Springfield boosted its "rainy day" fund to $35 million, by adding some of its surplus from the past fiscal year.
Having $35 million in your “rainy day” reserve fund sure sounds like a lot of money.
But while Springfield officials said recently they are pleased to have that sum currently in the city’s stabilization reserve account, also known as the “rainy day” fund, it is not considered a lavish sum, they said. The account has fluctuated in recent years, having briefly peaked at $54.8 million in 2009 at the end of a five-year rule of a state-imposed Finance Control Board.
Lee C. Erdmann, left, Springfields' chief financial officer, and Mayor Domenic J. Sarno are pleased but cautious about the current balance in the "rainy day fund.
“Overall, the financial health of the city is good,” said Lee C. Erdmann, the Springfield’s chief administrative and financial officer. “But because values have declined for five years in a row, and mandated costs continue to increase each year, we have a structural gap which will need to be addressed each year going forward.”
In Springfield, the rainy day fund amounts to approximately 6.3 percent of the city’s total budget, falling within the city’s recommended cushion.
Mayor Domenic J. Sarno said the cushion is due to “strong financial management” and is “quite a testament to the city after truly challenging budget years.”
The reserve fund reached $35 million last week after the City Council added $5.3 million into the fund from its “free cash” account — a surplus left over from last fiscal year. The free cash balance totaled $7.5 million, with Erdmann saying other use of the balance remains under consideration.
In contrast, the city had no money in its stabilization fund and had a deficit of $37.5 million in 2004 when state officials assigned the Finance Control Board to oversee the city and restore fiscal stability. The deficits were erased and the multimillion-dollar reserves returned.
Local officials in several area communities were also reporting significant “free cash” surpluses last week, from fiscal year 2012, and some boasted of significant stabilization funds, but were also warning that tough fiscal challenges and large capital expenses lie ahead. The free cash is the surplus recorded after all revenues and expenses have been calculated by the communities and certified by the state Department of Revenue.
When Chicopee’s free cash was recently certified at $6.1 million, it broke a record for the largest amount left over from any budget.
“We substantially underestimate our revenues. We are very cautious. We know we have 12 full months to get through,” Mayor Michael D. Bissonnette said.
If the city is not careful, it could face mid-year layoffs and other problems if revenues are overestimated. In addition, savings came from lower fuel bills and plowing costs because of the warm winter, Bissonnette said.
The use of the free cash will be discussed with department heads and the City Council, and some will likely be deposited in the city’s stabilization account, he said. The council is currently discussing proposals from Bissonnette to purchase recycling and trash trucks, an ambulance, a fire truck and police cruisers.
In Holyoke, Mayor Alex B. Morse is pleased to have an $11.7 million balance in the stabilization fund, and to have finished fiscal year 2012 with a $5.3 million balance in its free cash account. The available reserves mean the city is well positioned to deal with daily operations and potential problems, he said.
“We’re in good financial shape,” Morse said.
Of the $5.3 million in free cash, $3.1 million has been spent or is committed, Morse said.
In Agawam, there is currently $3.7 million in the stabilization fund, but $3.1 million will have to be used to help defray costs associated with the Oct. 29, 2011, snowstorm. However, Mayor Richard A. Cohen has said the account will be replenished by that amount when FEMA reimburses the city that sum.
Agawam has $7.4 million free cash left over from fiscal 2012, which ended June 30. Of that, $2.75 million will have to be tapped to also cover expenses associated with the snowstorm. However, part of that sum, that is $1.7 million, will be replaced when the city gets reimbursement from the state Department of Transportation.
“We are trying to be fiscally responsible in terrible economic times,” Cohen said.
Westfield has a current stabilization fund balance of $6.2 million.
“This is a healthy balance that is expected to grow some once our free cash for fiscal 2012 is known,” said Mayor Daniel M. Knapik. “We have worked hard in recent years to build this account. It is a challenge to maintain a balance while trying to add to it because of the economy.”
Easthampton used about $250,000 from its free cash to eliminate a deficit in its property tax overlay account. The stabilization fund is about $1 million. Mayor Michael A. Tautznik said “a really good stabilization fund balance would be 5 percent to 8 percent of the budget or $1.7 million to $2.7 million.
“It was $50,000 when I became mayor in 1996 and we got it to over $2.3 (million) in 2001,” Tautznik said. The fund has been used “on and off to stabilize the budget in the years since, but not this year,” he said.
Greenfield has a healthy $1,456,000 in its stabilization fund, according to town Finance Director Marjorie L. Kelly. The town has not yet submitted its free cash to the state for certification but averages between $800,000 and $1.2 million in that account, Kelly said.
Mayor William Martin tends to be conservative about financial issues and like to keep a good supply of money on hand in those accounts, Kelly said.
“It’s safe to say Mayor Martin is always anxious to increase reserves,” she said.
According to Northampton Finance Director Susan Wright, that city has $690,481 in its stabilization fund at present. Both city officials and Moody Investor’s Service, which determines Northampton’s credit rating, would like to see more money in the fund.
Mayor David J. Narkewicz said he has made it a priority to focus on rebuilding the stabilization fund, which the city relied on heavily during the recent economic downturn. However, that is easier said than done, he noted.
“It’s always a balancing act,” Narkewicz said.
Wright said there was a little over $1 million in free cash at he beginning of fiscal 2012 and that the city used all but $267,013 of it. The state has yet to certify the current amount of free cash for Northampton, however.
Staff writers Jeanette DeForge, Mike Plaisance, Sandra Constantine, Diane Lederman and Fred Contrada contributed to this report.