slides: 5 Biggest Issues Facing City Budget with Slots Stopped in Tracks

Wednesday, June 05, 2013

Kate Nagle, GoLocalWorcester News with Monica White

The announcement by Rush Gaming that the proposed slot parlor for Worcester is not moving forward also mean the city will not hit the proverbial casino money jackpot for the city coffers.

The loss of any real chance to generate a new revenue stream, the focus for Worcester reverts back to the structural financial issues facing Worcester both in the short term and in the long term.

GoLocal asked two of the leading voices on fiscal policy in the city—Mayor Joe Petty and the Research Bureau's Dr. Roberta Schaefer, CEO of the regional fiscal think tank—to weigh in on the five biggest threats facing Worcester's future and their insight into strategies to address and correct the challenges.

As Mayor Petty identified there are some real and significant threats to the economic health of Worcester. As Worcester has made progress in areas of both improving the schools and stabilizing the funding, pension fund liability is significant ($150 million and growing). "The pension liability would require us to put $30 million to $50 million into the budget that we just don't have," said Petty.

Real Threats and Limited Revenue Streams

Worcester has functionally only three sources of revenue: 1) property taxes; 2) state aid; and 3) local revenue such as motor vehicle and permit taxes. The bad news is the city of Worcester is becoming ever more dependent on property taxes to keep the lights on in the city. "It is not a question of giving (paying taxes), it is a question of how they're spending it," said Dr. Schaefer.

In the past five years, Worcester's Property Tax Levy has risen from $199.1 million in fiscal year 2010 to a proposed $245.8 million in fiscal year 2014—a 23.4% increase.

A recently released report by the Research Bureau on the 2014 budget flags a number of issues that need reform:

The City Manager and the City Council should endorse the Governor’s bill to reduce OPEB (Other Post-Employment Benefits, primarily retired employees’ health insurance) expenditures. The bill’s provisions pro-rate benefits so they are based on years of service and hours worked and increase minimum eligibility from age 55 to 60.

Worcester Public Schools (WPS) should contract with a private company for all of the WPS transportation needs. Currently, the WPS owns some of the system’s school buses and hires the employees to maintain and drive them, which adds to the City’s health care and pension obligations.

The City Manager and the City Council should ask the legislative delegation to reconsider the State’s reimbursement formula for non-taxable property. The State should develop a new formula to reimburse cities and towns that host hospitals, colleges, museums, and other institutions that benefit the entire region.

The City Manager should continue to explore public/private partnerships to help fund the operation of non-core assets. Currently these assets cost the city over $2 million a year.

The City Council should continue to move toward a single tax rate for commercial and residential properties to make Worcester more competitive for attracting businesses and ensuring fairness to all taxpayers. Expanding the city’s tax base is the best way of increasing revenues to pay for the services that benefit all residents.

See what Mayor Petty and Dr. Schaefer identified as the biggest threats.