FFramingham Finance Subcommittee agrees on solution to $2.5M water-sewer fund deficitramingham's water & sewer funds are $2.5 million in the hole. Cut budgets or raise rates? February 5, 2021
Zane Razzaq Metrowest Daily News
FRAMINGHAM - After a months-long standstill, the Finance Subcommittee has agreed on how to plug a $2.5 million deficit in the city's water and sewer enterprise fund.

The fix for the multimillion-dollar hole will mostly come from dipping into the city's rainy day funds, or free cash reserve. Various city budgets, including the libraries, schools, and enterprise funds, will also be frozen - to backfill free cash - or cut.

The subcommittee voted unanimously for the solution. George King, who is the full City Council's chairman, said he did not feel it was a good way out, noting councilors could only vote for what the administration proposes.

"I'm only supporting this solution for the purpose of a compromise," he said. "We have to get past this issue and move forward. (But) I think this solution is harmful to the city overall and the financial stability of the city."

To fill the hole, $2.1 million will be used from free cash, but $611,000 will be returned to the balance at the close of this fiscal year, which occurs June 30. That would amount to a net free cash use of $1.5 million.

To replenish the free cash reserve, the school district will commit to returning $411,000 to free cash by the end of the year. They will accomplish this by contributing savings accrued from the pandemic, said School Committee Chairman Adam Freudberg, such as savings on field trips or salary savings from teachers going on unpaid leaves.

The School Committee backed this with a unanimous vote.

Another $250,000 will be frozen from municipal department budget funds and returned to free cash. This would mostly come from the library, said Chief Financial Officer Mary Ellen Kelley, with a smaller amount coming from two unnamed departments.

"I don't know if I want to lay them out here until we actually have an agreement on it. The majority is coming from the library," said Kelley.

Also, $200,000 will be cut from the water and sewer enterprise funds. The General Fund Reserve appropriation will be reduced from $400,000 to $200,000.

Taking $1.5 million from free cash would drain roughly 19% of that reserve, which is typically used to fund one-time expenditures, capital projects or to replenish other reserves. Free cash is sometimes likened to a municipality's savings account.

The state recommends against using free cash to supplement current-year departmental operations to encourage good budget practices throughout the year.

"I'm fearful for the process in terms of the next budget. Ms. Kelley, we have to do better in terms of communication to the subcommittee," said Finance Subcommittee Chairman Adam Steiner to the city chief financial officer.

The entire City Council is scheduled to examine the solution for a first reading on Feb. 16. A second reading will occur before the state's March 3 deadline to approve Framingham's tax rate.

Framingham administrators first brought the deficit to the City Council's attention in early December. It is largely due to sharply lower commercial use of Framingham's water and sewer systems during the pandemic.

Businesses, including restaurants, pay the highest rates for the city's water, and with many shuttered or operating at reduced hours, the amount being paid into the fund is now less than the cost to run crucial city services.

Mayor Yvonne Spicer's original proposal was to cut the budgets of the Water and Sewer departments by $100,000 each, and reduce the School Department's budget by $800,000. The remainder would have come from free cash. That would fix the deficit and avoid increasing water and sewer rates on struggling residents, she said.

Most councilors and members of the School Committee balked at pulling $800,000 from the School Department's budget while the district copes with the monumental consequences of COVID-19 on public education.

As a result of the problem, real estate and personal property tax bills have been delayed. The state has not yet approved the city's tax rate, which could not be finalized as long as the problem is unsolved.

"When the bills go out, the third and fourth quarters of fiscal 2021 will be due on May 3, but they can be paid before the May 3 deadline," city officials said in an earlier press release.

Zane Razzaq writes about education. Reach her at 508-626-3919 or zrazzaq@wickedlocal.com. Follow her on Twitter @zanerazz.

Framingham Threatened By Water, Sewer Deficit: Opinion February 3, 2021
Neal Mcnamara Framingham Patch
The Framingham City Council Finance Subcommittee will meet on Thursday to continue discussing the water and sewer fund deficit. (Neal McNamara/Patch)

The following is an op-ed by At-Large Councilor George King Jr. The views here do not necessarily reflect those of Framingham Patch.

