How The Coronavirus Has Affected Newton’s Finances

NEWTON, MA — Newton is hurting amid pandemic, Mayor Ruthanne Fuller told the city council Monday night in an an address about the long range fiscal outlook for the city.

"We are in a world of hurt right now," she said. "In our good City, we are hurting right now."

As of Oct. 19, 1,064 Newtonians have tested positive for the coronavirus. And of those, 138 have died. It was with that backdrop that Fuller and her Chief Operating Officer Jonathan Yeo and Chief Financial Officer Maureen Lemieux outlined the city's financial challenges for fiscal 2022-2026, and what capital improvement project looked like in the years ahead.

It was the most in-depth look at the city's finances since the pandemic hit in March.

Several plans — from projects to repair or replace Lincoln Eliot Elementary, the Newton Early Childhood program at Horrace Mann, and the expansion of the Library's Children's room — have been put on hold. Work on updating Franklin, Countryside, Ward, Underwood, Horace Mann elementariness, have all also been put on hold for now.

In the coming five years the city will focus on 203 projects, according to Yeo.

The mayor called it a time of “tight wallets” in an interview Monday before the presentation to city councilors.

"Despite the significant financial constraints and uncertainty, there are still a lot of project planned, covering a wide range to sustain schools, help seniors, improve streets and improve village vitality," said Fuller, stressing that because the city had managed its financial resources so carefully leading up to the pandemic, it was in a much better position than many other municipalities.

Yeo stressed that for the overall projected capital spending the city was still planning to reserve 5.5 percent of its revenue to service the city's debt. This year, the city is spending about $25 million on debt, next year the city expects to spend about $25.2 million on debt, according to the city.

The city has plans to bond $650,000 to help fund the Oak Hill School classroom additions, it will also put some money toward replacing HVAC work at the police station.

The biggest project in the coming years will be the Needham Street Project, which will revamp all of Needham Street. That, however, is state funded.

Other major projects this year:

Oak Hill Middle School: The addition of three classrooms to address a rising middle school population is set to be completed by September 2021.

“COVID has not changed the work that we are doing in any way,” said Fuller.

The police station: Cost: $1 million in design. The city expects to complete design and construction of the police station's heating and ventilation upgrade in 2021. The work will includes a new air system for dispatch center.

Fire Engine: Cost: $800,000: Yeo said Fire Engine No. 2 is in the process of being built and is expected to be delivered by the end of 2020.

"The aim is to keep all frontline high priority fire equipment at an age not to exceed 15 years.," said Yeo. "That’s national guidance for well-run fire departments."

The old one will be used as a back up.

Continuing roads program: Cost: $7 million, then $5 million: Instead of $9.5 million a year, the city is going to be spending a little less on the roads program, according to city officials, although they are quick to stress there is still significant spending and focus there. Pre-COVID-19 the city planned to invest $9.5 million each year in transportation improvement projects. In spring, amid the updated budget and pandemic they pivoted. This year, fiscal 2021, the city is spending about $7 million. Going forward it plans to spend $5 million next year, before then gradually increasing funding on it until they are able to return to $9.5 million. “At this point that’s our estimate,” Yeo said.

Systemwide Permitting Update: Cost: $750,000. The city is working to update its permitting process system. They are currently in the process of accepting bids for the update, and expect it to take 18 months to complete. Officials said it should be up and running by the end of 2021.

Water Storage Facility Update: Cost: $900,000. The city is planning to fix the 130 year old covered water storage facility in Chestnut Hill. The covered reservoir will be updated by the end of 2021.

Also look for major village center projects in West Newton and Newtonville by 2021, a new design for the Comm Ave carriageway project in Auburndale using state funds, and water sewer and stormwater work. The city is moving forward on a revamped senior center at the current site, and that project is in the feasibility stage.

Revenue takes a hit

Lemieux said most revenue streams took the hit they expected between June and September, and that information helped inform the next few years.

"This was the most difficult forecast that I have ever tried to put together," Lemieux said. "Since we are in such a world of uncertainty."

Just earlier this year the city saw a $9.6 million drop in revenue than they had previously budgeted for. So officials scrambled to have the school department to decrease its budget by $1.5 million, they asked the retirement board if it would be OK to put $1.4 million less in the retirement system and decided to cut the roads program by $2.5 million. And still had to find $4 million in other reductions.

The good news, now is that the city plans to receive $900,000 more in state aide than they budgeted for.

But what the city didn't foresee was how much of a hit hotels would take.

In a typical year, the city receives about $2.5 million from the hotel occupancy tax. During the first quarter of fiscal year 2020, or calendar year 2019, the city received about $760,000. During the same period in 2020, the city received just $91,000.

“The impact to the hotels has been dramatic, far more dramatic than we expected to see,” Lemieux said.

When it comes to the meals tax, last year the city took in $549,000 for June, July and August. This year amid the pandemic it received $298,000.

"We all expect to see quite possibly a decline in those meals tax numbers as we head into the cooler temperatures," said Lemieux. "We are certainly worried."

Parking meter and ticket revenues are also down substantially, but despite a pause on most parking rules throughout the first quarter, the city still received some revenue.

Typically the city will receive around $325,000 in parking meter revenue during July, August and September, this year it received $29,000 from people who didn't realize they didn't have to feed the meters.

Police were still ticketing for some parking rules, such as fire hydrant restrictions and double parking, though they had paused enforcing things like the one or two hour limit parking. During the past three months the city received $44,000 in parking violation revenue, down from the more normal $350,000.

Rainy Day Fund

The city still has a $6.1 million rainy day fund set aside, and there are no plans to use it yet.

Because, things could get worse, according to officials.

"Want to hold that rainy day fund,"Lemieux said. "We know it is raining and raining very hard, but we also know that we need to maintain that rainy day fund for what we still may not know is coming."

Even with this year's budget having to be trimmed by $9.6 million, it still grew year over year, officials pointed out. Lemieux said, so far, the city has no official metric for the city on what it would take to dip into the rainy day fund.

"Whatever that number would be we have not reached it," she said. "We would need something [to happen] that is catastrophic to dip into that. And $9.6 million was a lot of money, but with the size of our budget I would dare say that was not catastrophic."

Replenishing that fund will be incredibly difficult in these tough times, that’s why we have to hold on tight to it, she said.

Override in the future?

Officials say it's too early to tell if there will be an override down the line to secure some of the projects that have been put on hold.

"I would not expect us to ever seek an override, until the city and the people within it have recovered," Lemieux said. "Until our people are back on a stable financial path."

The final word

Last year the mayor called the financial outlook "sobering." This year the mayor said she sees the city recovering in large part because of community involvement, but also because of prudent past fiscal management.

"We will recover because we managed our finances with care so we came into this economic downturn from a position of strength," she said.

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To read the full Long-Range Financial Plan and Five-Year Forecast and the Capital Improvement Plan for 2022-2026 visit newtonma.gov.

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