November 11, 2016
By THOMAS GRILLO
LYNN — The city’s chief financial officer is considering a Proposition 2 ½ property tax override next year — a first in the city’s history — to pay for a school budget shortfall, two new schools and raises for union members.
“We’re looking at options and an override is definitely a possibility that should be on the table,” said Peter Caron. “If officials don’t want to do that, we’ll have to examine other options, such as cutting services.”
Caron called on City Council President Daniel Cahill to schedule an emergency meeting of the council for next Tuesday to approve a home rule petition to send out the third quarter tax bills early, Cahill said. By doing so, the city buys time to figure out how to deal with the lack of school money.
“If we get approval, I won’t have to set the tax rate until mid-March and we can consider our options to find money in the existing budget or to find new revenue to address the problem,” Caron said.
The CFO declined to say how much money the city needs or how much it would cost taxpayers.
There are a handful of large ticket costs that must be addressed.
The list includes a $7.5 million shortfall in school spending. A wage increase for the Lynn Police Department over four years will cost more than $3 million and the city’s prospective share for the cost of building two new middle schools is $68.5 million.
And there’s more debt coming. The Lynn International Association of Firefighters Local 739 is in arbitration discussions on a wage hike.
In an interview early in the day, Mayor Judith Flanagan Kennedy said the city’s schools are not facing a financial crisis.
“It’s not insurmountable,” she said. “It’s just going to be a process in collecting tax money in the most expeditious manner possible,” she said.
Lynn is the only city in Essex County that has not opted to impose a .75 percent local tax on top of the state’s 6.25 percent meals tax. The tax would add 75 cents to a $100 dinner bill, about 19 cents to a $25 meal and raise about $600,000 annually for the city.
“The mayor is opposed to any new taxes,” Caron said. “But she has an obligation to make sure that the city is run, you can’t just ignore this problem, she’s got to address it.”
Originally, the city was planning to ask voters to approve a so-called debt exclusion in February to pay for the new schools that would add $163 annually to the real estate tax bill for 25 years.
“We were planning on a debt exclusion for the new schools,” Caron said, referring to the temporary tax increase. “If any solution involves going to the public for a vote, it should be a single vote, not a debt exclusion and a Prop 2 ½ override.”
Under Prop 2 ½, the amount of property tax raised can never exceed 2 ½ percent of the full cash value of all taxable property in a community. An override is a permanent addition to the levy limit.
The city’s finances came into focus earlier this week when the Massachusetts Department of Elementary and Secondary Education told the mayor that the city’s contribution to school funding was short by $7.5 million. As a result, the department was prepared to withhold $11 million in Chapter 70 school funds this month until City Hall makes the cash available for schools.
Caron said he talked with John J. Sullivan, the department’s associate commissioner, and explained the shortfall was based on an “unanticipated reallocation of health insurance for the active and retirees.” In addition, he said the city is reviewing the calculations that resulted in changes to health insurance to make sure they are accurate.
The fix would require an infusion of new revenue into the school budget as a way to address the problem. It’s unclear where that money would come from. The city budget is $299.6 million. Of that, $197.4 million is allocated for schools in fiscal year 2017.
“The Department of Elementary and Secondary Education understand the parameters of the issue,” said Caron. “It appears they are willing to give us some leeway to devise a workable plan that allows us to make the schools whole before imposing any penalties.”
Still, Sullivan said the issue has not been resolved yet.
“I’m waiting for Mr. Caron to email me so that we can internally discuss possible next steps,” Sullivan told The Item in an email.
Thomas Grillo can be reached at email@example.com.