FY18 Budget Update BOA Final — File 203376

City of Somerville FY18 Budget Update May 11th 2017 Mayor Joseph A. Curtatone Ed Bean, Finance Director & City Auditor 1

General Fund Performance FY17 • Through April 30th, 2017 • Revenue • Collected 81.2% • Projected to exceed revenue budget by $2.1M (0.9%) • Expenditures • Expended 79.7% of General Fund appropriations • Expended 72.3% of School Department appropriations • Projected to underexpend appropriations by up to $5.5M (2.5%) 2

General Fund Performance FY17 • The single anticipated deficit within FY17 will be remediated through a combination of interdepartmental transfers and a Free Cash appropriation. • The Administration plans on increasing the Snow Removal budget marginally for FY18. FY17 Snow Removal Deficit FY17 Budgeted $1,286,000 FY17 Expenditures $2,381,997 FY17 Snow Removal Deficit $1,095,997 3

FY17 Budget Composition FY2017 Approved Budget 4

Historical Budget Composition 5 Category FY13 FY17 % Increase FY13-FY17 $ Increase FY13-FY17 Share of Total Growth Schools 52,545,257 65,420,081 25% 12,874,824 34% Public Safety 35,419,878 41,249,438 16% 5,829,560 16% Pension & Fringe 34,733,964 38,466,076 11% 3,732,112 10% Public Works 20,549,329 26,662,191 30% 6,112,862 16% General Government $12,280,768 $18,879,501 54% $6,598,733 18% State Assessments 11,871,004 14,035,001 18% 2,163,997 6% Debt Service 8,998,327 10,748,066 19% 1,749,739 5% Culture & Recreation 2,362,196 3,282,026 39% 919,830 2% Other 4,836,611 2,156,507 -55% -2,680,104 -7% Overlay 1,400,000 1,700,000 21% 300,000 1% Totals $184,997,334 $222,598,887 20% $37,601,553

Fixed Costs Drive Municipal Budgets 6 FY17 Budget Percentage of Budget Personal Services 68.2% Ordinary Maintenance 23.3% Special Items 7.3% Capital 0.1% FY17 Appropriation Percentage of Budget Health Insurance $22,054,950 10.0% Pensions 13,832,940 6.2% Debt Service 10,748,066 4.7% Total 46,635,956 20.9% Municipal budgets are heavily influenced by Personal Services appropriations as well as fixed costs such as Health Insurance, Pensions, and Debt Service.

FY12-FY18 State Aid Review Even after removing the MSBA reimbursement, net state aid will grow by 0.28% in FY18 when compared to FY17. For a full breakdown of State Aid projections for FY18, see Appendix A. 7 Cherry Sheet Receipts MSBA Reimbursement State Assessments Net State Aid Percent Increase FY12 40,763,828 4,230,955 11,727,941 33,266,842 FY13 42,333,751 4,230,955 11,866,423 34,698,283 4.30% FY14 43,249,493 4,230,955 12,406,821 35,073,627 1.08% FY15 44,488,007 4,230,955 13,467,279 35,251,683 0.51% FY16 44,625,233 3,547,977 13,409,986 34,763,224 -1.39% FY17 46,428,249 3,547,977 14,035,001 35,941,225 3.39% FY18 46,727,326 2,157,052 14,235,017 34,649,361 -3.59%

Revenue Composition Review 54% 66% 36% 22% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% FY2004 FY2017 Other Local Receipts State Aid Taxes 8 As a result of limited growth in net State Aide, the proportion of the budget funded by State Aid has dropped by 14% since FY04.

State Aid: A Closer Look 9 Major Revenue Accounts FY13 FY18 (est) % Change Chapter 70 $19,316,888 $20,170,688 +4.4% Charter Tuition Reimbursements 1,174,433 705,206 -39.9% Unrestricted General Gov’t Aid 21,311,532 25,171,000 +18.1% Major Assessment Accounts FY13 FY18 (est) % Change MBTA $4,802,268 $5,166,283 +7.6% Charter School Sending Tuition 6,634,770 8,891,621 +34.0%

Property Tax Summary *Projected 10 Fiscal Year Levy Limit Final Tax Levy Reduction from Levy Levy Increase FY13 $109,923,150 $109,923,036 $114 FY14 116,126,060 116,112,597 13,463 5.63% FY15 123,036,937 122,165,461 871,476 5.21% FY16 129,440,163 129,147,863 292,300 5.72% FY17 137,032,678 136,071,682 960,996 5.36% FY18 143,317,057* TBD

