City Councilors Ponder Benefits, Drawbacks of Spending, Saving

Cinder McNerney of First Southwest both talked about the benefits of the  city saving money for a rainy day and taking advantage of borrowing for projects during this period of low-interest rates. (WHAV News photograph.)

Spending versus saving taxpayers’ money was the underlying subject Wednesday night as city councilors heard from consultants about how Haverhill’s rainy-day funds help boost the city’s credit rating.

On one hand, consultants supported Mayor James J. Fiorentini’s argument against spending more on police, education and economic development. On the other hand, they also supported city councilors’ arguments that current low interest rates—3 to 3 ¼ percent— mean there’s no better time to borrow for major construction projects, such as school repairs, sewer projects and covering the old dump. Take, for example, an exchange between Councilor Colin F. LePage and Cinder McNerney of First Southwest.

“We should be taking care of capital things that we know we have now and work on our reserves. We shouldn’t just keep putting capital projects off. We should be taking advantage of the time frame that we have,” LePage said. “I think so,” McNerney responded.

There were also many gray areas in between. At one point, Council President John A. Michitson argued that what makes for excellent credit also makes for an unhealthy city. “We could have a top bond rating in the city of Haverhill and have people dying and kids not doing good in the schools. That would not be a good situation,” he said.

He elaborated, telling WHAV what he believes to be the city’s dilemma.

“The city has a big tug of war going on because they are a lot of people in the city that want to move it forward, want to help education, want to have better public safety—very important. But, that is not a big factor in the bond rating.”

Fiorentini countered that good credit also means paying less interest when the city borrows for the kinds of project councilors support. He said the city enjoys a AA bond rating, but would like to move it up to AA+—and save another one-quarter of a percent—by saving more. Following the meeting, he explained why.

“We have to keep building up our reserves. In good times, you add to your reserves so that when the rainy day comes—and it always does—you have them. When the last recession hit, Lawrence lost $10 million in state aid in one day.”

Michitson said there is a cost to the city’s future economy by poorly educating children today. He hinted there is room to raise taxes a bit without hitting the caps—or levy limit—imposed by the tax-limiting law Proposition 2 1/2. McNerney questioned the approach.

“The fact that you have this unused levy capacity right now doesn’t mean just go spend it. You have to spend it in a way that would be sustainable,” she said.

She explained the city’s credit rating isn’t just based on saving money, but how much “flexibility you built in to the way you operate the community.” Michitson responded spending more on economic development would more than pay for itself in new commercial tax income to the city.

Frank Serretti of the city’s auditing firm Powers and Sullivan said the city’s current reserves would carry the city only about a month in an emergency. That assumes spending $471,000 a day based on the city’s budget.

Fiorentini proposed the meeting with consultants to offset workshops, such as the one about adding police officers, planned by the council, calling it “a counterbalance to the spend, spend, spend workshops.”

3 thoughts on “City Councilors Ponder Benefits, Drawbacks of Spending, Saving

  1. I question a City Council that has repeatedly tried to tax at the 2.5% limit on homeowners. I did a little research on my property related to the value. I also looked up on the City website a few family members property values. There seems to be a substantial increase in the value of land for residential property from 2016 to 2017. The value of the land that my house sits on increased by $28300 for 2017. This is just an increase in land value not any improvements to my property or any yard items. There was a $22200 increase in land value to my mothers property. We live in two separate parts of town. I looked up two businesses in Haverhill and there was not an increase to the land values for these businesses. Did the value of land only increase for the residential property? The residential tax rate decreased by .37 from $15.36/$1000 in 2016 to $14.99/$1000 in 2017; however land values increased. The commercial tax rate decreased by .58 from $27.01/$1000 in 2016 to $26.43/$1000 in 2017; however no increase in land value. If the city also increased the tax rate by the maximum of 2.5% for residential then that would effectively increase my taxes by more than 2.5% for 2017; although maybe land values wouldn’t have increased? My information came from the City of Haverhill website.

  2. “He hinted there is room to raise taxes a bit without hitting the caps—or levy limit—imposed by the tax-limiting law Proposition 2 1/2. McNerney questioned the approach.” –

    Raise taxes while incomes are and have been flat. Brilliant.

    If these people can’t recognize a bubble when it’s right in front of them, then all this talk is nonsense. Over half of the city’s revenues come from property taxes, which thanks to investors and wealthy buyers in MA, have created an entire rentier class. The prices of which are completely disconnect from household incomes – so go ahead and raise taxes, watch what happens. WHEN this new bubble collapses, revenues are going to plummet, and I’d speculate that pols will once again say: “We didn’t see it coming.” Throw in household and consumer debt at all-time highs, what does it matter anymore? The poor and lower-middle classes will be screwed because idiots floating the “rates are low” and “borrow more” narratives simply do not care, are too dumb, or delusional from their own hubris.

    https://fred.stlouisfed.org/graph/?g=e16P