Framingham is facing a significant financial problem, and it is not being addressed by Mayor Yvonne Spicer's administration. Our Water and Sewer Enterprise fund is hemorrhaging money and there is great reluctance to recognize the threat that poses.

The water and sewer fund had over $8 million of surplus funds when the mayor took office three years ago. The mayor is responsible for setting the rates. Instead of reducing spending in the fund to match the rate income or increasing rates to support the spending levels she desired, she tapped reserves to keep rate increases low. That was a high-risk strategy in good times, and the pandemic shoved it over the edge.

The $8 million reserve of just three years ago is now a $1.5 million deficit. It took just three years to run through $9.5 million of cash reserves. On top of that rapid loss of money, the City supplemented the water and sewer fund this fiscal year with an additional $3.5 million taxpayer bailout. Already at $13 million of losses, the mayor's team informed the City Council in November that the fund needs an additional $2.5 million subsidy in order to balance our books and set our tax rate. That is over $15 million in three years!

To date the City Council has balked on spending $2.5 million to bail out the fund further. Instead, City Councilors have advocated finding a compromise solution that combines several strategic and structural approaches. The mayor has responded to this by declaring she is being held "hostage."

In addition, the Mayor has announced she will need to raise rates 12 percent on July 1. Further to keep the rate hike at just 12 percent, she has said she will need $2.5 million more from the taxpayer, totaling $18 million.

I used the word "hemorrhaging" above. I used it because the water and sewer fund has run an $18 million deficit in just three years. More than half that deficit was in place before the pandemic and no action was taken then.

Much of the City Council has warning of significant financial threats to the city for months, before we even were aware of the depths of this growing problem. These are very challenging times. We need to collaborate and compromise to reach a solution that has real change. If we keep spending the reserves, we have real trouble.

Spending reserves threatens our financial stability as a community. As $18 million floats away in just three years, the foundation is almost gone. Once that happens the structure totally collapses. The city's general fund cash reserve is not a bottomless pit either. It has been slashed in half over the last year, from $16 million a year ago, to $8 million now. At this pace every reserve the city has will be washed away.

This is not crying wolf, the numbers do not lie. Thoughtful reductions can be made and our services can be maintained. Or we can let it collapse. Personally, I will engage in long and at times frustrating debates looking for a solution, before I let it collapse. Many of my colleagues feel the same.

The City Council cannot implement our own plan. We have to vote yes or no on the mayor's plan. Financial resolutions have to be filed by the mayor under state law, but approved by the Council, hence why we need compromise.

This problem has to be recognized and fixed. To date there is reluctance to do either.

George King is the City Council chair and a member of the Council Finance Committee, which will meet on Thursday at 7 p.m. to continue discussions on the water and sewer fund deficit.

Framingham Foresees Yearly Water, Sewer Rate Increases Until 2032 January 27, 2021
Neal Mcnamara Framingham Patch
Water and sewer bill increases may come with a 12 percent hike in July, and then annual 1 to 4 percent increases, according to officials.

FRAMINGHAM, MA - Framingham business and property owners may be in store for more than a decade of annual increases, according to officials, after the water and sewer department ran into a deficit this year.

During Mayor Yvonne Spicer's weekly community hour on Tuesday, city Chief Financial Officer Mary Ellen Kelly gave an overview of structural deficit problems in Framingham's water and sewer funds, and possible solutions to them.

Kelly described two key problems that came together to create a $1.5 million deficit in fiscal year 2020: In recent years, Framingham has been using the water and sewer department's yearly surplus to offset rate hikes. There was no rate hike in 2020, and increases in previous years have been between 2 and 4 percent. When the pandemic hit, businesses shut down, severely cutting into water and sewer revenue, leaving the department in a deficit - and with no savings to cover it.

"So, we come to a point where we come to a pandemic, and we're not as resilient in the water and sewer fund as we are in the general fund," Kelly said during the community hour.

