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Date: 2/7/2023
NORTHAMPTON — An annual tradition between the three major municipal cohorts in Northampton returned on Jan. 31.
The City Council, School Committee and the trustees of the Smith Vocational and Agricultural High School met with Mayor Gina-Louise Sciarra over Zoom to go over financial trends and projections for fiscal year 2024 (FY24), as well as the rest of FY23. The mayor meets with these entities around the end of January every year before the budget process picks up.
Currently, the city is a little more than halfway through FY23.
According to Sciarra, who presented the projections across 60 slides, taxes currently make up 70 percent of the city’s revenue in FY23, 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 FY23. Currently, education in Northampton involves the highest number of expenditures, while the next highest is employee benefits, and the third highest is public safety. The total amount of money being spent on education in FY23 is $61 million or 55 percent of the budget when you only include when including expenses that are not reflected in the school budget but are paid for by the city.
Employee benefits, meanwhile, took up 20 percent of budgeted expenses while public safety engulfed 13 percent.
Sciarra also detailed the city’s financial reserves, which are used for one-time expenses or other emergency situations like weather-related catastrophes or major infrastructure failures. “Maintaining adequate reserves leaves Northampton better positioned to deal with funding issues in difficult times and gives us the tools to provide continuity of services,” said Sciarra.
Currently, the city has a AAA bond rating when it comes to its 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 for lower borrowing costs for capital improvements, which saves the city “hundreds of thousands of dollars,” according to Sciarra.
The rating is best among many of their surrounding towns and cities.
The city recently created a new reserve, the Climate Mitigation Stabilization Fund, to support Northampton’s progress toward carbon neutrality. This fund currently has $3 million.
“The projects to de-carbonize our buildings… to get to net-zero are extremely expensive,” said Sciarra in January. “These are big goals that we have, and they will include a lot of expenditures. We want to make sure that we’re planning for these projects and that we are earmarking some funds for these goals.
“We hope that having some available funds positions us well to be ready to take advantage of state or federal grants that we know are absolutely needed for the U.S. to start making real advances in terms of decarbonizing,” Sciarra continued.
During this conversation, the mayor introduced an adminsitrative order creating a new Department of Climate Action and Project Administration. A public hearing on the order will occur during the Feb. 16 City Council meeting.
“If approved by the council, this department, with careful planned use of the Climate Change Mitigation Stabilization Fund, will guide the city’s efforts to realzie the goals outlined in the Sustainable Northampton Comprehensive Plan,” said Sciarra.
Back in the fall, the City Council voted to maintain a single tax classification for FY23, which means the tax rate will be $15.84 per $1,000, the lowest it has been since 2015, according to Marc Dautreuil, the principal assessor.
The tax rate puts Northampton in the lower half of surrounding communities. Specifically, the commercial tax rate is the third lowest among the 11 surrounding communities that were compared in the chart Sciarra presented, making Northampton an ideal place for businesses.
Home values, however, remain high in the city. According to Sciarra’s chart, the average single-family home value in Northampton is $424,527, which ranks third highest among the 11 surrounding communities compared. Only Amherst and Longmeadow feature higher values. Home values, in general, have increased between FY22 and FY23 in all the surrounding communities.
“Rising home values have been not just a local/regional, or even a state conversation, but also a national conversation,” said Sciarra.
Northampton also receives less state aid than all other communities except for Longmeadow, in relation to the chart. The city is using higher local receipts to offset a lack of state support.
“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 [coronavirus] pandemic … the city feels that impact greater than the communities who rely less on local receipts.”
Compared to the 11 surrounding cities, Northampton also has the highest new growth value at around $56.7 million due to a myriad of construction projects, condominium conversions and property renovations.
“We’ve been seeing generally new growth within the last few years,” said Sciarra. “We’re grateful for that.”
While the city is seeing a general uptick in revenue after the coronavirus pandemic-especially in hotel/motel and meals sales-cannabis remains the one nebulous area for revenue within the city.
During the months of May, June and July of 2022, the city took in almost $246,000, which is a stark decrease from the $344,000 they took in during that same time frame in 2021, and the $535,000 they took in during that time in 2019. In fact, the city saw its worst three-month stretch for cannabis between August and October in 2022.
“For revenue purposes only, I need to keep an eye on [cannabis] because that’s going down,” said Finance Director Charlene Nardi, during the last finance committee meeting. “And the city has relied on that revenue for its operating budget, so that’s a cautionary tale.”
All in all, Sciarra said that Northampton will continue to pose a competitive single tax rate, while single family home values will remain strong in FY24. Meanwhile, local receipts like meals tax and hotel/motel tax are rebounding to pre-pandemic levels, but other revenues like cannabis are declining.
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 14, while the City Council must conduct a public hearing and vote on the proposed FY24 budget by June 30.
Fiscal years run from July 1 to June 30. To learn more about the city’s projected budget, visit the city’s link at https://northamptonma.gov/DocumentCenter/View/21419/FY24-Budget-Presentation-FINAL-1-31-23.