ORDER-2022-132 : An Appropriation from Free Cash, account 01-324001, in the amount of $1,225,000 (One Million, Two Hundred Twenty-Five Thousand Dollars), to various stabilization accounts as set forth herein.

Transcript (~22 min @ 27:30)

Speakers identified by voice; unnamed voices are numbered within this recording. Auto-caption text — verify against the video.

▶ 27:05 Jen Grigoraitis: have a motion to recommend made by counselor garapay seconded by counselor Stewart. Is there any discussion? Seeing none Mr. Clerk. Can you please call the roll counselor Echols? Yes counselor garpy. Yes counselor. Jamaladin. Yes counselor Stewart. Yes. That's the crime Shady. Yes, president vanilla. Yes and chair greatest. Yes. We have seven. Yes seven. Yes, so that will be recommended for passage to the full Council next. We have order 2022-132. an appropriation from free cash account zero one dash three two, four zero zero one in the amount of 1,225,000 to various stabilization accounts as set forth here in and we are still under suspension of the rules and I believe are CFO Mr. Delaroso is here tonight to speak to this.

▶ 28:08 Speaker 5: Thank you and good evening. Good evening.

▶ 28:12 Speaker 5: I believe there is a memo in your packet dated May 10th of 2022. Which outlines each individual fund the nature and purpose of each with an understanding? Of what this order will try to accomplish as far as meeting our Target funding for all seven of these funds. And I would be happy to walk through it with you if that's the will of the council.

▶ 28:41 Jen Grigoraitis: You can just very briefly walk us through what which funds are before us. That would be great.

▶ 28:45 Speaker 6: certainly

▶ 28:47 Speaker 5: first and foremost Steve we have what we call the foundation stabilization funding you may have the spreadsheet in your packet may make it easier to follow

▶ 29:00 Speaker 5: and that fun right now has a collective balance. So literally oval 7.1 million dollars in our Collective stabilization funds together. This particular fund has just sun to 3.7 million dollars. The requests before you is to answer some of 200,000 to this fund for a total of over 3.9 million dollars. The city's goal is to have the fund equate to 5% of the operating budget. in fiscal 2022 that amount would be just over 4.5 million dollars. If approved this would be a positive move in our efforts to reach that goal. The Massachusetts Municipal associations best practices include adopting Reserve funding targets of 5% or more based on the specifics of the municipal budget and consideration of spending and revenue risk. There was also a standing city council order ordinance section 48-5 that speaks to the funding of the stabilization fund annually. We have also budgeted $50,000 to go into this fund as part of the standard annual operating budget request.

▶ 30:20 Speaker 5: The next fund is the contract stabilization fund 8404. And this particular fund has over 838,000 this request before you were to add the sum of 460,000 to the fund. In order to ensure that the city can find negotiated collective bargaining agreements. when needed in non-union compensation obligations when settled this includes retroactive payments relative to the respective contracts and non-union salary adjustments today. Going into FY 2023 the police superiors and Patrol out of contract as of June 30th 2021. in addition the clerical and laborers unions are out of contract commencing, June 30th 2022 The target balance for this fund is 1.3 million dollars. Next we have the familiar Capital stabilization fund. Number 8405 balance right now is just over 547,000. And for the record we are not seeking any funding at this time as it mirrors our targeted amount of 550,000 at this within the fund. Here as you are aware Capital purchases and excess of $25,000 a funded from the source. This enables a city added flexibility in addressing its capital needs pay as you go financing. For items that are not advantageous to issue debt on for example departmental equipment. And maybe needed at any time during a fiscal year. The next we have a suits and claims stabilization fund 8406. The balance is just over 502,000. Here we address costs associated with legal claims and suits that arise the wealth for fiscal year. We are not seeking any funding at this time as it meets our targeted amount of $500,000. Next we have the special education stabilization fund number 8408. Which is used to fund special education costs realized by the school department. That exceed its budgeted funds the request is to add the sum of 465,000 to this fund. We commonly have just over 34,000 in the fund. Our Target allocation is a standing balance of 500,000.