Framingham is also projecting a $2 million water and sewer fund deficit in fiscal year 2021. Adding the deficits between fiscal years 2020 and 2021, the city is on the hook for $3.5 million, and the state is requiring $2.5 million to be paid off this year.

Along with items like refinancing debt and updating the rate structure, rate increases will likely be necessary to keep the water and sewer fund from going into negative territory in the future, Kelly said.

Spicer's administration told a City Council subcommittee on Jan. 21 that a 12 percent rate hike - about $25 per quarter for the average user - may be necessary starting in July. Kelly said Tuesday residents could expect increases between 1 and 4 percent between July 2023 and 2032.

Complicating the matter, the state revenue department will not certify Framingham's 2021 tax rate until the $2.5 million water and sewer fund deficit is resolved. Spicer and the City Council have clashed over a solution so far, preventing tax bills from being sent.

Spicer wants the Council to use free cash reserves to pay off the $2.5 million that's due this year. Councilors have balked at that solution since Framingham already spent $6.2 million in free cash to plug holes in the general fund, leaving reserves at around $8.2 million. If elected officials do not reach a solution, the state will add the deficit to the tax bills, which means property owners will pay about $84 more on average.

The Council will continue discussions on a fix for the short and long-term water and sewer deficits at a Finance Subcommittee meeting on Thursday.

Spicer Administration Hemorrhaged $18 Million in 3 Years; Proposing 12% Water & Sewer Increase January 24, 2021
George P. King Jr. Framingham Source
FRAMINGHAM - Framingham is facing a significant financial problem and it is not being addressed by the Spicer Administration. Our Water and Sewer Enterprise fund is hemorrhaging money and there is great reluctance to recognize the threat that poses.

The water and sewer fund had over $8 million of surplus funds when the Mayor took office three years ago. The Mayor is responsible for setting the rates. Instead of reducing spending in the fund to match the rate income or increasing rates to support the spending levels she desired, she tapped reserves to keep rate increases low. That was a high-risk strategy in good times, and the pandemic shoved it over the edge. The $8 million reserve of just three years ago is now a $1.5 million deficit. It took just three years to run through $9.5 million of cash reserves.

On top of that rapid loss of money, the City supplemented the water and sewer fund this fiscal year with an additional $3.5 million taxpayer bailout.

Already at $13 million of losses, the Mayor's team informed the City Council in November that the fund needs an additional $2.5 million subsidy in order to balance our books and set our tax rate. That is over $15 million in three years!!!

To date the City Council has balked on spending $2.5 million to bail out the fund further. Instead, City Council members have advocated finding a compromise solution that combines several strategic and structural approaches. The Mayor has responded to this by declaring she is being held "hostage."

In addition, the Mayor has announced she will need to raise rates 12% on July 1.

Further to keep the rate hike at just 12%, she has said she will need $2.5 million more from the taxpayer, totaling $18 million.

I used the word "hemorrhaging" above. I used it because the water and sewer fund has run an $18 million deficit in just three years. More than half that deficit was in place before the pandemic and no action was taken then.

Much of the City Council has warning of significant financial threats to the City for months, before we even were aware of the depths of this growing problem. These are very challenging times. We need to collaborate and compromise to reach a solution that has real change. If we keep spending the reserves, we have real trouble.

Spending reserves threatens our financial stability as a community.

As $18 million floats away in just three years, the foundation is almost gone. Once that happens the structure totally collapses.

The city's general fund cash reserve is not a bottomless pit either. It has been slashed in half over the last year, from $16 million a year ago, to $8 million now. At this pace every reserve the City has will be washed away.

This is not crying wolf, the numbers do not lie.

Thoughtful reductions can be made and our services can be maintained. Or we can let it collapse.

Personally, I will engage in long and at times frustrating debates looking for a solution, before I let it collapse. Many of my colleagues feel the same. The City Council cannot implement our own plan.

We have to vote yes or no on the Mayor's plan.

Financial resolutions have to be filed by the Mayor under state law, but approved by the Council, hence why we need compromise.

This problem has to be recognized and fixed.

To date there is reluctance to do either.

George King is one of two elected at-large City Councilors. He was elected in 2017 and has been serving on the City Council since January 1, 2018. Since January 2020, he has been serving as Chair of the 11-member City Council.

