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Date: 2/8/2022
NORTHAMPTON – The School Committee, trustees of Smith Vocational and Agricultural High School, and the City Council conducted a joint meeting on Feb. 1 to go over financial trends and projections for fiscal year 2023 (FY23), as well as the rest of FY22.
According to Mayor Gina-Louise Sciarra, who presented the projections over a Zoom call, taxes currently make up 70 percent of the city’s revenue in FY22, and includes personal property tax and real estate tax, as well as taxes like meal, motel/hotel, marijuana and motor vehicle excise. State revenue, meanwhile, makes up 15 percent of the projected budgeted revenue, while charges for services comprise 11 percent of the projected revenue.
During the presentation, Sciarra also described the expenditure situation for FY22. Currently, education in Northampton involves the highest amount of expenditures, while the next highest is employee benefits. The total amount of money being spent on education in FY22 is $57. 9 million or 54.6 percent of the budget when you include expenses that are not reflected in the school budget but are paid for by the city.
Currently, the city has a AAA bond rating when it comes to their reserves, meaning they are in strong financial health. The high bond rating provides the city flexibility for future crises and allows them to maintain a robust capital improvement plan, as well as to maintain and upgrade infrastructure. It also allows the city to borrow at the lowest cost possible for future projects.
“Northampton was really able to handle the loss of revenue due to the pandemic better than many other communities because we have reserves to rely on,” said Sciarra. “The city currently has two-and-a-half months of savings.”
Back in the fall of 2021, the city approved a single tax rate at $17.89 per $1,000 for both residential and commercial property, which falls in the lower half of surrounding communities in both instances. Specifically, the commercial tax rate is the third lowest among the 12 surrounding communities that were compared in the chart Sciarra presented, making Northampton an ideal spot for businesses. The average single family home value, meanwhile, is $352,329, which is third highest amongst those same communities.
A big problem, however, is Northampton receives less state aid than all other communities except for Longmeadow, in relation to the chart. “We are succeeding in offsetting our lack of state support with other revenue, other than property tax,” said Sciarra, adding that Northampton usually relies on local receipts more than any other community. “However, when those local receipts are impacted from an event like the pandemic … the city feels that impact greater than the communities who rely less on local receipts because they receive more state aid.” Northampton receives less state aid due to property values, income and demographic.
The city’s local economy is in decent shape, with Northampton’s growth value in FY22 being a little over $63 million, which is highest among those 12 surrounding communities. Northampton has seen new growth over the past five years, but Sciarra said a lot of it has to do with the Village Hill project.
For FY23, Sciarra said that the city can raise an additional $2.5 million within the levy limit, based on a conservative new growth estimate of $750,000, as well as the Proposition 2½ increase of $1.7 million – which is an automatic increase each year based on state law.
As a preliminary projection, the city estimates that FY23 revenue will increase by a little over $4 million, while state aid is up by a “modest” $480,000, according to Sciarra. The city projects their local receipts to rebound from an off year, but the Omicron variant makes the situation a little less predictable.
Revenue sources such as hotels/motels/meals and parking are continuing to rebound this year from the pandemic. According to Sciarra, the second quarter revenue in FY22 for hotels/motels/meals is about 90 percent of what second quarter revenues were like in FY19, while parking revenue in the second quarter of FY22 is 70 percent of the FY19 second quarter parking revenue numbers.
All in all, the projected FY23 budget shows that Northampton will continue to pose a competitive single tax rate, while single family home values will remain strong. Meanwhile, negative impacts from the COVID-19 pandemic will continuously be addressed with future American Rescue Plan Act funding, which amounted to $21.7 million for Northampton. Additionally, inflation and supply chain issues will increase costs and department budgets, which the city is already seeing with rising fuel and energy costs.
With this presentation in the books, the next step for the city is for the five-year Capital Improvement Program to be submitted to City Council by March 2. Northampton Public Schools and Smith Vocational will then submit adopted budgets to the mayor by April 17, while the City Council must conduct a public hearing and vote on proposed FY23 budget by June 30.
Fiscal years run from July 1 to June 30, 2023. To learn more about the city’s projected budget, visit the city’s link at https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fnorthamptonma.gov%2FDocumentCenter%2FView%2F19031%2FMayors-FY2023-Financial-Trends-and-Projections-for-the-Fiscal-Year-2023-Budget-Process&wdOrigin=BROWSELINK.