▶ 33:12 Speaker 5: The next two the first one is the opeb. stabilization fund 8407 a balance is just one million 48,000. The request is adding fifty thousand dollars to the fund. To continue funding of this significant liability plays a key role in the determination of a bond rating by standard imposed rating agency. If you look at the most recent stand and pause report, data, September 15 2020 you'll see notations to that effect. We have also Incorporated requests with 50,000 is part of the standard in will operating budget. And finally, we have the OSHA fund number 8409. stabilization phone with the cone balance of over 155,000 We are requesting the sum of fifty thousand dollars be added to this fund which would bring the balance it just over 205,000. And again, the city's Target for this fund is 250,000. So overall we try to do as strategically as we can. Is to apply 20 to 25% of the city's free cash each year. towards funding stabilization funds that require funding they not they don't necessarily all have to be funded every year. If you don't use the fund then that's great. If you do use it, then we will seek to replenish it at the as we have free cash certified. But we do have certificate targets set up for that. It's very strategic. And again, I clean emphasize enough what it means to the community that we have the kind of Reserve balances. protection to the city because the end of the day everything else is secondary. If we can't Safeguard the financial status of the city then we don't have anything. Right now at these funds are approved will have over 8.5 million dollars, which is the highest. And City's history ever. And again, no fund. None of these funds can be addressed unless the city council approves it period you have to prove a going in you have to approve it going out.

▶ 35:37 Jen Grigoraitis: Thank you. Thank you. Are there counselors with questions counselor Eccles followed by counselor Gary pay followed by counselor story.

▶ 35:43 Jack Eccles: Thank you madam. Chair. Thank you, Mr. Joe Russo for being here. Thank you Phillip. Pleasure. I think I've asked this question before but I just need a little bit more clarity it just every year it seems like we have like a net increase. So in 2020, we were at 66.1 million was how we ended fiscal 2020. Now we're at 8.5. Is there ever a value of like the total bottom line of stabilization funds where it's like that's that's good. We don't need to put 20 to 25 or maybe this year. We only put 10% of free cash

▶ 36:17 Speaker 5: that's a great question again and candidly if in fact we're at some point where we have that decision to make it'll be because we've been so consistent each year doing what we're doing. I can recall honestly that the city at one point didn't not have did not have any stabilization fund and first began with fifty thousand dollars. That was a big deal that was huge and we were actually a junk bond status. So we begin that practice back in 92 And what happens is you can see We Grew From One Fund literally now, we have eight include in the recreational marijuana stabilization fund, but now we have eight and they're all for a specific purposes, but we have found and it's an excellent question. Is that as we go forward costs go up. So my the contract cost today won't be with the contract cost is and two or three years. It's gonna go higher and I hire as Costco. What contract you have to keep peace Pace with that you'll have no way to find your retroactive contracts when they come time to come before the council unless you want to Corrupt your operating budget funds which is what you never want to do that. I can actually recall that one. I first came here early on we when Maria is 900,000 in contract cost. $900,000 we had no way to pay the Retro contracts. So that was one of the hurdles that we had to overcome so by establishing this particular fund it gives us that assurance that as you settle these contracts we can come to the council with full faith and confidence that we can fund it. And again these the contract itself the fund is not dedicated to any one particular segment Public Safety or not Public Safety. But overall so as I look out and I realized that we're already at least a year behind in to contracts the significant contracts that if behooves us to continue to move the target a little bit to the right so we can cover the cost. But that's an excellent question. But again, there's no ultimate number there is always always an emphasis that you can't let it go one of the things that they don't like to see is a sporadic. Can't you know deposit to a fund and a couple of years you don't do anything? So then like to see that what they love about us is we're always consistent they can come here. 10 years ago 15 years ago five years from now. This is how consistent we are. That's exactly what people that want to buy your bonds. Look for are they consistent? Can they be trusted financially? That's what it's all about. When right now, we're well over 100 million dollar operation that's outside of the Enterprise funds. We're a big shoe. and we have to have the resources to cover that But that's an excellent question.