City "Recommending" Multiple Water & Sewer Rate Increases Starting with a 12% Increase on 7/1/2021 January 16, 2021
Frank Wood Framingham Unfiltered
The administration late this afternoon released the requested information as to the water and sewer deficit. I have not read it in depth, but in general this is what they are "recommending":

A 12% rate hike effective July 1, 2021. "Recommending" is an odd term to use, because the decision on the rate is the full and complete decision of the Mayor. The report adds it is the first rate increase in two years. This is made to sound like a bargain when it is described as only costing $25 dollars on the average quarterly water bill. Or $100 a year.

In addition, they are "recommending" the taxpayers subsidize the water and sewer fund again next year to the approximate level of $2,500,000. That is about $85on the average tax bill.

What we speculated two months ago is accurate, the rates are about 20% below what is required to fully fund expenses. In the proposed scenario, a 12% rate hike results in still incurring a 2.5M deficit.

There is no mention as to whether they are going to continue borrowing $1,500,000 a year to pay salaries.

Lots to read and this problem is a result of many different inputs, not just one. High spending levels and inefficient rate setting have been compounded by the pandemic, making for a significant financial problem in the City of Framingham. Despite the desires of some, we cannot spend our way out of this.

For those who want to read I am sharing a link to my copy. I expect it will be uploaded to the meeting materials soon, but here it is in the meantime.

Framingham Councilors At Impasse Over Water, Sewer Deficit Fix January 13, 2021
Neal Mcnamara Framingham Patch
Weeks after a deficit that threatens tax bills came to light, a key City Council committee is deadlocked on a solution.

FRAMINGHAM, MA - The Framingham Finance Committee held a tense three-hour meeting Tuesday night to discuss how to fix a $2.5 million deficit in the city's water and sewer fund, a problem that has ramifications for property tax bills.

But for the fourth consecutive meeting, the committee failed to reach a consensus on how to fix the deficit, deciding instead to kick the issue into a future meeting. The Finance Subcommittee needs to vote on a recommendation to fix the deficit before the issue can move to the full City Council for approval.

The deficit problem came into view on Dec. 4 when Mayor Yvonne Spicer asked Council to consider her plan to fix it: cutting $800,000 from Framingham Public Schools, reducing the water and sewer departments by $100,000 each, and using $1.5 million from the free cash balance.

The City Council then moved to "table" the issue until Jan. 15 to allow the Finance Subcommittee time to find a way to fix structural problems in the water and sewer departments.

On Tuesday, Spicer and other city officials were set to present financial information about the water and sewer funds, plus a proposal on what kind of rate increase would provide enough revenue for the funds to remain stable.

The presentation went off the rails, however, when At-Large Councilor George King grew frustrated that Spicer hadn't provided Councilors with spreadsheets that were part of the presentation. The committee had previously asked to be provided with the materials before the meeting.

"I find this exceedingly frustrating and frankly a little insulting," King said.

King then voted to table the presentation, which led to a combative two-hour back and forth between Councilors, Spicer and other administration officials - with District 2 Councilor Cesar Stewart-Morales at one point telling District 4 Councilor Michael Cannon to "shut up."

Of the five-member Finance Committee, members Stewart-Morales and Chair Adam Steiner are open to using $2.5 million from the city's estimated $9 million free cash fund to fix the deficit. After it's fixed, the Council can move on to fixing structural problems in the water and sewer department, they say.

On the other side, King, Cannon and At-Large Councilor Janet Leombruno want long-term fixes for the structural problems before agreeing to a fix for the $2.5 million deficit.

"This is a long-term problem disguised in short-term clothing," King said.

If the Council does not fix the deficit, the problem might be offloaded onto taxpayers. The city needs to pay off the $2.5 million deficit in this fiscal year, otherwise tax bills could go up - about $71 for the owner of a home of median value.

At the end of the discussion, Councilors did not vote on a recommendation after Stewart-Morales made a motion to use $2.5 million in free cash for the deficit.

"It seems like this subcommittee is at an impasse," Steiner said.

