PEABODY — The mayor's $156.9 million city and school spending plan for fiscal 2021 represents a drop of nearly 1.2%, or $1.9 million, from last year's budget due to the fallout from the coronavirus pandemic.
A remote special meeting of the City Council Wednesday night hashed through Mayor Ted Bettencourt's budget crafted "under the extreme circumstances driven by COVID-19," according to his budget letter to the council.
Bettencourt told councilors this was a "worst case" budget. But the city's finances could worsen if the state sees a second wave of infections in the fall, businesses are again forced to close, and people wind up out of work.
It's been a late and truncated budget process for the fiscal year that begins June 30, one that would have been over by now, Bettencourt said.
"This has been as atypical year as I could imagine," Bettencourt said.
He said city finance officials did some heavy lifting and held off as long as possible to get as much information as they could, even amid uncertainty about state aid and continued tax collections.
"And certainly, behind the devastating human toll that the COVID19 has caused, the pandemic has left ... cities and towns ... in economic turmoil, the worst it's been in decades," the mayor said.
The revenue side
The city gets money from three sources, with property taxes representing the lion's share of the budget: about $110 million in fiscal 2020.
"This year the taxes have been extremely difficult to collect, more so by far than any other year than we have experienced," Bettencourt said.
Due to the pandemic, quarterly property tax collections were pushed back from May 1 to June 29 to give residents and businesses extra time to pay with no penalties or interest.
Bettencourt said the city had expected to collect $27 million in property taxes, but these collections are short by about $3 million.
It's the largest quarterly discrepancy the city has seen in collections since Bettencourt has been mayor and probably the largest seen in past administrations, he said. More tax money may come in by June 29 when taxes are due.
The city normally collects approximately $800,000 in taxes a month from the Northshore Mall, the city's largest taxpayer. But the mall was closed for three months during the pandemic, representing about $2.4 million that has gone uncollected. Bettencourt said the good news is the mall is operating at half capacity, so collections may pick up.
The biggest unknown is state aid. The city normally gets about $30 million in state aid: $9 million in unrestricted aid and $21 million in education aid.
Bettencourt said it might be August before the city knows its state aid numbers. It expects to receive a 15% reduction in state aid worth about $5.5 million.
Local receipts such as motor-vehicle excise, motel room and meals taxes are down by millions, too.
"This budget is going to be a work in progress," Bettencourt said. "I wanted to move forward tonight with the budget rather than moving forward with a 1/12th budget," i.e., a budget goes month-to-month.
He said it would be better to make tough decisions now, and make adjustments later if revenues pick up.
Ward 6 Councilor Mark O'Neill said he was concerned about crafting a budget now due to the uncertainty.
"It's going to be very difficult to come up with our budget number and approving that, with so many what could be considered unknowns," O'Neill said.
Bettencourt said his goal was to preserve jobs and core city services of police, fire, education, library, department of public services and City Hall.
"Unfortunately, because of the situation we find ourselves, there have been a number of positions ... I'm asking not to fund, or that we have had to combine," Bettencourt said. Many jobs that were not filled were in the schools.
The city offered an early retirement incentive for school employees and reduced positions through attrition.
"We eliminated a large majority of the part-time positions hoping we could bring them back in the future," Bettencourt said.
Finance Director Michael Gingras said the projected revenue shortfall for fiscal 2020 for the present budget is about $6.7 million.
However, the state Department of Revenue will allow the city to take the deficit and spread it out over three years, paying for it through the tax rate. Gingras said he plans to use $2 million in reserves and there is some expectation more money will come in before the end of the fiscal year. Another unknown is how much the state may provide in COVID revenue relief, he said.