Springfield City Council sends free cash to reserve accounts
Money set aside for "rainy day", unfunded pension liability, property purchases
The city of Springfield, Massachusetts has socked away budget surplus cash for the proverbial “rainy day.”
At a special meeting Monday night, the Springfield City Council voted to transfer about $10 million in free cash to reserve accounts so the city will have access to the money during the next fiscal year which starts Friday July 1st.
With little discussion and no debate, the Council voted quickly to approve three separate transfer orders that were requested by the administration. Other possible uses for the free cash, such as applying some of it to lower the property tax levy, were discussed for nearly an hour at the Council’s June 13th meeting and again for almost an hour during a Finance Committee meeting last week.
By sending $5.8 million in free cash to the city’s Stabilization Reserve Fund, it will help the city maintain its high bond rating and be available to help balance future city budgets, said Lindsay Hackett, the city’s deputy finance chief.
“We’ve had a few Finance Sub-Committee meetings in which we discussed why we think moving the funding over to the stabilization reserves is important,” Hackett said. The reserve fund balance will now top $50 million.
The $1.5 million transferred to the Pension Stabilization Reserve Fund will be used to offset the cost of future contributions to cover the city’s unfunded pension liability, explained Hackett.
“It’s just setting a little money aside if we need it in the future either to meet our obligated amount we need to come up with in the general fund budget, or to overfund our appropriation,” she said.
A third transfer of $2.5 million was to a capital projects reserve. Hackett said this money is being held to pay for the planned purchase of two properties by the city. The properties were not publicly identified during the meeting as the city is negotiating with the current owners over the purchase price. The Council will have to approve the actual use of the money for each purchase, explained Hackett.
“(The transfer) is just an accounting measure to move the money so it is available in FY’23,” she said.
City Councilor Tracye Whitfield, who chairs the Finance Committee, and City Councilor Justin Hurst voted against the $5.8 million transfer to the stabilization, or “rainy day”, fund. The other orders were approved unanimously.
At the earlier meetings where the use of free cash was discussed, Whitfield had been vocal about using it to lower the property tax levy to give homeowners, particularly the elderly, a break.
“They can barely afford the cost of living as it is and now we’ve got $5 gas and $5 milk and they’re already on a fixed income,” Whitfield said at the Council meeting on June 13.
Whitfield and Hurst were both highly critical of the city using $6.5 million in free cash earlier this year to bail out the redevelopment of the former Court Square Hotel building after the developers threatened to shut down the project because of the skyrocketing cost of construction materials.