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City of Boston Thomas M. Menino, Mayor

Operating Budget Fiscal Year 2002 Capital Plan Fiscal Years 2002-2006

Volume I - Overview of the Budget

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Thomas M. Menino, Mayor

Dennis A. DiMarzio, Chief Operating Officer

Edward J. Collins, Jr., Chief Financial Officer

Office of Budget Management Lisa Signori, Director

Karen Ahern Connor, Deputy Director, Operating Budget

Roger McCarthy, Deputy Director, Capital Planning

Operating Budget and Capital Planning Staff

Dorothy Baxter Penny Berrier Michele Bilodeau Carol Brait Robinson Butterworth Darrell Crockett Lynda Fraley Chris Giuliani Melissa Goff Benjamin Hanley John Hanlon Era Kaplan James Kennedy Marianne Regan Anthony Reppucci Ralph Rosati Richard Sylvia Gregg Tivnan Mirta Velez James Williamson Franklin Wong

Systems Administrator Gerard Rufo

Central Office Staff Deborah DeLeo

Lilianna Guzman Renee Hogan Jacquelyn Murphy

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Table of Contents

Volume | Overview of the Budget

Letter of Transmittal: Thomas M. Menino, Mayor Executive Summary

Summary Budget

City Council Orders

Revenue Estimates and Analysis

Innovations in Education

Budget and Performance Goals

Financial Management of the City

Capital Planning

Statutes and Ordinances Governing Boston's Operating and Capital Budgets Boston's People and Economy

Budget Organization and Glossary of Terms

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GOVERNMENT FINANCE OFFICERS ASSOCIATION Distinguished Budget Presentation Award

PRESENTED TO City of Boston,

Massachusetts

For the Fiscal Year Beginning July 1, 2000

loan pry bing Lifhipd Ea

President Executive Director

The Government Finance Officers Association of the United States and Canada (GFOA) presented an award of Distinguished Presentation to the City of Boston for its annual budget for the fiscal year beginning July 1, 2000.

In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan and as a communication device.

The award is valid for a period of one year only. We believe our current budget continues to conform to program requirements, and we are submitting it to GFOA to determine its eligibility for another award.

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CITY OF BOSTON - MASSACHUSETTS

OFFICE OF THE MAYOR THOMAS M. MENINO

June 26, 2001 TO THE CITY COUNCIL

Dear Councilors:

| retransmit herewith my Recommended Budget for Fiscal Year 2002 for the City of Boston and County of Suffolk. The Recommended Operating Budget totaling $1.8 billion is 4.4 percent greater than the Fiscal Year 2001 Budget and would represent the City’s 17" consecutive balanced budget.

As you are aware, the City is still awaiting final action on the State’s Fiscal Year 2002 Budget — Senate deliberations are underway and Conference Committee action will follow. The Fiscal Year 2002 Budget is based on the best information the City has available about the likely outcome of the State’s Fiscal Year 2002 Budget.

Consistent with my original budget transmission submitted to you in April, this budget emphasizes progress, partnerships and priorities. It invests in those initiatives that have created so much progress for Boston. It underscores our ongoing efforts to build partnerships that strengthen neighborhoods and serve families, particularly in those areas where City government cannot and should not go it alone. Most important, this budget makes clear that people are our highest priority, particularly those in greatest need including children, seniors and working families.

Although this budget submission does not contain an appropriation for housing, my strong commitment to increase and protect Boston’s affordable housing supply by leveraging $30 million in city resources over three years, has not changed. I will be coming back to you with a separate appropriation order for Leading the Way (the City’s comprehensive three year strategy to increase affordable housing) as soon as the proceeds from the sale of 154 Berkeley Street become available for transfer to the Leading the Way account in the general fund.

The major change in the resubmission is a reduction of $1.7M in the appropriation requested for the Suffolk County Sheriff, consistent with the reduction in the maintenance of effort requirement contained in both the House and the Senate budget proposals. This reduction will be used to fund the increase in the School Department’s appropriation needed for the FY02 costs associated with a collective bargaining agreement settled after the April submission. In this resubmission funds were also reallocated from the Collective Bargaining Reserve to the Graphic Arts and Library departments to reflect collective bargaining contracts that have been settled since April. As requested, the City Council’s budget was also increased to include funding for an Assistant Budget Director, meeting room renovations, floor cleaning services, as well as a mobile sound system. The total bottom line of the recommended FY02 budget of $1.8M has not changed.

