Notes from the
Finance Control Board, Saturday, July 31, 2004 (First Meeting)
Call to order by CVR: Springfield was founded in 1636, made a town in 1852, and 152 years later, we are in a new and sobering situation. Welcomes Eastern Massachusetts members of the Control Board who introduce themselves.
Alan Le Bovidge, Commissioner of Revenue, retired Vice Chairman of Taxes Division at PricewaterhouseCoopers, author of April 2003 Report (http://www.mass.gov/eoaf/docs/DLS_Springfield.pdf ) on Springfield finances.
Jake Jacobson, Wisconsin native “who came to Cambridge [MIT] in 1965 and never left.” Helped with April 2003 DOR report (see above link) on City’s finances and has been involved in many businesses, specializing in finance, accounting and analytical matters. Sees his task as figuring “out where we are and where we’re going.”
Tom Trimarco, legal consultant with expertise in finance law; former assistant general counsel in the US Dept. of Transportation. Sees himself as a careful, thoughtful person, looks forward to working with the Mayor and the President of the City Council.
CVR: We’re very grateful to these men. I hope the board will act together rather than in a 3 to 2 automatic count. This will be a journey we’ll take together as a community; our problem is mainly financial, and their is mainly in finance.
They are new to the City, and they’ll learn we’re boxed in. We have 35,000 residents living below the poverty line, and a negative balance of $23,000,000 in free cash, a junk bond rating, and the highest tax rate in Massachusetts. Of our $435 million budget, $235 million goes to the schools, leaving general government in trouble with a balance of $200 million, $110 million of which is slated for debt service, health insurance, and school transportation, leaving $90 million for our 1500-1550 employees, half of whom are in the police and fire departments.
It was frequently mentioned in Boston that we get the largest amount of state aid of any community, but most of that ($235 million) goes toward the schools, leaving only $33 million for general government, a figure that has essentially remained static for 18 years although our costs have tripled or quadrupled. We are like a drowning person whose nose is just l½ inches above water. I see that the heads of our municipal unions are here, and [looking at them] our success and failure depend on you.
CVR, with a second from Sarno, nominates Alan LeBovidge as chair; he is elected unanimously.
LeBovidge Budget matters have to be dealt with today. The Open Meeting Law requires advance notice covers these meetings, but it does not require advance publication of an agenda. I hope for good attendance from the public at these meetings, and we welcome questions and comments, but these meetings will not be a public forum.
CVR We need control board approval for a 1/12 budget for August; this represents a “stand-pat” budget to cover municipal expenses for 4 ½ weeks. We will probably need another 1/12 budget for September as well. We will be submitting a 9/12 budget for the rest of the year on before October 1. The format is a traditional one: a line item budget by department, mostly for personnel services.
LeBovidge Please expand on the meaning of a “stand-pat” budget.
CVR We have rising health insurance costs which will be $5million this year. Debt service is also rising and will be $5.8 million this year. In addition, the City owes $4million for pay raises to municipal employees approved before July 2003, and we have $4.7 million in unpaid health costs from previous years (down from $6.7 million).
DECISION: Unanimously approved 1/12 budget for August.
CVR I will ask City Clerk Bill Metzger to make and keep an official record of all actions taken by the Control Board with the Executive Office of Administration and Finance and the Springfield City Clerk to be the official repositories of this record.
Another matter requiring our attention is the City’s cash flow, the need for short-term borrowing. [A cash flow analysis is distributed to board members.] There is always a need for short-term borrowing to cover low revenue periods, and I suggest borrowing from the no-interest $52 million state “trust fund” instead of from a bank. (Last year the City spent $750,000 on interest charges.) State money will be available to the City only if requested and the request is approved by the Executive Office of Administration and Finance.
LeBovidge Why not save the borrowing cost?
Jacobson Should we just handle this shortfall or make an appropriation for the whole year?
LeBovidge What about appropriating up to $30 million for the Mayor to draw down?
Trimarco How about $15 million to get us through the calendar year?
Decision Unanimous vote to approve a $15 million line of credit for the rest of the year.
LeBovidge Repayment date when?
CVR Next is the matter of the wage freeze for City employees. These contracts were negotiated in good faith, and our obligation still exists, but we can’t meet them now . I would like to board to approve an extension of the wage freeze until August 31, 2004.
Decision Unanimous vote to continue wage freeze until August 31, 2004
CVR For the past several years, the City’s outside auditing firm has been Melanson Heath who have agreed to perform this year’s audit for $150,000; PeatmarwickCoopers has submitted an estimate of $250,000. We are allowed to enter into a no bid contract for a CPA firm, but we must notify the House and Senate as required by the control board legislation.
Decision Unanimous approval to enter into a contract with Melanson Heath to audit City finances.
CVR The enabling legislation also says that the board is to approve and disapprove all contracts for goods and services, a clause lifted from the Chelsea situation where there was no executive, but here in Springfield, we still have a normal government. I see this requirement as cumbersome [given the distance between Springfield and Greater Boston] and suggest that the control board delegate signing contracts to me. I normally review all contracts and, if I see something I don’t understand, get information from the department in question. I could give the control board a digest of every contract I sign. Of course, this might change once the control board has staff. Otherwise, City government might grind to a halt; we have 300-400 contracts in the federal funds area alone.
Jacobson What is the range and size of contracts?
CVR There are no multimillion dollar contracts, the biggest ($2 million) has been for a highway project. Some are for $100,000. School department contracts are coming from everywhere.
LeBovidge What is the duration?
CVR One year; three-year contracts require city council approval.
Trimarco I suggest going forward on the basis the Mayor recommends.
CVR In 4 – 6 weeks we’ll have a clear picture of what we’ll be dealing with.
Jacobson As a safety measure, pick a ceiling and duration of under 1 year with the goal of keeping the Control Board out of the middle of City government.
CVR $500,000.
Trimarco What is the largest contract now waiting [for approval]?
CVR Examples:
$1.5 million for fire alarms and fire protection for Symphony Hall, needed before the start of the symphony season in September
$114,000 for a contract with UMass with the health department
$200,000 for emergency preparedness
LeBovidge What about a ceiling in the $300,000 to $500,000 range?
Trimarco Is that reasonable?
Decision Unanimous vote allowing the Mayor to approve all contracts under $500,000 and requiring that he submit a bi-weekly report of contracts signed to the Control Board.
CVR The control board is to have control over all personnel matters. We have LOTS of these. In fact, we could become the Personnel Policy Board of Springfield! I would like approval now to fill four vacancies:
1. One grant-funded health care access nurse/coordinator
2. One senior comptroller for the police department
3. One grant-funded elder affairs post
4. One electrician for the school department, esp. for Putnam High School
(We have 7 million square feet of buildings, and we have 1 plumber and 1 painter.)
Decision Positions approved unanimously.
CVR The Control Board needs staff and office space to ensure 5-day per week omnipresent interaction with the City. We need able, experienced people who are ready to work. There may be office space in the “Little State House.”
LeBovidge We will meet with the Mayor on this next week.
CVR We need to decide how often to meet and the time and date of the next meeting. Council President Sarno and I are extending an open invitation for guided tours of the City to all board members so they can see first-hand what our needs are.
NEXT MEETING: Monday, August 16, at 10:00am in Room 220 of City Hall.