PITTSFIELD — A report by the Tyer administration on the city's financial condition has prompted some city councilors to call for reductions in the fiscal 2017 budget.
In a presentation Thursday before a joint meeting of the council and School Committee — an annual requirement in the city charter — Mayor Linda M. Tyer, city finance officials and outside advisers described Pittsfield's budgetary trends.
"Fiscal  and beyond will present us with serious challenges that we must address with a number of strategies that control costs, foster growth and encourage collaboration," the mayor said in her report.
Those challenges were laid out during the session by Finance Director Matthew Kerwood, Board of Assessors Chairwoman Paula King, the city's outside auditor, Thomas Scanlon of Scanlon & Associates, and actuary Michael Frank, of Aquarius Capital Solutions Group.
The budget restraints cited include annual city tax increases coupled with stagnant growth in property valuation, a shrinking level of excess Proposition 2 ½ levy capacity, along with only small annual increases in state aid and local revenue from excise and other taxes and fees.
"Without substantial growth in the tax base, the levy ceiling will be driving the bus for a long time," Kerwood said, referring to the city's shrinking ability to raise taxes without an override vote.
"This is an eye-opener, especially for the people watching at home," said Councilor Kevin Morandi, following the presentations.
He said the city must look at cutting costs and possibly city positions when the council deliberates the fiscal 2017 budget next month.
Councilor Kathleen Amuso said she has asked for spending restraint for the past two years but budget requests have steadily increased. "This time, I will be looking for reductions," she said, adding that "Some positions might need to go unfilled."
Scanlon, as he had at a recent council meeting, provided highlights of the annual city audit, which focused in part on the level of cash reserves, and a steady annual decline in Pittsfield's ability to raise taxes without a Proposition 2 ½ override vote.
The auditor said stagnation in the growth of total real estate valuation since the Great Recession, coupled with annual budget increases, has caused the amount the city can raise without an override to plummet in recent years — although it still would allow a tax hike of up to approximately $5 million to $6 million without an override.
He told the officials that having such excess levy capacity is, in fact, rare among the more than 80 municipalities his firm works with. Many, he said, are already at their tax levy limit (allowing increases of 2.5 percent per year, plus the annual increase in property valuation).
In answer to questions from councilors, Scanlon said having excess levy capacity shows financial flexibility and is seen as a positive by bond rating agencies, which allows the city to receive favorable interest rates when borrowing.
He added, however, that at the current rate of tax increases, the excess levy capacity could vanish in two or three years, requiring an override vote for any tax hike and possibly causing rating agencies to reconsider the city's A+ bond rating.
Scanlon has recommended raising taxes while excess levy capacity remains and placing the funds into a stabilization account. He said the city's stabilization accounts now total $1.8 million, but that figure has remained stagnant for five years, and he advised adding to the city's funding reserves.
Tyer and Kerwood said the city hopes to soon receive state Department of Revenue approval to release $1.65 million in a restricted fund set up during Pittsfield's financial crisis of the early 2000s, when the state stepped in to help resolve the problems.
They said the plan is to place that $1.65 million in a stabilization fund.
Kerwood said the major expenses driving city budget increases include the salaries, raises and benefits for 2,127 full- and part-time school and city employees, plus pension and benefit obligations for retirees.
He also cited the state and federal mandates associated with special education, environmental requirements and other programs, especially in light of state aid levels that "are staying flat" and likely to remain so next year.
The finance director said the city's overall debt load of about $95.4 million, with interest included, is not unusual for a community of its size.
Frank reported on unfunded, accrued obligations, such as for pensions and retiree health insurance, which now must be shown on annual municipal reports as liabilities, although those costs have always been calculated on other reports.
Charts displayed during the presentation show unfunded accrued liabilities for retiree health insurance — including costs projected out long-term for current workers — now are estimated at $234.5 million. Frank and Kerwood said the new employee and retiree health insurance contract for Blue Cross Blue Shield coverage that began last July has, however, helped to control those costs.
Kerwood said Friday that the city's long-term unfunded retiree health insurance costs are not unusually high for a city of Pittsfield's size and do not raise immediate alarm bells.
However, he said the Tyer administration is planning to address it. He said that includes continuing to add annually to a trust fund set up last year with a $100,000 appropriation to help control those costs and to work with an investment advisor to increase the trust fund amount.
Total assessed property valuation in Pittsfield is down $129.4 million since fiscal 2010, King said, leaving a total citywide valuation of $3.34 billion. However, she said overall values have slowly risen in the past two years and are expected to do so again this fiscal year.
To significantly raise the city's excess levy capacity figure, though, Scanlon and other officials said that would require major economic growth. Scanlon said it would have to be comparable to a casino opening in Pittsfield.
Councilor Donna Todd Rivers said of the financial reports, "This is incredibly serious. I have a little bit of a tentative stomach over this."
She said city officials might have to consider "what goes and what stays" in the next budget, adding, "We can't have it all."
School Committee member Cynthia Taylor said, "This is very sobering, to say the least. We really heard the hard numbers tonight."
However, Taylor, who has advocated strongly for maintaining school spending levels, said one option for city officials is to join the battle for increased Chapter 70 state aid to school districts.
"We can really have an impact on this legislation," she said, referring to a proposed overhaul of the Chapter 70 program.
The School Committee on Wednesday approved a fiscal 2017 budget with a 2.91 percent increase.
Tyer is still preparing her overall city budget, which will include the school budget, for submission to the council for review during June. A new spending plan is due before the start of the fiscal year on July 1.
Contact Jim Therrien at 413-496-6247.