BOSTON CITY HALL ¢ ONE CITY HALL PLAZA * BOSTON * MASSACHUSETTS 02201 ¢ 617/635-4000

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This budget balances competing priorities within the City’s available resources. I respectfully request your favorable action on the Fiscal Year 2002 Operating Budget and the Five Year Capital Plan for FY02 to FY06.

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Thomas M. Menino Mayor of Boston

CITY OF BOSTON - MASSACHUSETTS

OFFICE OF THEsMAYOR THOMAS M. MENINO

April 10, 2001 TO THE CITY COUNCIL

Dear Councilors:

I transmit herewith my Recommended Budget for Fiscal Year 2002 for the City of Boston and County of Suffolk. The Recommended Operating Budget totaling $1.8 billion is 4.4 percent greater than the Fiscal Year 2001 Budget and would represent the City’s 17" consecutive balanced budget.

This budget is about progress, partnerships and priorities. It invests in those initiatives that have created so much progress for Boston. It underscores our ongoing efforts to build partnerships that strengthen neighborhoods and serve families, particularly in those areas where City government cannot and should not go it alone. Most important, this budget makes clear that people are our highest priority, particularly those in greatest need including children, seniors and working families.

You will note that the budget increase for this year is smaller than in previous years. Although the Boston economy is strong and Boston’s fiscal health has been recognized and rewarded by bond rating agencies, hard choices were required in FY02 due to uncertain state and federal commitments to core priorities such as continued education reform, housing and youth programs, including summer jobs.

Despite these uncertainties, this budget successfully provides for further improvement in the educational and physical quality of the Boston Public Schools, enhanced public safety, and the consistent high quality of basic services to which Boston residents have grown accustomed. The budget includes improvements to over 100 parks and playgrounds, increased resources for seniors, expanded after-school programming, ‘State-of-the-art equipment for firefighters, a new class of police recruits, and an array of public health initiatives aimed at emerging issues, from mental health to substance abuse to families transitioning off welfare. I continue to direct resources to ensure that public buildings are genuine neighborhood assets. A new library and two new Community Centers will open this year and I continue efforts to improve and maintain libraries, schools, community centers, police and fire stations, and neighborhood business

districts.

This budget is the result of a review of existing expenditures and new program needs and provides the best allocation of the City’s available resources. I look forward to working with you during this process and I respectfully request your favorable action on the Fiscal Year 2002 Operating Budget and the Five Year

Capital Plan for FY02 to FY06.

Sincerely,

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Thomas M. Menino Mayor of Boston

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Executive summary

INTRODUCTION: Progress, Partnerships, and Priorities

The FY02 Operating Budget is a reflection of the values and priorities that Boston’s families share. It renews our commitment to those initiatives and ideas that have created so much progress for Boston. It underscores our ongoing efforts to forge partnerships that strengthen neighborhoods and serve families. In short, this budget makes clear that people are our highest priority, particularly those in greatest need including children, seniors and working families. Meeting this obligation required hard choices. Although the Boston economy is strong, uncertain state and federal support for core issues like continued education reform, housing and youth programs mandated caution. Despite these concerns, this budget successfully invests in those areas that promise the greatest return over the long-term, starting with our children’s education and extending all the way to capital projects that create new public assets in every neighborhood. It also invests in those areas that best improve the quality of City living for Boston residents. These include a series of new Public Health programs addressing issues that range from mental health to drug abuse to assisting families coming off welfare, improvements to over 100 parks and playgrounds, increased resources for seniors, expanded after- school programming, state-of-the-art equipment for firefighters, and a new class of police officers to maintain the appropriate level of staffing.

The FY02 Operating Budget of $1.8 billion in recurring revenue and recurring expenditures represents a 4.1% increase over the FY01 recurring revenues and expenditures. This budget is the result of a review of existing expenditures and program needs, and provides the best allocation of the City’s available resources.

