Guest columnist Mayor Gina-Louise Sciarra: Northampton’s capital spending makes fiscal sense
Published: 01-14-2025 5:31 PM |
On Jan. 2, I presented to the Northampton City Council the latest version of the city’s five-year Capital Improvement Program, including $23.2 million in investments for fiscal year 2026, including:
■$3 million for road safety at Northampton High School.
■$1 million for sidewalk repaving, a five-fold increase from FY23 and FY24.
■$2.75 million for road resurfacing, an 83% increase from FY24.
■$7.1 million for water, sewer, and stormwater infrastructure upgrades.
On Jan. 16, the City Council is expected to vote on several orders for funding FY26 capital projects from multiple funding sources. One taps $7.4 million from the “free cash” account for a range of projects, with about $2.6 million for school-related needs including the road safety project, Chromebooks for students, and ventilation for Smith Vocational’s Building B.
The free cash account includes newly added funds from the previous fiscal year’s surplus, plus previously unspent free cash. Currently, it includes $3.15 million in federal American Rescue Plan Act aid, though the aforementioned order will authorize those funds for upgrades to Main Street’s infrastructure, which dates as far back as 1871.
According to the state’s budget experts, free cash is a “nonrecurring revenue source” — surpluses are never guaranteed to materialize — and “should be restricted to paying one-time expenditures, funding capital projects, or replenishing other reserves” — such as stabilization funds, which are interest-bearing accounts used to cover unexpected cost increases, revenue dips or other emergencies.
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The council is considering the capital proposals in the aftermath of a FY25 budget shortfall that led to a reduction of 20 Northampton Public School positions. In turn, some on Jan. 2 called for $2 million in free cash to be used to restore the positions.
Hiring, however, requires more than a one-time transfer. Recurring expenses need recurring revenues. Failure to follow this principle is exactly why we suffered a shortfall.
While I agree we can’t be content with the status quo, arguments in favor of this request, circulating online, have been premised on four misconceptions.
The first is that the city generated an unusually high $11.66 million surplus in FY24.
However, that’s the total in the free cash account, including the carryover of ARPA and previously unspent funds. The surplus was $6.83 million.
The second claim is that the city has been unnecessarily low-balling budget estimates to generate excessive free cash, depriving schools of upfront revenue.
But cities across Massachusetts have produced unusually high amounts of free cash during the pandemic because economic uncertainty prompted extra cautious estimating. ARPA funds also inflated the numbers. We’ve already returned to using more aggressive estimates and free cash is returning to traditional levels. Savings from unspent budget lines in this free cash certification equaled only 1% of the FY24 general fund budget, while the 10-year average is 2.14%.
Buoying the $6.83 million surplus is a high amount of investment income: $2.4 million. Before FY23, the city earned an annual average of about $200,000. Then the city’s treasurer moved money into an investment vehicle tied to higher interest rates. With rates starting to come down, similar amounts in future years cannot be presumed. This exemplifies the volatile, nonrecurring nature of free cash.
The third claim is that stabilization funds are not being made available to schools, even though $3.2 million from our Fiscal Stability Stabilization Fund has directly supported NPS operating costs in FY24 and FY25. Such one-time transfers can be fiscally sound if, according to the state’s budget experts, “provisions are made to replenish the reserves.” Per our “Fiscal Stability Plan,” we do that with portions of free cash and, with voter approval, periodic property tax overrides.
The fourth misconception is that the city is hoarding money in stabilization funds. This argument is based on a table provided by the state that ostensibly allows people to compare what each municipality has in stabilization funds relative to its operating budget.
For FY24, out of 207 municipalities with reported amounts, Northampton’s $35.8 million ranks sixth. As a percent of the operating budget, Northampton’s 27.3% ranks 12th. Few cities crack 20%.
That appears excessive. But unclear in the table is that Northampton’s amount includes $16.5 million from enterprise stabilization funds. These support our Water, Sewer, Solid Waste, and Stormwater enterprise funds.
Enterprise funds are closed systems maintained by utility fees, which cannot be redirected to schools. Furthermore, not every municipality has enterprise stabilization funds. Comparing Northampton’s total to other cities is not apples-to-apples.
For example, Amherst and Easthampton do not have enterprise stabilization funds. If you remove Northampton’s enterprise stabilization funds and then compare each municipality’s FY24 percentages relative to their budgets, Northampton’s 14.74% is lower than Amherst’s 17.99% and Easthampton’s 15.25%.
Thanks to sound fiscal management, Northampton has been able to invest more in education than ever before. The annual increase in the city’s direct contribution to NPS was 5.07% in FY23, 7.41% in FY24 and 8.99% in FY25. This is the only period in the last 30 years with three consecutive years of increases above 5%. For FY25, it is estimated that total spending for NPS will be 138% of the state-determined minimum for our district, which would be the second highest amount since FY1993, when we spent only 92% of the minimum.
This is despite a huge decline in state aid. Twenty years ago, one-third of the NPS budget was covered by the state. Now it’s one-sixth.
Northampton taxpayers can have confidence that their public servants are managing their money carefully and doing everything possible to invest in education and infrastructure, while also spacing out overrides to not overburden taxpayers while we try to keep pace with rising costs.
Still, challenges for schools persist. A community conversation about how to improve school finances, while practicing fiscal responsibility, is overdue. I hope we can work together to promote the amazing work by our teachers and support staff, and convince more families to choose NPS, keeping Northampton revenue in Northampton schools. I also hope the council will authorize the capital funding proposals at their next meeting.
Gina-Louise Sciarra is the mayor of Northampton.