Historical New Growth Review 11 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Millions *FY18 Projected Projected New Growth Contributors for FY18: ASQ Block 11 (Retail) ASQ Block 6 (Mixed Use) ASQ Block 5A (Hotel/Res/Retail) $2.9M

$192k $280k $820k $1.3M 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 FY12 FY13 FY14 FY15 FY16 FY17 FY18 (Est) Millions PILOT Payments Increasing 12

Other Revenues & Excise Trends • Excise Trends • Motor Vehicle: Reduction projected for FY18 • Hotel/Motel: Slower growth, at capacity • Meals Tax: Strong growth $604k $947k 0 0.2 0.4 0.6 0.8 1 Millions Hotel/Motel Excise Revenue $1.1M $2.0M 0 0.5 1 1.5 2 2.5 Millions Meals Tax Revenue 13

FY18 Building Permit Projection $2M $1.4M $0.5M $1.8M $3.9M $- $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 Projected Building Permit Revenue FY18 ASQ Block 8 USQ Block D2.3 USQ Block D2.2 Tracked Projects >$50k Baseline (Projects <$50k) (In millions of dollars) 14

FY18 Other Financing Sources • Parking Meter Receipts • Free Cash • Overlay Surplus • New Revenue Source: Cable/Telco 15

FY18 Appropriations Overview • Finance requested a level service budget from Department Heads for FY18 • The administration’s budget submission this year will have largely level service, save for a few targeted investments. 16

FY18 Personal Services Changes • Net new positions (est.) • Schools: Pending school budget • City: 2 in Libraries (contractual) • Improvement requests are still being vetted as the budget develops over the final weeks. Positions may be added if capacity allows. 17

FY18 Personal Services: Labor • Salary contingency up 141% from FY17. • Contracts currently pending: SMEA, SPEA, SPSOA, IAFF. • New police contract included in FY18 appropriation, covering FY13-FY15. • Police PS up $875,000. • Non-Union MCAB phase 2 recommendations implemented. • Spread across all departments, $900,000 in market adjustments for 156 employees + boards & commissions. • For comparison, phase 1 cost $940,000 for 47 employees + elected officials in FY17. 18

Health Insurance & Pension • GIC premium increases projected between 6-7% for FY18. • Pension • Current unfunded accrued liability: $132,035,270 • FY18 appropriation between $13.8-$14.3M • Full funding schedule ends in 2034 Type Active Plans Individual - Active 829 Family - Active 809 Retiree 1,230 Total 2,868 19

FY18 Projected Debt Service Category FY17 FY18 (est) Change Principal / LTD $7,554,123 $6,511,624 -$1,042,499 Interest / LTD 2,668,943 2,900,240 231,297 Interest / BAN 500,000 537,500 37,500 Total 10,723,066 9,949,364 -773,702 Percent of Appropriations 4.81% 4.29% -0.62% • Full debt service payments for the SHS renovation start in 2026. • GLX payments of $10M annually begin in CY2018 pending special legislation. 20

Anticipated FY18 Investments • DPW Fleet Division • Maintenance of our existing assets • Parks & Recreation Fields Maintenance Division • Invest in our playing fields • Schools Schools Everything Else Salary Contingency & Health Insurance 33% 33% 33% The majority of the FY18 budget growth is projected to be from investments in the Somerville Schools, and fixed costs.* *Subject to final budget request 21

Long-Term Budget Management • Free Cash • Balance as of 4/1/17: $9,862,925 • $2M projected to fund FY18 budget ($500,000 reduction from FY17) • Federal Funding Challenges • SHS & GLX Debt Service 22

3,731,500 5,400,750 7,405,750 8,664,500 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000 10,000,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054 Full SHS Debt Service Payments Begin in 2026 23

Long-Term Budget Management • Free Cash • Balance as of 4/1/17: $9,862,925 • $2M projected to fund FY18 budget ($500,000 reduction from FY17) • Federal Funding Challenges • SHS & GLX Debt Service 24

Thank You City staff are on hand to answer any questions you may have 25

Appendix A: FY18 Cherry Sheet Assessments FY18 Projected Special Education 16,184 Air Pollution 25,774 MAPC 40,754 RMV Non-Renewal 73,260 School Choice 30,100 Charter Tuition 8,891,621 MBTA 5,156,283 Boston Metro 1,041 26 Receipts FY18 Projected State Reimb SRV SPS 291,544 Chapter 70 20,010,098 MSBA 3,547,977 Charter Reimbursement 1,524,119 Unrestricted General Gov’t Aid 24,226,179 Urban Excise 132,000 Veterans Benefits 376,309