This year’s Five Year Capital Plan totals $1.5 billion and includes $117.4 million in new FY02

Eexaer Cautyigvae

authorizations for 88 projects. Boston’s Five Year Capital Plan is an investment program for the City’s future. The City’s Five Year Capital Plan has been consolidated with the Operating Budget to present a complete picture of the City’s resources and strategic financial plan.

Summary Of Additional Resources

The FY02 Budget represents $69.9 million in additional funds from recurring revenue sources. Consistent with last year’s budget, the recurring revenue increase is led by the City’s largest revenue source, the property tax levy. Net property tax revenues are projected to grow by 5.8 percent in FY02. This year, the City of Boston is projecting only a modest increase in state aid allocated to Boston through the State FY02 budget process. With state aid and net property tax levy making up approximately 80 percent of the City’s revenues, the City was challenged to meet its needs within available resources, so that the City’s budget remains balanced. The FY02 Budget is soundly balanced based on reasonable assumptions. Figure | illustrates the sources of increased recurring revenue for the FY02 Budget.

The available revenue growth provides the basis for planning the FY02 appropriations and fixed costs. The FY02 Budget includes $69.9 million in recurring expenditure increases consisting of non- discretionary costs and investments in some new and expanded programs.

In keeping with the Mayor’s commitment to improve education, the FY02 Budget allocates 35 percent or $24.6 million of the recurring revenue increase to Schools. Appropriations for City departments net of non-recurring appropriations increase $19.3 million. Non-discretionary expenditures increases are as follows in the FY02 Budget: fixed costs for pensions, debt service and state assessments are $18.4 million or 6 percent, and health insurance is $11.3 million or 13 percent. In addition, the FY02 Budget establishes

Summary 1

a $15 million collective bargaining reserve for the projected impact of unsettled collective bargaining agreements (an increase of $8.8 million over the remaining FY01 collective bargaining reserve). (Figure 2).

FY02 Sources of Increased Revenue Recurring

Millions

$50

$40

$30

$20

$10

$0 Net State Other Misc. Lic.& Excises Levy Aid Dept. Permit

Figure 1

FY02 Allocation of Increased Revenue

Millions Recurring

$35

$30

$25

$20

$6

$1

$5

$0 ; Schools Fixed City Health Coll. Other Costs Depts. Ins. Barg.

Figure 2

Included in the FY02 Budget is $1.9 million in non- recurring revenue to fund the first year of a five year after-school public-private partnership, as well as the City’s $1 million annual contribution to the Risk Retention Reserve. A detailed discussion of the City’s revenues and expenditures can be found in the Summary Budget chapter.

Boston's Economy

The City’s economy continues to perform well with low unemployment, a diverse economic base, and robust property value growth. The Boston area’s economy is well balanced and well positioned in sectors of the economy with growth potential such as technology and biotech.

The City’s fiscal health was recognized in February 2001, when Moody’s Investor Service increased the City’s bond rating from Aa3 to Aa2. This upgrade gives the City credit for its long history of balanced budgets, prudent fiscal policies, and a conservatively structured debt position with manageable future borrowing needs. This upgrade comes one year after Standard & Poor’s Rating Service upgraded the City’s bond rating from A+ to AA- in January 2000. Credit quality is analyzed to determine the interest rate that should be paid for a municipality's bonds. A higher credit rating translates into real dollar savings for the City.

The high priority City management places on adopting sound fiscal policies ensures that the City will maintain balanced financial operations even if the Boston area economy does not continue its recent rapid growth. The majority of the City’s workforce is expected to remain stable in FY02 with increases driven primarily by investments in education and maintaining an appropriate level of staffing in Police.

INVESTING IN EDUCATION FY02 Highlights:

e Of $69.9 million in new City revenues, the schools receive the lion’s share.

e $27 million invested to expand the Transition Program and Mathematics Support Plan to help students pass the MCAS, as well as expand after-school math instruction.

e New teacher hires to reduce class sizes at all Srade levels.

e More than $1 million new dollars for Boston Community Centers to expand After-School Programs.

No other investment promises a greater return

than children, beginning with their education.

