City Administration explains low Free cash

In this week’s City Council Packet is notice that the State, 10 months after the close of the 2015 fiscal year and 7 months after the city submitted their numbers to the DOR, has certified the City’s free cash.

The Administration provides a plausible reason for having so little available cash, citing the harsh winter.

The amount of certified free cash is lower than recent years because of the Administration’s decision to utilize end-of-year surpluses to bring down the significant snow and ice deficit of FY2015. $1.9 million in surplus appropriations were transferred by the City Council in June of 2015 to reduce the deficit to a figure that would not additionally burden the tax levy. Had that transfer not occurred, the free cash number would have been higher by $1.9 million, but the city would have had to amortize $1,017,805 annually over three years, as opposed to the $500,000 that is currently being amortized.

The administration also suggest what to do with the Free Cash

As a non-recurring revenue source, utilization of free cash to fund recurring costs is not a prudent measure. Many communities let free cash accumulate year-over-year and do not appropriate the funding as it is certified. It is my recommendation that we allow the funds to roll- forward and revisit the potential use when fiscal year 2016 free cash is certified.

What I found amusing was the administrations need to show “free cash” through the years to try to justify the low available amount.

Below is a table that highlights free cash levels over the past few years:

Screen Shot 2016-05-27 at 8.42.30 AM

If they explain why this year’s “Free Cash” is low they should to be fair, explain why other years “Free Cash” is negative.

For instance in 2006/2007 the last State Rep Turned Manager had used all of the City’s Reserves to run the operation budget (2007 budget was built on revenue that wasn’t there and free cash that was not certified.) which is why both of those years ended up in negative numbers.

They also forgot to highlight that during Fiscal Year 2009 the Commonwealth’s response to the economic downturn was to institute mid-year budget reductions known as 9c cuts. Lowell responded by reducing the budget in mid-year by some $3 million, $600,000 of that coming from the schools.

So there is has Paul Harvey used to say “The rest of the Story”

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