Framingham Chief Financial Officer Mary Ellen Kelly told Councilors she would provide them with the materials from the presentation that had held up the meeting by Friday. The Finance Committee will meet again on Jan. 21 to discuss the issue further.

Framingham's water & sewer funds are $2.5 million in the hole. Cut budgets or raise rates? December 8, 2020
Jeannette Hinkle Metrowest Daily News
Framingham is facing a $2.5 million shortfall in its water and sewer enterprise funds. Cuts are on the table to avoid raising water and sewer rates on residents during a difficult financial time.

FRAMINGHAM - Commercial use of Framingham's water and sewer systems has plummeted during the pandemic, plunging the city's water and sewer enterprise funds into a $2.5 million deficit.

Businesses, including restaurants, pay the highest rates for the city's water, and with many shuttered or operating at reduced hours, the amount being paid into the fund is now less than the cost to run the crucial city services.

The City Council is holding an emergency meeting tonight to discuss potential patches for the multimillion-dollar hole, and consider long-term solutions for the problem, which could affect the amount of money residents pay for water and sewer service later.

To fix the deficit and avoid increasing water and sewer rates for struggling residents, Mayor Yvonne Spicer's administration is recommending the city cut the budgets of the Water and Sewer departments by $100,000 each, and reduce the School Department's budget by $800,000.

The requested cuts to the water and sewer budgets come on top of more than $800,000 in reductions made in those departments during the fiscal 2021 budget process.

The $800,000 in proposed School Department cuts would be subtracted from the district's fiscal 2021 budget of roughly $143.2 million, according to Chief Financial Officer Mary Ellen Kelley.

The city had increased the School Department's budget by $4.76 million from fiscal 2020 to fiscal 2021. The cuts proposed by Spicer's administration would reduce that increase to $3.96 million.

If approved, the combined $1 million in budget cuts to the Water, Sewer and School departments still leave a $1.5 million deficit in Framingham's water and sewer enterprise funds.

To close that gap, Spicer's administration recommends taking $1.5 million from the city's free cash reserve, which has a balance of $8 million. Spicer's administration does not recommend dipping into another potential reserve, the city's stabilization fund, sometimes called a rainy day fund, in case the pandemic continues to cause deficits.

If approved, taking $1.5 million from free cash would drain roughly 19% of that reserve, which is typically used to fund one-time expenditures, capital projects or to replenish other reserves and is sometimes likened to a municipality's savings account.

The state recommends against using free cash to supplement current-year departmental operations to encourage good budget practices throughout the year.

Kelley said the deficit plan as proposed was designed to avoid hiking water and sewer rates for residents. If the enterprise funds aren't made whole by finding money in existing budgets, residents could see increases to their water and sewer rates of 6% in January and again in July.

"We're trying at all costs to avoid rate increases," Kelley said. "People don't have the revenue to be paying the higher bills. It's a real conundrum for us." Why are the water and sewer funds so deep in the hole?

In the mid-2000s, Framingham's sewer system was causing real problems.

Partly because of a lack of investment in the aging system, the infrastructure began to fail, and sewage overflowed more than 50 times in Framingham between 2004 and spring 2007, according to a state report.

In March 2007, the state issued an administrative consent order and a notice of noncompliance that required Framingham to undertake major construction and rehab projects over several years.

In a blog post, City Council Chair George King wrote that spending in the water and sewer enterprise funds has "been out of control" since the state issued the consent order, which he said the town - facing potential fines - agreed to "hastily."

In the decade following the consent order, water and sewer rates doubled, in part to pay for the projects and maintenance mandated by order.

But Department of Public Works Director Blake Lukis said the infrastructure improvements and preventative maintenance planning required by the state were desperately needed, and the low rates residents were paying before the consent order reflected the fact that the city wasn't doing enough to care for its water and sewer systems.

"With a lack of maintenance, lack of investment, you have low rates," he said. "We were not being good stewards of the system for many years, and being good stewards means doing the preventative maintenance on a regular basis and investing in the infrastructure to make sure that we're keeping it up to date."

