Midyear finance report puts city revenue on track, highlights deficit

The city is on track with collecting projected revenue this fiscal year, although city officials are watching a looming deficit in an employee benefit fund.

That was the message from the Finance Committee’s midyear budget report, which assistant city auditor Laura Doane presented to members of the City Council’s Finance Committee at its Tuesday night meeting.

Doane told the board that property tax revenue collected so far tallies just below 50% of the year’s estimation. 

She said this midyear mark on tax-revenue collection is normal and expected, as the tax rate was set just about four months ago, in November. 

“The next two tax bills that are sent out will be at the new tax rate, so that’s pretty much in line with what we expect,” she added. 

Doane said the city has collected 51% in state aid so far this fiscal year, which is also in line with expectations. 

Doane said the local receipts category was also mostly in line with expectations. Local receipts are defined by the state as locally generated revenues such as vehicle excise taxes, building permits and fines.

She further noted that the city’s collection rate on motor vehicle excise taxes “looks low” with only 15% in hand so far for fiscal 2025, but that is because the bills don’t go to vehicle owners until February or March.

“Overall, we don’t have any general concerns about the revenues that are coming in so far,” said Doane. 

Expenditures

The committee also focused on a major looming deficit in the city’s Other Post Employment Benefits (OPEB) trust fund.

Doane said the budget from Mayor Jeannette A. McCarthy allocates $200,000 a year to the fund and city employees each contribute $10 weekly to the fund. 

Doane said the balance is just under $21.9 million.

She also said a recent actuarial valuation of the fund calculated a $591 million liability.

Finance Committee member and Councilor-at-Large Kathy McMenimen asked if there is currently a target date to break even on this liability. 

“How are we ever going to get to zero on that?” asked McMenimen. 

Doane pointed out that last year the liability for the fund was $724 million. Doane attributed this to investment and interest rates. 

Doane also said that once the city’s retirement plan is fully funded, which is estimated to be done in 2032, that funding can be reallocated to the OPEB fund. Doane said this is an estimated $25 million to $30 million.

“It is a very high number on the books. I would say that’s probably one of the city’s few negative things, because it is a high number,” Doane said. “But most other communities have high liabilities, too.”