SalemNews.com, Salem, MA

Local News

December 20, 2013

Mayor defends tax rise

(Continued)

“That’s the highest reserve we’ve ever had,” he said. Acknowledging the mayor’s concerns, he countered, “It’s my opinion (if we do access the reserves) that’s not going to impact the bond rating at all.”

“I sympathize with that point of view,” said the mayor. “As mayor, it’s very tempting to dip into the reserves.”

Among the things stopping him is the advice the city gets from its financial consultants at First Southwestern and from Finance Director Patty Schaffer, who has served in three city administrations.

“I give great credit to her recommendation,” he said.

The city currently enjoys an Aa1 bond rating from Moody’s, which is only once removed from the highest rating possible. Maintaining this healthy assessment over time makes it possible to borrow money at low interest rates, an important advantage given that some of the city’s largest expenses, like the multimillion dollar Higgins school, are borrowed over a period of years.

“Taking $4 million from the reserves would erode our financial strength and put our bond rating at risk. ... We did dip into the reserve for $1.5 million,” which the council approved, he said. But stopping there is “prudent,” he said. “In every bond rate review we’ve had, Moody’s has stressed the strength of our reserves.”

Bettencourt noted that the city wasn’t alone in asking residents to pay more, but he added, “Our tax increase compared to other cities and towns is lower.”

In answer to a question, he said his approach on this matter is part of his approach to finances in general, one that recognizes how bad things can get and how quickly that can happen.

“It is a decision I made when I became mayor — I wanted to build up the reserves. I’m very cautious. Should there be an emergency, I want to have the money to handle the emergency,” he said.

Alan Burke can be reached at aburke@salemnews.com.

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