This budget continues to focus resources to

improve teaching and learning in Boston’s

classrooms. An additional $2.7 million is included to expand the Transition Program, with its primary

Executive Summary

focus on literacy, and the Mathematics Support Plan to address the City’s challenge of accelerating student achievement in mathematics. The Mathematics Support Plan, which began in FYO1, will be broadened in FY02 to include after school instruction to students who need it most, using the City’s very best math teachers. These two critical initiatives help the City’s lowest performing students meet the rigorous standards and high expectations that are the foundation of the School Committee's promotion policy, Focus on Children, a multi-year reform plan, and the Commonwealth’s graduation requirements.

The results of the City’s previous investment are encouraging. Over the past two years, Boston's Massachusetts Comprehensive Assessment System (MCAS) results improved across all grades and subject areas. Boston’s gains exceeded or equalled statewide gains in every grade and subject.

The FY02 Budget also includes a number of new and continuing programs critical to the implementation of Focus on Children. A total of $4.4 million in new resources in this budget will contribute to progress in the following priority areas: movement toward smaller learning communities at Boston, South Boston and Dorchester High Schools, the purchase of new instructional materials in support of the arts and the Mathematics Support Plan, a textbook inventory control plan, additional school safety and support services, and repairs and maintenance of school buildings. The purchase of instructional materials in the arts, including dance, music, theatre and visual arts will provide the necessary tools and materials that enable Boston to implement the BPS Arts Standards.

Also included in the FY02 Budget is funding to reduce class size at all grade levels and additional professional development time for teachers.

The Mayor’s 1999 State of the City address stressed the importance of bringing neighborhoods together through schools as community institutions. This year’s Five Year Capital Plan includes the authorization for the construction of three new schools: Orchard Gardens (grades K-8), Brunswick Gardens (grades 6-8) and Mildred Avenue (grades 6-8). The Capital Plan also includes authorization to begin design and acquisition for a major renovation and addition at the Burke High School.

Ex e816 ULtiv é

Boston was the first major urban public school district in America to connect every school to the Internet and as such has been recognized as a leading model for its school technology initiative. The City continues to invest in school technology through both the FY02 Budget and Capital Plan. By the end of FY02, not only will every school be connected to the Internet but also every classroom in 95 schools and the student to computer ratio will be 5:1.

Just a few years after Mayor Menino made education reform a top priority, Boston’s schools are showing signs of promise. That promise is reflected in modern buildings and classrooms and the determination of the City of Boston to give our children every opportunity to succeed.

The FY02 Budget continues funding for the youth development services offered by numerous departments and programs such as Public Schools, Public Libraries, Community Centers, Parks and Recreation, the Pubic Health Commission and the 2:00 to 6:00 Initiative. Boston Community Centers’ budget will increase 6%, or $900,679 million in order to expand After School Programming. During FY02, the City will continue to develop and implement an integrated child care strategy, including a plan to guide the City’s efforts to help families and local communities meet their child care needs; a technical assistance program to offer technical advice and support to agencies and individuals seeking to offer child care services to City residents; and a public education campaign to educate parents about how to find quality, licensed child care.

A full review of goals, accomplishments, and finances of the Boston Public Schools can be found in the Education Chapter.

CITY LIVING KEEPS GETTING BETTER FY02 Highlights:

e $10 million for a state-of-the-art fire radio system.

e A new class of police officers to maintain an appropriate level of staffing

e An 8.2% increase in the Elderly Commission budget to improve the Senior Shuttle operations and expand public/private partnerships.

e Expanded neighborhood street cleaning.

Summary 3

¢ $300,000 to install new school zone and safety Zone traffic signals at crosswalks and intersections around schools. This budget continues the City’s emphasis on delivering services at the consistently high level to which residents have grown accustomed. From public space to public safety, from street cleaning to street repairs, Boston’s constant efforts to improve the quality of its services is a major reason that Boston is one of the most livable cities in America.

With crime in Boston falling to the lowest level in more than 30 years, the sense of security in the City’s neighborhoods is high. The City takes pride in the improvement it has fostered in its neighborhoods. From the City’s ReStore Boston Program, which works with businesses on storefront improvements, to the Abandoned Housing Initiative, all of the City’s neighborhoods have benefited from neighborhood enhancements. The goal, however, is to make every residential neighborhood an even better place to live. The FY02 Budget and Capital Plan provide the funding to enhance the City’s neighborhoods for all residents and families.

