Mayor Lozeau's Budget Remarks

Nashua Mayor Donnalee Lozeau's remarks to the Board of Aldermen on May 13, 2014.
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On your desks this evening is the proposed FY2015 budget. In addition, there are two others items that I would call your attention to. First, there is a small blue bound book, looks like this, and that contains the information for city staff. Although it is also in the budget book before each division, we thought you might appreciate it in a separate document that would make it easy to flip through while doing the budget. Also, in that small book that I just mentioned is a blue sheet dividing between the two sections and then behind that blue page shows the city positions that have their salaries paid from more than a single source, also referred to as split funded positions. So, hopefully that will make it a little bit easier for the Budget Committee this year when looking up that information. 
 
The other item is a companion piece of legislation to the budget, R-14-033, that I will also speak to in my remarks this evening. Each year when I present the budget I like to give the context of our economy, a recap of FY2014 budget and a sense of the challenges we’ve faced and those to come. 
 
When I presented last year’s proposed budget, we had an unemployment rate of 6.1% and while this year’s rate of 5.7% is certainly not something to celebrate, it is clearly moving in the right direction and is well below the national average. Also moving in the right direction is the median purchase price for homes. Last year, I reported that was $220,000 and this year it’s $239,000. Unleaded fuel costs have decreased over the last 12 months by 3.5%. Although I am a bit afraid to mention it as it is so volatile I would hate to jinx us. Over the past 12 months the food prices and utility costs saw an increase, the largest being electricity which had its highest increase since 2006 of 12.7%. 
 
I believe it is always helpful to know the history of where we have been as often it helps define why we are where we are. Now some of you have certainly heard it before, so my apologies, please indulge me. 
 
From FY2009 through FY2011 between State and local revenues we had a cumulative loss of more than $16 million and I stopped counting then. And, if that wasn’t enough of a challenge, we had additional costs in FY2012 to FY2014 of just less than $9 million. 

Now remember, this year, every $1.8 million in appropriations equals 1% on the tax rate. So, since I’ve been here, it started at $1.6 million equaled 1%, then $1.7 million, and now we’re at $1.8 million. 
 
The good news is we had success with our strategies to mitigate some of those cost drivers. We were able to slow the rate of wage increases between FY2012 and FY2014. 

While we couldn’t, and still can’t, control the New Hampshire Retirement System (NHRS) increases, we were able to have a positive impact on healthcare costs. The ways we did that were to negotiate a lower administrative cost, but the biggest positive impact was the majority of our employees accepted an additional 10% of the premiums and accepted consumer driven care which included deductibles and increased co-pays, along with the introduction of a high deductable health savings account. 
 
Other positive initiatives included a fleet assessment that provided the basis for a long term strategic plan for funding the costs of new vehicles and alternative vehicles. Our strong financial ratings allowed us to borrow at significantly lower rates. 
 
Our FY2014 budget was $236.1 million with a 2.3% spending cap. And the most costly item that faced that the FY2014 budget was the bi-annual rate increase from the NHRS of $3.7 million. 
 
We brought the budget in under the cap by $381,000. It was a revaluation year which 
resulted in 66% of our residential taxpayers paying the same or less in taxes and, had it not been a revaluation year, the tax rate increase would have been 2.5% 
 
That budget continued our investments in capital equipment and capital 
improvements for buildings and for infrastructure. 
 
We have never drafted a budget without looking at our history as I have said, but also looking at our future, both the short term and the long. I would be remiss if I did not take this moment to mention that the challenges we will face in the FY2016 budget will be more difficult than this year. We expect a spending cap of less than 2% and we expect another bi-annual employer rate increase from NHRS which we estimate to be a cost of greater than $3 million. 
 
Tonight, the proposed FY2015 budget is $241.2 million with a spending cap of 2.1% and it is below the cap by $209,000. Should this budget pass, and we use a similar amount of surplus revenues and unspent appropriations, the tax rate will increase by less than 3%. 
 
You will note we continue to budget revenues conservatively. FY2015 likely will see a decrease of a few hundred thousand in State adequacy aid but should see a like amount increase in catastrophic aid. While we continue to see low earnings on interest rates on our money, we are seeing a modest increase in motor vehicle revenues. 
 
This year my request to Divisions was no more than a 2% increase over last year’s levels. 
 
You will find that is the case with the exception of Schools and Police. Their proposal to me was different than you see tonight. Schools brought me an increase of 3.5% which equates to a dollar amount of just over $1.6 million beyond my request and Police brought an increase of 3.0% which equates to a dollar amount of just over $161,000 beyond my request. I have reduced these in the document before you to 3% for schools and 2.5% for police. 

