HOLYOKE — Mayor Joshua A. Garcia released a five-year budget forecast workbook, a new tool to project the city’s fiscal future. The mayor appeared Wednesday before the City Council’s Finance Committee.
Garcia responded to an order filed by Councilor at-large Kevin Jourdain, who was concerned about the amount of free cash or discretionary funds earmarked for capital projects. Jourdain asked the mayor to present a five-year forecast.
Garcia hired an outside consultant to crunch the numbers and present a budget workbook. The mayor said fiscal year budgets were “moving targets,” primarily when unforeseen situations crop up.
“You project a 5% increase in insurance. Next thing you know, it’s 15%,” Garcia said. “What is predictable is mostly contractual. The new approach allows flexibility when inputting data or making assumptions on capital needs or taxes.
“It produces a number that allows us to keep a finger on the pulse, to guess, more or less, the direction we’re going as we prioritize our city resources,” Garcia said.
The project to create a five-year financial model began several months back. The council received a summary of the findings a few weeks ago.
Andrea Terkelsen, of Eric Kinsherf CPA, said the workbook was designed based on the process used when setting the annual tax rate. The accounting firm “didn’t want to create something completely foreign and difficult for everyone to use,” she said.
The workbook can be updated annually with figures from the most recent city budget. She added that the approach provides “great flexibility and functionality,” especially with assumptions or a changing fiscal landscape.
“Typically, you want to look at your more recent years, particularly when you’re going to do your next budget cycle,” Terkelsen said. “It’s helpful to pick a five-year window.”
Considerations in setting the city tax rate are the General Fund, Community Preservation Fund and Wastewater Enterprise Fund. “Those three funds are critical to the tax rate-setting process. They all work together and play together,” she said.
Budgetary considerations are operating expenditures, capital spending and special revenue funds. Assumptions examine revenues required “to present a balanced budget” or available and allowable by the state.
“We always want to have a key focus on what comes before the Council each year and to vote on those budgets and make amendments,” Terkelsen advised.
The budget workbook takes a “deeper dive” into operating expenditures, including wages, employee benefits and nondiscretionary spending like purchased services, supplies, safety and training.
“Any forecast model we deal with draws from many different assumptions,” Terkelsen said. “We had to start from somewhere to build a clear picture.” She also addressed capital spending for debt servicing major projects and fixed assets.
Part of the tax levy pays down small-to-medium debt, typically from a stabilization account or special set-aside funds. However, difficulty arises with deferred maintenance, whether maintaining a large building or replacing a firetruck.
Terkelsen cautioned against deep cuts for deferred maintenance as delays may compromise a building, road, or a piece of critical infrastructure. Instead, she recommended the city factor in larger expenses in the annual budget.
The new system guides stakeholders on what is affordable while “understanding the whole picture and what the workbook does.” The process begins with assumptions and adjusts as needed.
Councilor at-large Joseph M. McGiverin said the workbook was a good start. “The purpose is to help guide us through the upcoming years,” he said. He recommended factoring in how a new middle school would impact future budgets, especially the 2028 fiscal year.
“We haven’t set any affordability or any bars for that committee,” McGiverin said, “in terms of what the city can afford.”
The School Building Committee began the design selection process for the proposed middle school. The committee held a session on Thursday.
The Massachusetts School Building Authority reimburses communities for up to 80% of construction costs. Holyoke’s last reimbursement rate for two middle schools was under 60%, garnering little support from key councilors.
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