Manager’s Chart

Gerry: I emailed the City Manager asking him his reactions to Former City Manager Jim Sullivan’s Letter to the Editor in the Lowell Sun July 8th. The Manager was gracious enough to respond and gave me his consent to sharing his response on my Blog. I am still learning the fine art of blogging and haven’t mastered putting graphs into these post without having major reflow issues so I have attached these as a separate item and noted to see attachment in the Manager’s response

” I did see his letter and would respond that he once again misrepresents and misinterprets history in an attempt to make the argument that Lowell is recklessly spending taxpayer money at an alarming rate. Nothing could be further from the truth.

I have no idea where he comes up with a $16 million number in FY07 for increased taxes. I did not “convince” the City Council that the FY 2007 budget was underfunded, it was. The voted budget included $3.5 million in free cash as a funding source, but there was none. In fact, the Department of Revenue certified free cash at negative $2.2 million. This is but one example in a budget that relied on erroneous income sources. Surely Mr. Sullivan can sympathize, as he also inherited a free cash deficit upon becoming City Manager of Cambridge for a second time in the mid 1970’s.

Secondly, the Council never sends a budget to the DOR, nor does it ever send a revised budget. As a former city manager, Mr. Sullivan should know this. City Council votes on appropriations. The DOR then makes sure that funding is in place to support the budget, and sets the tax rate for the community. Had I not acted swiftly, the FY 2007 tax levy would have increased by $11.1 million. Because of the measures that I took, taxes instead increased by $6.4 million, plus new growth. Here’s a table (see attachment) that shows the tax growth that has occurred from FY06 to the present with a break down of the increase on existing properties or the levy, new properties and then the total tax increase.

The 2006 numbers are for the year that ended 6/30/06. In FY 07 I’ve listed the taxes that were listed in the budget that was submitted that had the erroneous income and expense numbers, the taxes that would have occurred in the FY07 budget based upon the spending that was voted by the City Council in the budget that was approved in June of 2006, and the taxes that did occur in the revised budget that I presented to the Council in November/December of 2006. You can see that we reduced the necessary growth in taxes by roughly $3 million. This was achieved by cuts and long overdue fee changes.

As shown in the chart (see attachement) with information taken from the Department of Revenue, the 2007 tax levy was $85.5 million. We anticipate that the 2011 budget will be supported by a levy of $104.6 million. This is an increase of $19.1 million over five annual budgets. $9.0 million of that represents taxes on property that did not exist in 2007, such as Lowe’s, Target, and the Jean D’Arc headquarters. Is Mr. Sullivan suggesting that Lowell should not tax those properties? The modest tax levy increases of 2.5 to 2.6% per year fund the effect of inflation on the City budget, nothing more. While Lowell has taxed at $5 million under our 2.5 percent limit for my entire tenure, surrounding towns tax at their limit, and beyond, by overriding Proposition 2 ½.

Indeed, it strikes me as odd that one of the most vocal opponents of the property tax relief measures that culminated in Proposition 2 ½ has suddenly become such a fiscal watchdog. Mr. Sullivan conveniently forgets that property taxes increased 44 percent during his last four years as City Manager of Cambridge, dwarfing the 22.3 percent increase seen in my first five annual budgets. Furthermore, upon Mr. Sullivan’s departure the City of Cambridge was taxing at 5 percent of full assessed value, which is more than double Lowell’s current tax levy.

Mr. Sullivan criticizes my administration for forecasting “huge deficits.” We disclose the conservative nature of those forecasts, and use them to plan and to make sound and sustainable long-term decisions. Moody’s states that our forecasts contain “reasonably conservative assumptions,” and praises our planning. It is true that our forecasts show deficits into the future. Most municipalities do not even attempt forecasting.

Our forecasts are precisely what restrain us from overspending. Of course I will not allow free cash to reach a $7.6 million deficit in 2015, but it is good to know that I have to take the necessary actions to do so. It apparently escapes Mr. Sullivan’s attention that I have improved our free cash position by $1.7 million, added $500,000 to our “rainy day fund,” and preserved our excess levy capacity during the worst economic crisis in 80 years.

It seems that Mr. Sullivan is against borrowing, although his record as Cambridge City Manager proves otherwise. Given the choice, I would prefer not to borrow as well. Maintaining the infrastructure of a city the size of Lowell requires constant injections of capital, however. Otherwise the condition of our parks, fields and buildings will deteriorate, and bringing their condition back to acceptable levels would require even greater investment. Ignoring this is penny wise and pound foolish. That said our general fund debt service expense has declined from $21.8 million in 2008 to $19.6 million in 2011. This could not have been accomplished by overborrowing.

Mr. Sullivan continually raises the issue of the Early garage as an example of excessive borrowing. This decision was made before I became City Manager but more importantly it was a good decision that has paved the way for hundreds of millions of dollars of private investment and is operationally sustainable if we look at the parking program of the city as a system not as a single stand alone operation. His objection to the purchase of our streetlights is also off base as it will save us $250,000 per year after paying the necessary debt service, the charges for electricity and the maintenance contract. A simple review of the other communities in the state which have done this bears this out. I know…I did this in Chelmsford.

Likewise, his objection to the energy projects is also off base. The investment of $21 million in our facilities for energy improvements pays for itself through reduced energy consumption and we have a guarantee by the energy vendor that is coordinating the work. Mr. Sullivan has argued that a professional City Manager would have a cost benefit analysis done before such an expenditure. I agree and that’s why one was done. It’s several hundred pages long and he, or anyone, is welcome to come in and look at it at any time.

Although I sincerely respect Mr. Sullivan’s public service and his experience as a municipal manager, the fact is that the world of municipal finance has changed significantly since he was manager. City managers began facing a new set of challenges on the day that Proposition 2.5 went into effect (which was, ironically, the same day that Mr. Sullivan resigned as City Manager of Cambridge). Indeed, Mr. Sullivan himself stated that Proposition 2 1/2 would result in, “…an inability (for municipalities) to perform the services required by law”. Moreover, the Education Reform Act of 1993 further reduced the tools available to municipal administrators in managing cities and towns across Massachusetts. Add to that challenges like exploding health insurance costs and funding a pension system that wasn’t properly funded in the 1970′s. Such obstacles have forced today’s city and town managers to be more creative, efficient, and resourceful than our predecessors. This is not meant as a slight to Mr. Sullivan or managers of his era but the municipal management profession has evolved in response to these obstacles.”

Bernard F. Lynch | City Manager
Office of the City Manager
The City of Lowell
City Hall, 375 Merrimack Street, 2nd Floor | Lowell, MA 01852
t: 978.970.4000 | f: 978.970.4007 | http://www.lowellma.gov