Mayor's Budget Presentation FY17 — File 201589

Somerville Budget Overview Mayor Joseph A. Curtatone June 7, 2016 F Y 1 7

Building on our Strengths to Shape Our Future 2

Investing in our Schools and Youth Development Delivering Critical Human Services Serving Somerville Together Strengthening Core Services to Enhance Our Quality of Life Taking on Challenges 3

A Budget Guided by Our Core Principles and the Community’s Orienting Values Raise a Family Work Live Somerville, A Great Place to: Play 4

FY2017 Appropriations Proposed Operating Budget = $222,947,719 Million Total Municipal Appropriation = $207,314,582 Million 5.6% over FY2016 5

Operating Budget 29% 18% 17% 12% 9% 6% 5% 2% 1% 1% School Department Public Safety Pension & Fringe Public Works General Government State Assessments Debt Service Culture & Recreation Other Overlay Reserve 6

Historical Spending Increases Have Been Modest 5.10% -2.80% 3.90% 5.40% 5.60% -4% -2% 0% 2% 4% 6% 8% 10% FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 7

Operating Budget Actuals FY04-15 (Real Dollars) 0 50 100 150 [phone removed] 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Millions General Government Public Safety Education Public Works Culture and Recreation Pension Benefits Employee Benefits State and County Charges Education and Public Safety have been the largest cost drivers over the last decade. 8

Operating Budget Actuals – FY04-15 (Inflation-Adjusted) Adjusted for inflation, expenditures show modest growth focused on improving City services and our school system. 0 50 100 150 [phone removed] 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Millions General Government Public Safety Education Public Works Culture and Recreation Pension Benefits Employee Benefits State and County Charges Healthcare & Other Employee Benefits Public Safety Public Works Education 9

Values-Driven New Investments & Increasing Fixed Costs $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 Millions Net Change from FY16 to FY17 10

We will NOT be going to the tax levy limit FY17 Levy Limit = $136M $650k under limit

FY17 Highlighted Investments - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 12

Investing in Our Schools - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Continued investment in our schools: $2.3M increase (4.6%) increase over FY16 13

Maintaining Our Assets - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Investing in core services & preventive maintenance for our buildings 14

Investing in Our Future - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Borrowing wisely and at low rates to invest in critical projects 15

Controlling Our Costs - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Managing healthcare costs through GIC 16

Sound Fiscal Management - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Keeping our commitment to fully fund our pension by 2034. 17

Improving Our Athletic Fields - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Ensuring the sustainability and quality of our playing surfaces 18

Personal Services: Fixed & New Costs - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 Union Contractual Obligations MCAB Recommendations New Positions Non-Union Merit Increases & Holiday Personal Services Changes FY16 to FY17 $800,000 increase in Overtime $3.3M total increase in Personal Services from FY16 19

FY2017 Revenue by Source 20 Taxes 66% State Aid 22% Licenses & Permits 4% Other Revenue Sources 3% Fines & Forfeits 3% Misc Recurring 1% Fees 1%

Changes in Revenues Income Updates • Powderhouse school sale • Increased hotel and meal taxes • Increased PILOT payments • Increased building permits • State aid up slightly (3.7% over FY16) Fee Updates • No fees will increase • New marijuana dispensary siting permit fees • Motor vehicle excise tax increasing due to increase in the value of car purchases (nationwide trend) 21

Four Administrative Orders Optimizing coordination of key functions Move Engineering under Capital Projects Merge Water and Sewer into unified department Expand Recreation to Parks & Recreation Establish a Fleet Division within DPW 22

Four Administrative Orders Coordinating management of critical capital projects Move Engineering under Capital Projects 23

Four Administrative Orders Applying best business practices to a $30M+ enterprise Merge Water and Sewer into unified department 24

Four Administrative Orders Fostering specialization on core priorities: Fields Expand Recreation to Parks & Recreation 25

Four Administrative Orders Coordinate care and maintenance Establish a Fleet Division within DPW 26

Building on Our FY16 Investments in FY17 27

Our Big Picture Investments Are Paying Off Student MCAS Growth is Up Permit Revenue is Up and Growing Crime is Down Hotel & Meals Tax Revenues are Up The GLX is Under Construction Reserve Funds are Up 28

Our Core Service Investments Are Paying Off Student Substance Abuse is Down Senior Program Participation is Up Road surface improvements are Up Number of Water Mains Replaced Doubled Food Inspections are Up Library Services Use is Up 29

Together We Improved Services LED Streetlights Installed Citywide More services moved online and into the cloud 34.5 Miles of Water Mains Flushed Annual Energy Savings Increased Affordable Housing Efforts Intensified Total Residents receiving City info is up 30

Together We Built Academic Strength with Smart Investments • Somerville Public Schools led all urban school districts in Student Growth Percentile (SGP) for 3rd straight year • Only urban district among top 15% for combined growth in ELA & Math • Overall District Composite Performance Index has improved in every subject for last 4 years (Math, ELA, Science) 31

Together We Can Continue to Enrich Student Learning 32

Focus on School Technology • Maker space expansion • Fab lab at SHS • New Technology Innovation Specialist • STEAM pilot at Healey • SHS First Robotics team • Online registration for PIC • Increase technology use for students at-risk of dropout • Expand Student Insights dashboard to all schools 33

Programs for All Students • Special Education capacity building • Additional pre-K classrooms with CAAS and afterschool programming • Expansion of college & career readiness programs • Expanded student services & mental health services • New Language & Leadership Liaison • Creation of New Starts program with SCALE for students with educational gaps • Investments in staff development and support 34

Together We Intensified Affordable Housing Efforts 35 • Sustainable Neighborhoods Working Group (SNWG) discussions complete. • SNWG Report issued. • Recommendations Review Committee evaluation complete. • Next steps: Reengage SNWG and launch community discussions.

