WOBURN - Acknowledging the city's revenue projections could easily spiral off course with a resurgence in the state's COVID-19 outbreak, the City Council agrees with Mayor Scott Galvin's intentions to shore up the FY'21 budget by dipping into municipal reserves.
During a special hearing in City Hall last week, the aldermen voted unanimously to endorse without major change Galvin's proposed $160.7 million spending plan, which will rely upon an estimated $4 to $5.5 million in stabilization funds and free cash to plug a sizable $8 to $10 million revenue shortfall.
"It's a very financially-sound budget, especially in these very uncertain times," said Galvin, addressing the council during the public hearing.
"We are prepared to pivot in response to the virus if it does come back," he later assured the aldermen. "The state and federal government has provided us with certain funds that are COVID-related, so we are prepared to adjust, if needed."
Because the state's months-long shutdown of the economy in response to COVID-19 has decimated meals and sales tax revenues, as well as one-time revenue sources such as money collected through building permit fees, city officials have had difficulty forecasting revenues for next year.
Complicating the matter, the state's budget managers are likely still weeks away from finalizing their spending plan, which leaves leaders in cities and towns guessing as to how much state aid might be slashed in FY"21.
Submitting what amounts of a level-service budget — though rumors abound about potential library layoffs — the mayor explained that he is counting on a $2.5 million reduction in state aid, while the city's financial department heads are further suggesting meals and sales tax revenues will decline by as much as 50 percent.
"In these times, we've been able to provide for the city departments and the schools. The [school] budget is going up 3.8 percent, and the auditor will tell you there's another $700,000 in there [for educational needs] that is being realized by pre-paying a myriad of next year's school bills," Galvin said.
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 $20.7 million.
Normally, the mayor submits a draft budget to the council by June 1 and the city officials spend a number of meetings reviewing the proposal with city department heads.
However, the council deliberations were much less involved this year due to the COVID-19 pandemic and associated City Hall workplace restrictions.
In total, the council's Finance Committee meet twice to discuss the budget, and department heads — whose presence before the committee is generally considered obligatory — were instead given the option to decide whether to defend their budgets for next year.
According to proponents of Galvin's FY'21 budget, though the practice is normally frowned upon, the reliance upon reserve funding to cover reoccurring annual salary and spending commitments makes sense in light of the extraordinary circumstances.
"I think we're very lucky to have this budget," said Ward 5 Alderman Darlene Mercer-Bruen, referring to the multitude of surround communities that are implementing deep layoffs and service cuts. "At this time, the only thing that's constant is that everything changes every day. The earth is literally moving underneath our feet."
"This budget is a good start. Let's just see what tomorrow brings, because we have zero control [over what happens with the virus]," the East Woburn official added.
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.
Certified free cash holdings will likely drop substantially in FY'21 — as that money usually comes from revenues that come in over-and-above revenue forecasts. According to the mayor, he expects it will take at least two years before Woburn's tax and fee revenue streams return to pre-virus levels.