▶ 39:24 Speaker 2: Thanks. Thank you madam. President councilor.

▶ 39:29 Mark Garipay: Thank you, Mr. Della Russo the best practices by the mm mask Municipal Association is 5% of the budget. We're not going to reach that this year. Yeah, what percentage are we going to be at? I didn't do the math four. Yeah,

▶ 39:43 Speaker 5: it'll be a little bit. It'll be less than that. Probably maybe four. 0.2 or something of that effect, but one consideration just for the record. Is that right? Now? We qualify meeting that goal by the balance of our Free Cash Plus the stabilization fund. So for standard and Poor's purposes, we're using those two to make that happen and they respect that and they they look at that actually as a Positive move because you recognize that you're trying to reach this target. You're not ignoring it. It does exist for a reason and we really think about it. I mean when the kind of exposure you have with the budget our size. If you have a decrease in state aid of any significance like we had in 2009. Nine ten. We lost just under three million dollars in one year three million dollars of state aid just in one year. So when you think of it like that and we live through that I will say that. We weather the storm because we protected ourselves. But those kind of things that which are out of our control candidly. And we have to anticipate the best we can and literally provide some. Light for us for the community and that's what you're doing here.

▶ 41:05 Mark Garipay: So every year as the budget goes up to two and a half percent, we're gonna end up continuing to yeah put more money in there to try to get to that five percent. Exactly. That's all right on the contract stabilization fund is that the school department is their teachers contract that's not included in here and I understand negotiations. Now, is that is that expired? That contract that teaches contract. Do you

▶ 41:30 Speaker 5: know yeah, they're negotiations now, but we typically have not used this fund to fund that in the past ever. It's all been the city side. It's all been City side.

▶ 41:41 Mark Garipay: the special ed fund seems like when we first started on the love. I started on the board together. We it was like the first time I think we had actually used a special ed fund and now it seems like where drawing it down. Almost all of it the last couple of years and when I look at the budget. I'm wondering are we we under budgeting a budgeting it in the school side and using the stabilization fund to offset that should I mean the school school but looks like special ed. budget was 4.9 this year, we spent six point nine and does that in the 6.9? Does that include what we've drawn from the stabilization?

▶ 42:29 Speaker 5: On you would you happen to know that? No, I do the chair. I would have to defer to the superintendent but my understanding point and and one of the things that we did find in the past Sunday superintendent and Tamor, we went to a couple years where I believe we didn't use any of the fund in any year. However, when it became apparent that they were realizing additional costs and special education particularly during the middle of the year. This was a billion strategy to have so that you had some place to go to actually fund it without corrupt in the school budget itself.

▶ 43:11 Mark Garipay: I'm a big proponent of the stabilization funds. Thank you. I remember the tough years. I mean, we have a lot of uncertainty. I look at the last few years. I wonder where we would be we didn't have to use stabilization really that much but we were also got a lot of Opera money a lot of federal money that no one no one anticipated during covid. Exactly. I wonder if we didn't receive that would we we would be you know, any stabilization funds so I fully support this especially the the uncertainty coming up right now in the economy and next year's

▶ 43:45 Speaker 5: fiscals. And that's an excellent point for the chair because I expect to be talking to SMP this fall because we are going to Market and one of the things I can promise you as it do every year they will ask for this. They will ask but steps you taking to minimize risk because Asic the environment gets more risky Things become actually more sensitive on their end to try to assure investors that this is a quality acquisition and quality note that you're putting out. So always always something that works to our favor and the fact that we can do this kind of thing on a regular basis. It puts your Leaps and Bounds ahead of places that have just don't have it.

▶ 44:31 Robb Stewart: Thank you. No more questions counselor Stewart. Thank you madam chair. Thank you, Mr. Delaware for being here tonight. I will say that I've got a lot of confidence in your ability to manage the numbers accordingly. I think you do a great job of thank you very much keeping a a tight ship and a conservative viewpoint on how we need to avoid risk. So thank you for that first just first observation on the opeb within your stabilization ballots. You had the estimated Target Fund balance is obviously incorrect. You may want to fix that for your records. It's at 171 million. I think it's true to

▶ 45:11 Speaker 5: you. That's real. That's it. That's real is that

▶ 45:13 Robb Stewart: it should be at 171 million. Yes.