Lukis said that before the consent order, Framingham's water and sewer rates were the lowest of any community served by the Massachusetts Water Resource Authority. Now, the city is squarely in the middle of the pack.

The city has one remaining project to complete before it satisfies the consent order, according to Lukis. He said Framingham has the funding to begin phase one of that project, which relates to removing private inflow and infiltration to the city's water and sewer systems.

The projects required by the consent order did contribute to the city needing more revenue to fund water and sewer service, Lukis said.

"The debt the city had to take out to pay for the projects adds an additional fixed cost that we are required to pay every year," Lukis said. "But I don't think that the projects over the past decade are specifically what are leading to our revenue shortfalls today."

Revenue losses from the lack of use of water and sewer services by commercial ratepayers during the coronavirus is to blame, Lukis said.

King agreed the consent order isn't the primary reason for the $2.5 million deficit, and that the coronavirus is causing most of the shortfall.

But King also presented another reason.

"The rates are lower than the costs," he said.

Because water and sewer rates increased so dramatically from 2007 to 2017, drawing the ire of residents, Framingham's first mayor - the city's rate-setting authority - took the opportunity to lessen the annual increase in water and sewer bills when the municipality became a city, King said.

The rate increases were too modest to fully fund the water and sewer systems, causing the city to draw from the water and sewer enterprise funds' reserves, which are now gone, he said.

Without the cushion provided by those now-depleted reserves, incoming revenue from ratepayers is needed to run the services, and the pandemic shut down the businesses that paid the most for water and therefore contributed the most revenue, King said. Why is this problem coming up now?

The $2.5 million deficit in the water and sewer enterprise funds includes losses from both fiscal 2020 and fiscal 2021, the latter of which is ongoing.

In the spring, when losses for fiscal 2020 were known, Kelley, the city's chief financial officer, got state approval to amortize those losses over three years.

Kelley expected the state would also allow the city to amortize losses from fiscal 2021. But last week the state Division of Local Services rejected that plan, saying the city's tax rate would not be approved on time unless the city cured the $2.5 million deficit, which includes $500,000 in amortized losses from fiscal year 2020.

"I think she made the plan in good faith, but she should have checked it with the state months ago," King said.

Compounding that misstep is continued inaction by federal legislators on a new pandemic relief stimulus package, which municipal officials have hoped would include funding for local governments that have taken huge revenue hits during the coronavirus crisis.

In a September report, Kelley's office wrote that staff anticipated some federal or state funding would soon be available to offset expenditures or restore revenue.

But to date, the federal government has not made any additional emergency relief funds available to cities and towns, though discussions about a new aid package recently resumed, according to national media.

Because of the lack of federal relief and the Division of Local Services' rejection of Kelley's plan to amortize fiscal 2021 revenue losses, the city must fill the $2.5 million hole before Framingham can certify its tax rate and send out bills by the Dec. 31 deadline. Councilors to debate plan to fix deficit

With the deadline looming, Framingham's Finance Committee and City Council must fix the deficit quickly.

That means they'll have to decide whether the Spicer administration's proposal - cutting $200,000 from the water and sewer budgets, $800,000 from the school budget, and taking $1.5 million from free cash - is the right way to handle the problem.

Lukis said cutting the water and sewer budgets at this point in the year will pose a challenge for the Department of Public Works, largely because the division already cut its budget and sometimes-costly water and sewer emergencies happen most often in winter months.

"We are getting into the time of year where we start to see more significant failures, and some of the budget may not have been used yet because it's reserved for water main breaks and wastewater emergency issues," he said. "Those costs haven't been realized yet because we're just getting into the winter months."

If the water and sewer budgets are cut and a water main breaks, the division might have to request more money from the city, Lukis said.

"First and foremost, we respond," he said. "We have to do what we have to do and we have to keep the infrastructure in working order."

An $800,000 cut in the School Department's budget would also present real problems for Framingham Public Schools, which is facing a torrent of ever-changing and costly guidance on reopening during the pandemic, School Committee Chair Adam Freudberg said.

