Framingham Mayor Unexpectedly Slashes FY25 Capital Budget
This seems very unwise, deferring critical infrastructure maintenance, making the giant backlog worse, and raising downstream cost.
A previous article explained how the Mayor and City Councilors King and Cannon were laboring under a serious misconception that Proposition 2 ½ restricts the FY25 city tax levy increase to 2.5%, and how such a mistake completely distorts the city approach to the FY25 operating budget, increasing the likelihood of serious damage to city operations and the schools.
Framingham City Leadership Gets Proposition 2 1/2 Completely Wrong
That came to light in the March 12, 2024, City Council Finance Subcommittee meeting.
In the very same meeting, with a remarkably similar set of misconceptions, the Mayor announced he had slashed the FY25 capital budget to $25 million from $72 million last year, and discarded the entire 5 year FY25-FY29 Capital Improvement Plan.
Slashing the capital budget for FY25 is unexpected, but it is even more unusual to ditch the entire 5 year Capital Improvement Plan, which has been rolled out each year for the last decade like clockwork.
While there seems to be no reason on earth to ditch the entire Capital Improvement Plan, the Mayor did try to justify the FY25 capital budget cut.
The Mayor claimed that the city has to abide by a local 'rule' which limits capital project debt service to 5% of the annual budget. This is a misconception much like the Proposition 2 ½ misconception. There is no state law which mandates that, nor is that 5% anything other than a rough guideline whose origin is shrouded in local fog. No information on this could be found on the city website or from inquiries to sources on the City Council.
Many cities and towns across the Commonwealth have debt service much higher than 5%.
In fact, data from the Municipal Databank shows that debt service can be as high as 14.91%, and more than 125 municipalities (out of 351) have debt service higher than 5% of their annual budget. A table showing some of that data drawn from the Municipal Databank is shown at the end of this article.
Take a look and see how commonplace debt service greater than 5% is, and what a range of familiar, well-run cities and towns use that as an important tool in their management arsenal.
What matters now is the impact of this sudden Mayoral move on the state of the city.
Framingham has at least a $400 million infrastructure maintenance backlog: roof replacements ($100 million); road repairs ($100 million); water & sewer repairs ($200 million). Most cities and towns don’t have such a huge problem threatening their services and their finances.
The worst action to take when faced with a giant rising maintenance backlog is to defer even more maintenance than usual. The backlog will simply get bigger, and the problem will just be worse next year.
It would be much wiser to confront the problem now. Borrow enough money to take a good bite out of the maintenance backlog and make sure the scale of the backlog is smaller around this time next year.
Borrowing more at a time when our bond rating has slightly improved makes sense, but as Moody’s Investor Service suggests, the city needs to make use of its unused tax levy and raise taxes to service that increased debt. Raising city tax revenue and reducing the city maintenance backlog strengthens the city’s financial position.
As the Mayor notes, $1 million of additional debt service pays for the $25 million in new capital projects for FY25. Raising that $25 million back up to $75 million would add another $2 million in debt service for FY25, which would move the debt service to annual budget ratio to just 5.3%. That is not too different from 5%.
The Mayor could easily reverse his FY25 capital budget ‘slashing’ and start reducing the gigantic infrastructure maintenance backlog. Then we would be heading in the right direction.
Of course, financing that additional debt would mean a further 1% increase in the city tax levy and the King/Cannon tax cut machine is bound to oppose that.
Municipal Debt
Here is some data from the Municipal Databank showing debt service for Massachusetts cities and town in order of decreasing debt service as a percentage of annual budget.
