the day of our class that a goat had triplets, they had a new calf named Kipper and a new lamb named Norman.
Chris Pile is the finance director. He is the Mayor's right-hand-man (although he might be left-handed, you never know) and the senior finance resource for the city and a fount of budget knowledge. I've seen him on public access cable at a city council meeting answering budget questions. (I found a recent story featuring him that paints a picture about city finance at a city council meeting.) He spoke about about general municipal finance and most importantly was very good at organizing the class tonight.
I sound like a broken
Sorry to cut this so short (kidding). Next week we will all learn about Development and Planning. Then the Police Department, the week after that.
Thanks for joining me in City School. Please grade this week's paper and leave your comments here on this blog. Thank you.