Now We Must Grow Affordable Housing Resources New Inclusionary Housing Specialist to support the creation of and access to inclusionary opportunities • 70% of inclusionary housing units have been created since 2010 • 30% of units created during prior 20 years • Staff has not increased during that time 36

Together We Improved our Infrastructure above ground . . . and below Tackling Decades of Deferred Maintenance Preparing for Redevelopment Enhancing Quality of Life 37

We Must Manage & Shape Our Growth $1.2B in new growth in next ten years as direct result of Green Line Extension • New Projects Manager for Capital Projects • New Community Outreach Coordinator for Planning & Zoning 38

We Must Maintain Our Assets We must both maintain our assets as well as address decades of deferred maintenance • Water Catch Basin Cleaner • Sewer Public Works Worker • Night Custodian • Fleet Mechanic 39

Together We Strengthened Recreational Programming 40

Now We Will Enchance Our Recreational Resources: Our Fields • Expansion of Recreation Dept. to Parks & Recreation Dept. • Creation of Fields Division within Parks & Recreation • Development of new Fields Maintenance Plan 41

Library Use is Growing & Evolving New Assistant Director and Branch Specialist will keep all three library locations appropriately staffed and allow the Library to offer new types of programming that patrons value. Library usage is shifting from borrowing materials to programs like ESL classes and Teen Room activities. 42

Investing in our Human Capital • Increase retention to avoid: • Loss of productivity • Loss of continuity & institutional knowledge • Replacement costs • Recruit quality talent • Support diversity goals • MCAB Approved Salary Adjustments • New Part-Time Recruiter for Personnel Recruiting and retaining high-quality, diverse staff 43

Investing in Good Governance • New Legislative Liaison • New BOA Researcher 44

Addressing Equity & Inclusion • New Equity and Inclusion Coordinator • Support for staff training • Development of new diversity plan 45 Conversations on Race and Racism Fall 2015

Expanding Services for our Most Vulnerable Residents • New Health and Human Services Social Worker • New partnerships with local providers • Dedicated season staff for Mobile Farmers Market 46 Homelessness Task Force Fall 2015

Addressing our Greatest Challenge: Climate Change • New Sustainability Coordinator • Climate Action Plan • Community aggregation 47

Community Preservation Act Open Space & Outdoor Recreation Affordable Housing Historic Preservation 48

Community Preservation Act $4 million available in FY16 will fund… 49 -100 Homes Pilot, -Mystic Water Works and more -Milk Row Cemetery -Somerville Museum -Allen Street Open Space -Hoyt-Sullivan Playground -Groundwork’s South Street Farm -Community Path Repaving 3 more FY16 projects are still under review by the Aldermen: -Additional Appropriation for Affordable Housing Trust Fund -Community Path Design -Open Space & Recreation Land - Acquisition Fund

Growth made possible by conservative fiscal management 50

Our highest bond rating ever A growing commercial tax base Together, we’ve kept our finances strong and sound Growing stabilization funds Addressing long-term liabilities 51

Highest Bond Rating Ever 2004 2014 A+ AA+ S&P 2004 2014 A2 Aa2 Moody’s Ratings guarantee savings for Somerville 52

Bond Rating Agency Metrics 30% Economic Development 20% Management 10% Budgetary Flexibility 10% Budgetary Performance 10% Liquidity 10% Debt & Contingent Liability 10% Institutional Framework 53 City of Somerville Bond Ratings Source: Standard & Poor’s municipal ratings framework

Praise Noted in S&P 2016 Rating • “Strong management, with "good" financial policies and practices” • “Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA);” 54

Managing Fixed Costs Self-Insured GIC 8.5% 15.5% 8.7% 1.4% 3.5% 1.0% 5.7% 3.5%* 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Average Health Insurance Premium Increases from Previous Year *FY17 increases estimated by GIC as of April 2016 55

Somerville: $2,581 One of the Lowest Spending per Capita in State (General Fund FY16) Cambridge: $5,058 Based on 2015 ACS population estimates and published 2016 city budgets Boston: $3,320 56

Increasing Stabilization Funds Over the last decade, the City has appropriated significant reserves within Stabilization Funds – funds appropriated for specific purposes: capital projects, parks, collective bargaining outlays, and street reconstruction. $24 M $0 $5 $10 $15 $20 $25 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Millions 57