The schools are in the midst of launching a testing and contact tracing program that will cost tens of thousands of dollars to operate every week, he said. The department already made significant cuts this year, he added, and plans to spend every dollar appropriated.

"There would be real impacts to students, staff and the public health measures, which is the heart of this entire school year," he said. "To make any cut like this mid-year is complex and there will be legitimate trade-offs and impacts if it had to be made."

City Council Vice Chair Adam Steiner said he doesn't support pulling $800,000 from the School Department budget to fix the water and sewer deficit. Instead, he'd take the money from free cash, which was reportedly the Spicer administration's original plan.

King, who doesn't support further draining the free cash reserve, said the water and sewer deficit puts councilors in a bind.

"We can't go and cut the budget after we've approved it," he said.

Another option would be to miss the deadline for certifying the city's tax rate, King said. That would give Framingham more time to figure out how to address the deficit.

"I think we need to take time to plan out a reasonable solution that everybody has some input and some agreement on," King said. "I don't think we should do this right away. We need to take a month or two and really figure out what we're going to do this year, next year, and really tighten our belts."

Missing the tax certification deadline would force the city to send out estimated third-quarter tax bills, which are not required to be paid until May 1, sparking a potential cash flow problem for Framingham in March and April.

Steiner said the federal government needs to act soon to help cities and towns coping with COVID-related revenue losses like the one now facing Framingham.

"Cities and towns are going to die without help," he said.

Jeannette Hinkle is a reporter for the Daily News. Reach her at jhinkle@wickedlocal.com.

Framingham's water & sewer funds are $2.5 million in the hole. Cut budgets or raise rates? December 8, 2020
Jeannette Hinkle Metrowest Daily News

Plan to push off curing $2.5M deficit in enterprise funds won't fly as recommended Jeannette Hinkle MetroWest Daily News The state Division of Local Services recently told Framingham officials that if they wanted to send out certified third-quarter tax bills by Dec. 31, the $2.5 million deficit had to be cured - quickly.

FRAMINGHAM - The state has rejected a plan to push off filling a $2.5 million hole in Framingham's water and sewer enterprise funds that was meant to buy time for city councilors to fix structural issues leading to the deficit.

The enterprise funds, which pay to run the city's water and sewer services used by every Framingham resident, went deep in the red when businesses - which pay the largest share of fees - stopped using as much water amid pandemic-related shutdowns and restrictions.

More:Framingham's water & sewer funds are $2.5 million in the hole. Why?

The state Division of Local Services recently told the city that if it wanted to send out certified third quarter tax bills by Dec. 31, the $2.5 million deficit had to be cured - quickly.

On Tuesday, after an emergency meeting of the City Council, the Finance Subcommittee recommended 3-2 that the city miss the deadline to send out certified third quarter bills, meaning residents would get estimated bills not due until May 1.

The move was meant to give elected officials more time to come up with a sustainable solution to the deficit, which could occur again next year without major changes to the city budget, water and sewer rates, or the tiered water and sewer rate structure that puts much of the water and sewer cost burden on businesses still suffering because of the coronavirus.

More:Residents could get an estimated tax bill in February because of enterprise fund deficit

But the assumption of the Finance Subcommittee members who voted in favor of the plan to send out estimated third-quarter bills - City Council Chair George King, At-Large City Councilor Janet Leombruno and District 4 City Councilor Michael Cannon - was apparently misplaced.

On Wednesday, the state Division of Local Services informed the city that estimated tax bills cannot be sent out because of budget problems.

The Finance Subcommittee will meet Monday to come up with a new strategy for what King called "a very, very serious financial problem." No good options

King said Friday that there are no good options in front of the city.

At this point in the year, Mayor Yvonne Spicer's administration must present budget cuts to the council, so councilors cannot comb through the budget themselves to find savings. They must approve or reject Spicer's proposals to fix the deficit.

"Even if we thought we could cut throughout the budget, which I think we could, we can't do that now, so our hands are tied," King said. "The mayor controls what our options are."

In meetings this week, some councilors expressed deep frustration that Spicer's administration didn't impose more draconian cuts to the city's budget in the spring, when the pandemic was in full swing but its long term effects remained unknown.