As some of you may know I met last week with the School Board in an effort to ask them to help me ensure that we informed our citizens as soon as possible where those cuts would be. I was willing to not need all those cuts from only their operating budget and with their concurrence I reduced the school deferred maintenance. I put a bottom line cut of $160,000 and I did not include a transfer of the Vocational Technical revenue to their Trust fund. That fund, right now, stands at $566,000. The three of these things equal $560,000. I am confident that before they come before the budget committee they will identify the location for that final reduction of the $160,000 so we can inform the public. 
 
As for the Police, each year that I have had to cut their requested increase, I have done so in their overtime line. This year, I put that reduction of $70,000 in the bottom line instead. I know that you will continue to discuss their request for more officers, but I cannot support that approach. I believe that we should ask them to look to cover those concerns facing our community within the strength they have today. Things like adding the patrol that they need from within, because we face different challenges every year and I believe that they have the flexibility to focus concentrated efforts accordingly. I remain very concerned about a few things in their work assessment including the need to hire 1.6 officers in order to have 1. I fear it won’t be long before we hit the 2 to 1 ratio. While I understand most of my concerns are contractual, the 4/2 shift and overtime starting at 33 hours instead of 40 are very costly. These things are just not sustainable.

As you know in 2008, we created CitiStat. Nashua has a different CitiStat model. One that was more collaborative and inclusionary than traditional CitiStat models, and less, I guess I would say, punitive then other cities and states. The department is small. 

Traditional CitiStat departments have a group of people sometimes between 5- 7 or more that employ multiple analysts, investigators, and managers. The Nashua CitiStat department worked with managers and data to provide information that could aid in the decision-making process for daily operational needs as well as assist with projects and planning. CitiStat has helped us to see information in a different way and provided a full scope view of projects on a daily basis. You and the Board of Public Works have seen their work on many occasions, most recently on last year’s payroll comparison information and this year’s DPW vehicle review. 
 
From the beginning, the Director and I discussed the importance of the CitiStat function as just that - a performance and analytic function. Since the department’s core work relied on financials and operating system data, it seemed natural for us in this FY2015 budget to integrate the CitiStat Department into a function of the larger Financial Services Division. We will continue the core work and analysis, and will continue the great work the Director and Department provided the City.

I would thank our first Citistat Director, Dr. Dean Giftos, and our current Director Susan Valaitis, for sharing my sincere belief that you cannot manage what you cannot measure. 
 
Like we have in past years, this budget funds our capital as it relates to vehicles and buildings. 

Now let me again call your attention to the budget companion legislation on your desk tonight, R-14-033. This legislation creates a special revenue fund for paving. I know we have all discussed on multiple occasions how we would like to find a way to put additional funds into paving. I have long been a strong proponent of investing in our infrastructure and when I proposed my first budget the FY2009 budget, I budgeted the same $700,000 that had been the typical amount since at least back to 2005 and then brought in a resolution using prior year escrows and surplus to add another $500,000which brought it to $1.2 million and then in FY2010 budgeted $1.5 million and I intended to continue that trend until the economy changed significantly so in the following years I budgeted $1 million. 

This year, I concentrated on trying to find a creative and sustainable way to make better headway with investing in our roads and infrastructure. By using the state highway block grant and accepting it as a grant and then using $700,000 in Motor Vehicle Revenue, we are able to budget $2.047 million without negatively impacting the spending cap or other city divisions. It also provides the funds needed to purchase new software and develop a longer term plan for the foreseeable future. So, as you can see, we doubled it and then have $47,000 that we’d like to concentrate on that plan which I was going to try to mention before I stumbled over my numbers. I look forward to having a discussion with the Budget Committee about this as we have discussed it in our Board of Public Works meetings. 

I would like to thank all the city divisions and departments, boards and commissions and in particular the Directors of those divisions and departments for their willingness to work hard on behalf of our citizens, recognizing that we must work together, a solid financial plan relies on our staff, our citizens and our elected officials to strike the right balance. 

This is again a responsible budget. I believe it strikes that right balance between service delivery, strong education and public safety. We benefit from that balance when our financial rating agencies look at us and the decisions we make and say to those looking to invest in our city, Nashua has a AAA and AA+ rating due to strong financial management, low debt levels, manageable future retiree costs, very strong management, strong contingent liability profile, and reasonable tax increases. Those are their words. Just last week, we had another favorable bond sale. 
 
I would close my budget remarks tonight by thanking my dedicated and brilliant budget team of Accounting Manager Rose Evans , City Treasurer David Fredette, and our CFO John Griffin. 
 
I would also take a moment to extend my sincerest sympathies to Alderman Wilshire on the loss of her Dad. I think all of us can only imagine the heartbreak that she’s feeling at this time. 
 
Thank you all as always for your kind attention this evening. Thank you, Mr. President.