The city of Springfield, Massachusetts is banking on an investment to help lower property taxes next year.
The city will invest $45 million from its stabilization reserves, or “rainy day” fund, in high-yield, low risk, Federal Treasury Notes and use the return on the investment, which is calculated to be just over $2 million, to reduce the property tax levy by that amount next year, announced Mayor Domenic Sarno.
“It’s smart, it’s prudent, it’s safe,” he said.
He said after the city purchases the 1-year Treasury Notes there will be $5 million left in the stabilization account for emergencies and more than $65 million in a separate free cash account that can be used to cover any gaps in this year’s budget.
With the Federal Reserve raising interest rates in 2022 to try to drive down inflation, the rates on government-guaranteed Treasury Notes have soared to the highest levels in decades.
The city’s locked-in interest rate for the Treasury Notes is 4.67 percent.
Sarno credited City Councilor Mike Fenton with suggesting the investment idea to the city administration last fall.
“Instead of dipping into reserves for one-time, gimmick-type, relief this is not a one-time measure,” Sarno said.
The mayor said City Councilor Tim Allen, who chairs the Council’s Finance Committee, also endorsed the plan.
“So, this is what happens when you work together on something that is very, very positive,” Sarno said.
At the City Hall news conference, City Councilor Maria Perez spoke about how the investment will pay off for city homeowners.
“The constituents in the Ward I represent are the poorest in the state, so this is very dear to me,” she said.
Financial relief for city residents has emerged as an early issue in this year’s election campaign for mayor in Springfield.
City Councilor Justin Hurst, who announced his candidacy for mayor late last year, introduced a resolution at Monday night’s City Council meeting urging the administration to use $3.7 million from the free cash account to eliminate the $90 annual fee the city charges residents for curbside collection of trash and recyclables.
The resolution, which is nonbinding on the administration, passed 7-4. Hurst said its passage would show Councilors care about the financial strain city residents are under.
Sarno has stated that since taking office in 2008, his administration has practiced sound financial management that brought the city from the brink of bankruptcy to having the highest bond rating in the city’s history with healthy cash reserves.
Sarno has confirmed he will run this year for reelection.