"All of this has happened because the administration did not take the financial aspects of the pandemic seriously or didn't know how to deal with it," King said Friday.

Both Spicer and city councilors are reluctant to solve the deficit problem by raising taxes or fees on residents, many of whom are struggling financially because of the pandemic.

More:Framingham's lowest-paid workers struggled pre-COVID. Now, things are worse. What now?

The Spicer administration's most recent plan to cure the $2.5 million water and sewer deficit is to cut the city's water and sewer budgets by $200,000, cut the school budget by $800,000 and pull $1.5 million from the city's free cash reserve, draining that fund by about 19%, according to Chief Financial Officer Mary Ellen Kelley.

Most councilors and members of the School Committee balked at pulling $800,000 from the School Department's budget while the district copes with the monumental consequences of COVID-19 on public education.

But Kelley said the school budget is better equipped to withstand the cut than the municipal budget. An $800,000 cut to the $143 million school budget would equate to a 0.5% decrease in available funds, while the same cut to municipal budgets, which total roughly $63 million, would mean a 1.2% decrease, she said.

"Two municipal budgets already had over a 20% decrease, and a bunch are in the 10% to 16% range," Kelley said Friday. "(Councilors are) also critical of the services being cut back, but if you cut enough money you're going to cut services."

Another solution would be to take an additional $800,000 from Framingham's free cash reserve, on top of the $1.5 million drawdown already proposed.

Some councilors are wary of taking more money from a reserve fund of taxpayer money not spent in previous years typically used to pay for one-time expenditures, capital projects or to replenish other reserves.

But others, including Steiner, said taking a total of $2.3 million from free cash is better than putting additional strain on the schools during the pandemic. He said that's especially if a federal pandemic relief package is passed that would allow the city to replenish that reserve, though Steiner on Friday acknowledged the prospect of federal help at this point is theoretical.

"The short-term problem is this $2.5 million hole that was caused by COVID," Steiner said Friday. "It just makes sense primarily to use free cash to cover that."

Kelley said Friday the Spicer administration is still considering other cuts that it could present to the City Council. Those cuts, especially if they come from the administrative side of city operations, could be more palatable to councilors who don't want to cut money from the schools during a pandemic, raise taxes or fees on residents, or deplete cash reserves.

The city has not yet publicly floated dipping into the stabilization fund, sometimes called the rainy day fund, because of potential future losses from pandemic-related revenue hits.

King on Friday suggested a revised version of the plan to push off closing the deficit so the councilors have more time to look for solutions to the immediate hole in the budget and the structural issues that led to the hole.

The city could not send residents any third-quarter tax bills - estimated or actual - until the city cures the $2.5 million water and sewer deficit and plans a solution to seemingly likely ongoing losses in the enterprise funds.

That would give councilors more time to find a long-term fix to the structural issues with the water and sewer enterprise funds while still under the state's gun. King said that based on his experience with government, structural issues are almost never addressed by elected officials without the pressure of a looming vote.

Kelley said Friday that it would take roughly a month after the council votes to fix the deficit, thereby balancing the budget, to mail out certified third-quarter tax bills.

If the council votes to fix the deficit by mid-January, for example, actual third-quarter tax bills could be mailed to residents by mid-February.

Those bills wouldn't be due until May 1, so if enough residents don't pay the bill when they receive it, the city could be forced to borrow money to keep the government running, while also losing an estimated $50,000 in interest revenue on taxes that would normally be invested.

Steiner, who chairs the Finance Subcommittee, said Friday he wouldn't support that plan.

"We have a short-term problem that needs to be addressed right away, and there's no reason to make it worse by creating a cash flow problem," he said. "There's not going to be a solution to the bigger problem of the enterprise funds having a structural deficit anytime soon. That's a very complicated issue that I don't think anybody in the Finance Subcommittee is qualified to address until we've had some very detailed meetings with the Department of Public Works and the chief financial officer."

Jeannette Hinkle is a reporter for the Daily News. Reach her at jhinkle@wickedlocal.com.

Send comments to: hjw2001@gmail.com