Guidance on free cash From the Department of Revenue: • “Free cash: a non-recurring revenue source, a prudent use of free cash would be to fund one-time expenditures, a capital purpose or replenish other reserves” • “It’s like having a saving account, not a checking account. … used for extraordinary things or should problems occur.” 58

Maintaining Free Cash Conservative budgeting practices and fiscal responsibility have led to growth in Free Cash certifications, creating flexibility for capital expenditure financing and reduced need for borrowing. $8.2M $7.4M $10.6M $11.5M 0 2 4 6 8 10 12 14 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Millions 59

We have achieved the most new growth in a decade Annual New Growth FY03-17* $1.31m $3.17m $1.65m $3.74M 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Millions *FY17 Projected 60

Together, we’re working to shift the tax burden Projected Residential/Commercial Tax Share 74.2% 61.6% 52.1% 25.8% 38.4% 47.9% 0% 10% 20% 30% 40% 50% 60% 70% 80% FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 Residential Share Commercial Share 61

247 net new businesses in 4.1 square miles from 2013-15 As of June 2016 Businesses are choosing Somerville 62

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New & Expanding Businesses 1,312 Total Businesses at End of FY15

$604k $638k $767k $800k $977k $1.11M 0 0.2 0.4 0.6 0.8 1 1.2 FY12 FY13 FY14 FY15 FY16 FY17 Millions Hotel/Motel Excise tax projected to increase 13% in FY17 Hotel Tax Revenue Increasing 65

$1.1M $1.08M $1.25M $1.44M $1.6M $1.82M 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 FY12 FY13 FY14 FY15 FY16 FY17 Millions Meals tax revenue projected to increase 13.8% in FY17 Meals Tax Revenue Increasing 66

192k 182k 286k 280k 820k 1.27M 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 FY12 FY13 FY14 FY15 FY16 FY17 Millions PILOT Payments PILOT Payments to the city increasing by 52% in FY17 PILOT Payments Increasing 67

$993,599 in PILOT funds from Partners included in this budget (nearly double that of FY16) 68

Somerville is thriving because we invest, for the long-haul, in our orienting values WORK LIVE PLAY FAMILY

In FY17, We Will Continue to Invest in Core Services • Capital Projects • Sewer staff • Libraries • Fields • Admin Code Changes • Human Capital 70

We Will Also Invest to Take on Our Greatest Challenges From Affordable Housing to Zoning Overhaul 71

We Will Continue Our Commitment to Youth Education & Development 72

We Will Tackle Major Projects 73

SHS Reconstruction Cost of doing nothing is more than $100M - just to bring the building up to code 74 • Estimated project total: $253M • Estimated city share: $130M • Funding Sources: MSBA Grant, seeking Debt Exclusion vote, plus other tools to mitigate the impact • Next steps: • Submit ballot language to BOA in June • Present to MSBA 7/20/16 • Present financial and cost mitigation plan to BOA in July • Submit to Sec. of State by 8/3/16

Union Square Early action infrastructure work is already underway. 75 • Neighborhood Plan has been released. • Working Estimates: $70M total • The City has already invested in land acquisition & early action items • $40M in estimated utility work to be supported by the Water & Sewer Enterprise funds • $30M in estimated streetscape work supported by the general fund • Funding Sources: DIF, Infrastructure Investment Incentive program (I-CUBED), MassWorks grant

Green Line Extension • Municipal Contribution: • $50M required to ensure project goes forward • $8M already invested The largest public transit expansion the region has seen in a generation 76 Image Source: wbur.org

Mitigating Costs of the GLX • Due diligence on MBTA assessment increase • Developer mitigation fees: looking to predictable formula- based impact fees • Working with the Commonwealth to prepare clawback mechanisms including i- cubed • Spread the costs over time to avoid borrowing 77

Public Safety • Context: Related to the Union Square redevelopment. Both the Police Headquarters and Fire Engine 3 need to be moved out of Union Square per the redevelopment plans. • Timeline: Anticipate moving SPD/SFD from Washington St location by 2021 • Fire Study complete, recommendations forthcoming • Police Feasibility Study funding request in Finance Committee • Funding Sources: GO bonds, Sale of Assets 78

Critical Capital Investments • Athletic Fields • West Branch Library • Tree canopy expansion • Nunziato Field and storm water improvements • Winter Hill school yard renovations • Police station • Union Square Fire Station relocation Ten-year Capital Investment Plan updated annually 79

Assembly Square DIF Projections Captured Increment from the ASQ DIF area has consistently outpaced debt service payments. At the end of the repayment schedule, the accumulated project benefit is projected to approach $60 million more than required debt service payments. 0 2 4 6 8 10 12 14 16 18 Millions Net Project Benefit Captured Increment Debt Service 80

GLX returns The GLX will unlock more than… • 18 million square feet of potential new development along its stops, • 30,000 new jobs, • 9,000 of units of needed housing, • $3 billion in projected tax revenue for both Somerville and the Commonwealth by 2040 81

Meeting Our Operational Needs & Goals 82

Budget Accolades GFOA Distinguished Budget Presentation Award Certificate of Achievement for Excellence in Financial Reporting 83

Thank you 84