▶ 45:15 Speaker 5: That's the that's the liability right now.

▶ 45:20 Robb Stewart: So we're 170 million off. Well, that's a

▶ 45:22 Speaker 5: good excellent. I'm so glad to brought up counsel to a chair because this is one of those. I mean, this is one of those items that of you could talk for four or five hours on I promise you I won't do that. Please don't but it's just an essence. It is an I'm so glad about it mirrors the pension system. So we have the pension system here that has a finding schedule every year the city funds it about six plus million dollars now. So it's over here. Now what they're saying is you also have a liability on your health insurance which sits over here separately, but the state has not mandated a finding schedule to get us this number down the way they did on the pension side. So what they're saying is until that happens, which I couldn't tell you if it's ever going to happen candidly as I'm sitting here because I know the number would be extremely large and I don't know how cities and towns could do it under two and a half. Anyway, that's my opinion. They do want to see you recognize the liability. So they want to see that you proactively addressing it and not ignoring it. Once again, we recognize the liability. We're putting money aside by Statute. We don't have to. however, it does assist again the same thing it does assist us in the long run because believe it or not that number would be higher counselor. If we didn't put money aside. The number would actually be higher than we looking at significantly. But that's an excellent question. So it's just one of those things where some things you can directly control other things you can.

▶ 46:56 Speaker 1: Okay, thank you find that I saw that I yeah you

▶ 46:59 Speaker 5: were in trouble.

▶ 47:03 Robb Stewart: The second question I have is somewhere related to what console Gary pay was referring to when you look at. current state of interest rate And and this current state of inflation. right, you know historically we've been somewhere around 2% between one and a half and two percent for the last six or seven years. 2021 was 4.7% were projected to be a 5.8 3% Currently the main number is 8 five eight percent. I was just going to impact. the the stabilization funds What's your thought on that? Because I'm concerned about this.

▶ 47:54 Speaker 5: Well, I guess there's a little bit of good news and and maybe not so good news from my perspective historically. We have not been realizing. large interest gains with stabilization funds we just haven't interest income has not been. You know, I mean that we're all experience that we do a little bit better at what money market and things perhaps at that nature, but we have to limit our duration. But I think in response to your question, I think the jury's probably still out a little bit. I've actually heard some people say probably going to start getting more interest income as the rates adjust. for these funds so I've heard that too but like you with the uncertainty that surrounds The economy right now and what we're saying? I'm not exactly sure where that ball is going to land. I wish I could be more concrete but I think that the fact that we recognize it's out there that this Is something we can't escape from? That make it has to play a role in everything. We do here financially and probably in a way that hasn't been like that in a long time. So again, I assure your concerns. I wish I could do more but we gotta stay on topic we can take eye off it.

▶ 49:15 Speaker 1: All right. Thank you Mr. Dolorosa. Thank you very much.

▶ 49:17 Jen Grigoraitis: Councilor Karamcheti, I'd like to make a motion to recommend for passage. So the full committee. So we have a motion to recommend for passage made by Council Carm chady seconded by counselor Eccles. Is there any discussion

▶ 49:31 Speaker 1: Seeing none Mr. Clerk. Can you please call the roll councilor Eccles? Yes Council. Gerepe. Yes counselor. Jamaladin counselor Stewart. Yes councilor crime Shady. Yes, president. Sonella. Yes and chair regardis. Yes, we have seven. Yes seven. Yes, so that will be recommended to the full Council for passage next

▶ 49:51 Speaker 5: week. Thank you very much, you know belaruso and

▶ 49:53 Jen Grigoraitis: stay right there because you're up next again order 2022-133 and appropriation from free cash account zero one dash 324001 in the amount of 34,000 $10.35 to Pine Banks Capital outlay account. 016523-551-099. This appropriation will be used to pave the parking lot by the playground and Lodge.