By Chris Cassidy
Staff writer
May 14, 2008 12:36 am SALEM — The city has about six weeks to close a projected $2.6 million budget gap for the upcoming fiscal year. Mayor Kim Driscoll presented city councilors with a grim five-year financial forecast that projects a deficit of more than $4.2 million by fiscal 2012. Meanwhile, city officials are rushing to balance next year's budget over the next two weeks so it'll be ready for the City Council's review, which may come as early as May 22. "It's not easy to make these numbers work," Driscoll said. Special education, health insurance and retirement costs all continue to soar. Fuel and utility expenses are unstable. State aid is inadequate. A multimillion-dollar agreement with the city's largest taxpayer — the Dominion power plant — is set to expire on June 30. And residents are taxed — literally — to the limit, forcing the city to come up with new ways to raise money to pay for everything or make dramatic cuts. "It really feels like it's becoming unsustainable for cities and towns," said City Councilor Matt Veno, who cracked that at least the mayor's computer-presentation slides were laid out on a "calming blue" background. Health insurance costs will rise just 2.3 percent next year because employees will pay a higher contribution rate and because the city is shopping around when it comes to insurance providers. After next year, however, costs are expected to rise a staggering 10 percent each year. Retirement costs will jump about 6.1 percent next year and will nearly double from fiscal 2012 ($9.1 million) to fiscal 2025 ($18.1 million). Special education, which comprises 38 percent of the school budget, will also skyrocket to $15.5 million next year. Adding to the pressure, an agreement with the Salem power plant, whose tax payments make up 3 percent of Salem's entire budget, expires in six weeks and no long-term agreement is yet in place. The city can only raise taxes a maximum of 2.5 percent each year, so Driscoll told councilors the city needs to find new ways to bring in revenue — or face drastic budget cuts. Salem brought in about $831,000 in new growth this year. Other options, including redeveloping abandoned properties, would add money to the tax rolls, Driscoll said. Adopting a 1 percent local meals tax — which first must be approved by the state — would bring in $500,000 in extra revenue, the mayor said. "Local aid next year is scary," Driscoll said. "We're at a tipping point where we realize someone has to step in at the state level."
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