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Fiscal 2018 Annual Budget Recommendations

Worcester, MA (May 15, 2017) - View City Manager Augustus' proposed Fiscal Year 2018 Budget Document, recommending a tax levy appropriation in the amount of $632,201,552.00 for the purposes and to the accounts identified in the Line Item Budget contained therein.

The FY18 budget creates the opportunity to make strategic investments in our priorities - education, infrastructure and neighborhood improvements - all while staying true to our updated long-term financial plan. Over the past three years, we have expanded economic development and increased vitality in our great and growing City, and we have to continue that momentum. This budget invests in the future of our youth by starting to fund the construction of two brand new high schools, adds innovative public safety programs, focuses on cleaning up our neighborhoods and parks, and identifies solutions to important issues identified by the City Council and the residents of Worcester to improve the livability of our neighborhoods.

Building on Education
Education is a core responsibility that provides a key value to our city. Improving education is an investment in our community and its economic development. This budget builds on our commitments to invest in education funding:

  • Exceeds Minimum Contribution: The City exceeds the minimum required contribution of $227K for the fourth straight year - allocating a total of $1.73M in additional operational support to the Worcester Public Schools.
  • MSBA Approved Building Projects: We have a unique opportunity to build TWO new High Schools virtually simultaneously. This budget includes a deposit of $2.75M to initiate the new school building fund to prepare for this financial commitment, while acknowledging this is the first of annual installments which may require adjustments in the future.

New Public Safety Programs, Equipment and Personnel
Crime is down in the City due to significant efforts and strong funding of public safety personnel and programs. In FY18, we raise the bar even higher:

  • Recruit Classes: The budget supports recruit classes in both the Police and Fire Departments, providing stability, increased visibility and responsiveness in our neighborhoods.
  • New Fire Protection Engineer Position: This budget adds a civilian Fire Prevention Engineer, which will increase efficiencies in the plan review process, decreasing the amount of wait time for review by weeks, and enhancing customer service as new development and building rehabilitation are on the rise in the City.
  • WPD Forensic Lab: Adds a new civilian crime/forensic WPD Lab Director, which fills the position of a retired lieutenant and allows the relocation of a lieutenant to the line of duty.
  • Shotspotter: This budget maintains funding for the City's ShotSpotter gunshot detection program, which allows our police department to quickly respond and investigate, keeping our neighborhoods safe. This is the first year the City is responsible for full funding of the program.
  • Safety Equipment: Supporting the second year of the equipment replacement program to provide firefighters with two complete sets of turnout gear over four years, making a priority of providing protective equipment to the men and women of the Fire Department.
  • NRT and Summer Impact: The FY18 budget maintains the Neighborhood Response Team and Summer Impact programs, which allows for additional officers to be deployed to targeted areas, and during key periods.

Improving Neighborhoods, Parks and Infrastructure
My proposed budget builds upon our commitment to provide excellence in the delivery of core services, improves valued city resources, and creates new opportunities to address some persistent issues of concern. We have acknowledged the concerns of your honorable body and those of our residents who attend our Neighborhood Watch meetings and have implemented several new initiatives to address improve the livability of our neighborhoods:

  • New Snow Removal Program: We have successfully implemented the new snow program, and I am recommending an increase of $1.8 M to the annual snow budget to address the costs related to these changes.
  • Stump Removal Initiative: Based on the feedback of residents, we have included a one-time $400k fund to remove more than 600 stumps from our public parks and streets and reset the pavement once the stumps are removed. This will eliminate a backlog of stumps across the City, including in our parks. In the future, we will plan to remove stumps as trees are removed.
  • Median Strip/Traffic Island Cleanup: In this budget, we will implement a Median Strip/Traffic Island Beautification Program staffed by 20 city youth who will be employed through our Youth Violence Prevention Initiative this summer to address the ongoing challenges of overgrowth in our city street's islands and median strips. This group of teens will be hired to work for 8 weeks with members of our parks department to weed, trim and maintain the median strips and traffic islands throughout the City.
  • Improve Crosswalks and Centerlines: Following last year's aggressive efforts of restriping and repainting crosswalks and fog-lines to enhance pedestrian safety and increase the walkability in our city an allocation has been made to continue to once again restripe crosswalks/centerlines, school crossing zones, and fog-lines. Additional funds have been allocated for a number of new flashing lights to be installed in each district.
  • Outside Consultant for Shared Services: The City Council has inquired about reviewing the potential savings obtained by merging City/WPS Facility Management and Administrative Functions: This independent outside review will determine the feasibility and efficiencies of streamlining finance, administrative and human resource functions in addition to overall facility management citywide.
  • Economic Development City-wide Master Plan: Much has changed in Worcester in the 30 years since the plan was done - the City's built environment, population mix, housing market, and diversity of businesses, to name a few. The density of the development that is occurring in the Central Business District makes Worcester a different city today than it was even five years ago. The plan will identify issues, opportunities and recommendations surrounding land use/zoning, walkability, housing, historic/cultural resources, environment sustainability, public health and connecting bike paths.

