WOBURN - Bracing for perhaps the worst economic crisis in modern history, Mayor Scott Galvin plans to dip into Woburn's healthy reserves to stabilize Woburn's proposed $160.7 million operating budget for fiscal year 2021.
During the City Council's latest meeting in City Hall, Galvin appeared before the aldermen to formally introduce his citywide operating budget for FY'21, which calls for an approximate $4 million increase in spending over current year expenditures.
According to Woburn's chief executive, though the city faces a number of troubling financial uncertainties in the months ahead, for the time being, he is ready to ensure the community's stability by falling back onto the city's healthy financial reserves and excess cap space under Proposition 2 and 1/2.
"We are clearly in the middle of the worst economic crisis since the Great Depression. The unemployment rate has skyrocketed to record highs as corporate America and Main Street businesses have been forced to shut down due to the COVID-19 pandemic," warned Galvin in his budget message to the council.
Ultimately, the council in a unanimous vote referred the no-frills draft budget to the Finance Committee, which will conduct its own expedited review of the spending plan in the coming weeks.
Under the City Hall CEO's spending plan, general fund expenditures will climb by roughly 3 percent in FY'21 to $141.7 million. The rest of the overall budget will be comprised by water and sewer enterprise fund spending, which will reportedly decrease by around 1 percent to $20.69 million.
Education spending will be allowed to increase by 3.8 percent in FY'21 under Galvin's proposal. The mayor, in light of the unprecedented challenges being brought on by the COVID-19 pandemic, is also allowing school administrators to slate some $700,000 in current year budget surpluses towards FY'21 liabilities.
According to Galvin, unlike last year, when he called for a $7.5 million jump in annual spending as Woburn's revenue coffers swelled from construction-related boom times, Woburn is now facing perhaps the greatest financial crisis since the Great Depression due the COVID-19 crisis.
Specifically, the mayor and City Hall's financial experts are now forecasting a ruinous $6 million loss in local receipts due to the state's draconian three-month lockdown of the economy to contain the viral outbreak.
Meanwhile, with state income streams similarly decimated — some legislators say revenues could plummet by as much as $6 to $8 billion — Galvin is further predicting state aid allocations to Woburn will be slashed by as much as $2.5 million in FY'21.
"[T]here is serious concern regarding the ability of some commercial and residential taxpayers to make timely payments of their real-estate tax bills, which would severely stress our cash flow requirements — impacting our ability to make timely payments on our financial obligations," he further warned the city officials.
For years now, especially during negotiations over the school budget, Galvin has repeatedly rejected calls to subsidize Woburn's operating budget by using reserve funding or by taking advantage of the city's remarkable excess tax levy capacity.
However, according to the mayor, in light of the current crisis, which he suggested could last for at least two years, he is now ready to rely on those emergency budget accounts and tools.
"The well-planned and careful use of city reserves will allow us to fund modest but solid budgetary increases for these uncertain times. In addition, the capital budget for FY'21 non-emergency sending will be delayed by one year" he told the council.
"These revenues will come back [as we reopen our ecomomy], but we don't anticipate they'll reach FY'20 levels. So w're going to have to prepare for a multiple year use of reserves," Galvin later commented. "With that said, we also have to be responsible with the budget we approve. We have to look at areas where we can save and make sacrifices as necessary."
According to Moody's Financial Service, which last fall elevated Woburn's bond rating to an Aa3 status, the city in recent years has generated somewhere in the vicinity of $6 million in free cash on an annual basis while sitting on an estimated $42.1 million in total reserves.
Though Woburn's healthy stabilization and free cash holdings aren't unheard of, the community is one of just a handful of municipalities that has also managed to build up excess levy space under the constraints of Proposition 2 and 1/2.
Each year, the vast majority of surrounding cities and towns automatically hike their tax levies to the full 2.5 percent permitted under state law. Bucking that trend, the mayor and the City Council, trying to control residential tax bills, have often declined to utilize that full 2.5 percent increase — thereby giving city leaders a multi-million dollar cushion that could be relied upon in a financial crisis.
In FY'19, according to city budget records, Woburn had approximately $18.9 million in excess levy capacity.