Strengthen Long Range Financial Planning
As presented to City Council in March, we have incorporated the updates to the City's Long-Term Financial Plan into this budget, allowing us to address our shared public priorities and continuing our efforts as good stewards of the City's finances:

  • OPEB: Consistent with our financial plan, the recommended budget provides a 10% increase into the City's OPEB reserve fund totaling $550,000, demonstrating to bond rating agencies that we continue to address this liability in our ongoing financial planning.
  • Controlling Non Operational Cost Drivers: Health insurance reforms are continuing to yield benefits, as the City's health insurance costs are growing at a slower rate lower than state and national averages, with rates up less than 5.6 % compared to 9.25% national averages and 10-12% State of MA averages. This is another way we are tackling the City's OPEB liability, as slower health insurance costs keep our liability from growing at a faster rate.
  • Preparing for Known Expenses: This budget includes funds for known liabilities for the coming fiscal year including a model wage and benefit package for a 2% FY18 wage increase and updated health insurance plan designs, as well as funds for legal suits and judgements.

Financial Overview: The following summarizes the major financial changes from the FY17 budget. Details for each department are included in the complete budget document attached to this communication.

Fiscal Year 2017 Budget (Tax Recap) Proposed Fiscal Year 2018 Budget Fiscal Year 2017/2018 Change Percentage Change
Revenues
Property Tax 278,951,369 290,154,831 (1) 11,203,462 4.02%
Local Receipts 42,200,027 44,474,536 2,272,509 5.39%
State Aid Education 237,217,701 247,105,031 9,887,330 4.17%
State Aid General 53,800,865 49,767,224 (2) (4,033,641) -7.5%
Other Available Funds 697,519 699,930 2,411 0.35%
Free Cash 5,488,721 (5,488,721) -100.00%
Total Revenues 618,356,202 632,201,552 13,845,350 2.24%
Expenditures
Education (WPS - including assessments) 350,462,429 361,828,709 (3) 11,366,280 3.24%
Fixed 115,397,072 115,170,669 (226,403) -0.20%
Public Safety
- In FY17: FY 14-16 Wage Reserve
87,739,549
2,440,254

(4)
89,488,660
 
1,749,111
(2,440,254)
1.99%
-100.00%
Public Works
- Snow Program
21,013,948
4,200,000
21,246,653
6,000,000
232,705
1,800,000
1.11%
42.89%
Other Operational 36,602,950 37,216,861 613,911 1.68%
Contingency 500,000 1,250,000 (5) 750,000 150.00%
Total Expenditures 618,356,202 632,201,552 13,845,350 2.24%

Overall, the City's budget increases $13.8M, or 2.24%. More than $11M of that increase is being allocated to the Worcester Public Schools, based on state funding that increased by $9.9M combined with City funding that exceeds the required minimum by $1.75M.

Fixed Costs including debt service, pensions, worker's compensation, injured on duty payments, and health insurance will decrease by $226,403, thanks to a lower cost of borrowing due to the City's improved bond rating, and an ongoing commitment to reforms on the part of our City Administration and the cooperation of our partners in the City's bargaining units.

$550,000 will be used to fund the OPEB Trust - the City's second contribution from the recommended operating budget into the OPEB Trust. This is a 10% increase over FY17 per the Long Term Financial Plan. The City will still plan to meet its obligation under the Five Point Plan to deposit 30% of Free Cash into the OPEB Trust when that amount is certified next fall.

Public Safety spending increases by $1.75M due to our commitment to maintain staffing levels in both departments with recruit classes. (This does not include FY17's artificially inflated number, due to a $2.44 retroactive wage payments to the fire department). In addition, the budget allocates funding for the programs and initiatives mentioned above.

The Department of Public Works and Parks shows an increase from FY17 to FY18. This increase is driven largely by the updated snow program. The budget also includes investments in the Parks division for stump removal, island maintenance, turf management, and dog parks. The Public Works and Parks budget includes increases in the days of operation for the Park Steward program and adds funding to maintain the City's pool and beach services, while increasing the wages for summer and temporary staff.

Other operational departments show an increase of $613,911. This includes continuing the need to fund expected legal settlements; increasing the Veteran's Benefits line item to match recent spending levels (spending on Veteran's benefits is reimbursed by the Commonwealth at 75%). The Contingency line item will increase $750,000 to fund a portion of the FY18 wage increase. The wage and benefit package will include a 2% salary increase concurrently with the implementation and savings from the most recent health insurance changes consistent with the recently settled WPS collective bargaining units. All remaining departments increase $1M, or 3%, inclusive of all budgetary adjustments, contractual salary amounts, and program costs.

The budget document linked above provides detailed information on each department as well the line item budget containing the legal appropriation recommended amounts for the FY18 Operating Budget. This comprehensive recommendation achieves not only a balance of our revenues and expenditures, but an opportunity to build on our successes, improve on the delivery of municipal services, while incorporating the sound principles of our updated long-term financial plan. With this budget, we will commit to a better future for our schools and our city.

Respectfully submitted,

Edward M. Augustus, Jr.
City Manager

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