Pave the Way 2000 will be well underway in FY02. Pave the Way 2000 is an extraordinary program of street resurfacing and sidewalk repairs that will contribute to better roadway conditions throughout the City. The Pave the Way 2000 program adds $15 million to the City’s standard roadway and sidewalk program. These additional resources will result in 91 miles of neighborhood roadway paving and 40 miles of sidewalk repairs.

The FY02 Budget expands the City’s neighborhood street cleaning program. The City is moving to respond to the increased demand for street cleaning services.

In FY02, traffic safety will continue to be a significant element of the neighborhood policing strategies of the Boston Police Department, the traffic safety efforts of the Transportation Department, and the Walk this Way pedestrian safety program coordinated by the Public Health Commission. Community Policing surveys indicate that traffic is both a public safety concern and a quality of life issue for city residents. Enforcement will be targeted on roadways and intersections that have been identified as problem locations.

One of the City’s goals for FY02 will be to reduce the number of pedestrians involved in vehicle- related accidents. In FY02, the Boston Transportation Department is authorized to spend over $300,000 to install approximately 20 new school zone and safety zone traffic signals and other traffic safety materials throughout the City. BTD will also use $750,000 in traffic signal equipment capital spending to target improvements to some of the city’s most hazardous intersections. BTD also is authorized to spend $260,000 to improve and maintain crosswalks and other traffic safety pavement markings across the City.

In the FY02 Budget, the Elderly Commission enjoys one of the largest percentage increases of any City department. This 8.2% increase in its budget, approximately a quarter of a million dollars, will enable the installation of a new Senior Shuttle Scheduling and Tracking System so that this vital resource operates at maximum reliability and efficiency for seniors. The new dollars also authorize a reorganization of the Elderly Commission to focus on improving public/private partnerships and constituent relations.

Through the FY02 Budget and Capital Plan, the City will be doing more to support the arts and cultural activity in Boston. $1.1 million is authorized for renovations to the Strand Theater. A portion of the Neighborhood Improvement through Capital Expenditures (NICE) funding is earmarked for a demonstration project for public art in the Capital Plan. The City is also increasing the Cultural Affairs budget by more than 7%, among the largest percentage increases of any department in the FY02 Budget.

BUILDING STRONG NEIGHBORHOODS FY02 Highlights:

e Over 100 balltields, playgrounds, parks and tot lots to undergo improvements, and 1,000 new trees planted in the neighborhoods.

e The first new library to be built in Boston in two decades will open in Allston-Brighton.

e 7wo new Community Centers will open, the Tobin Community Center and the Vine Street Community Center.

e Anew D-4 Police Station will open in the South End.

Executive Summary

e Ground will be broken on 8 new schools. Through the Five Year Capital Plan, the City continues to transform its buildings and open space into neighborhood assets that all families can enjoy. Examples include renovating the Strand Theater, enhancing schoolyards across the City, and the opening of Millennium Park in West Roxbury.

The City’s library system plays an important part of every neighborhood. In recent years, the City has made significant improvements to the library services it offers. The FY02 Budget and Capital Plan support future library improvements.

A new, state of the art branch library in Allston will be fully operational in FY02. The Allston Library will be the first new library built in Boston in two decades. The 20,000 square foot library will have courtyard gardens, space for leisure reading, and a research area with computers and reference materials.

Libraries strengthen learning for all of the people of Boston, especially school age children. During the next fiscal year, the City will forge stronger partnerships between schools and libraries to maximize the return on the investment the City has made in both departments. Technology already in place at both Schools and Libraries will support these future-learning connections.

In FY02, two new Community Centers will open. These state-of-the-art buildings will offer programming that includes after-school programs, ESOL for new Bostonians learning English, and even feature new senior centers.

But building strong neighborhoods doesn’t just mean buildings. Open space is vital to the City’s quality of life. In FY02, the Parks & Recreation Department will make improvements to more than 100 ballfields, playgrounds, parks and tot lots, including a $3.5 million authorization for major renovation of Waterfront Park.

The FY02 Budget also reflects an aggressive continuation of the City’s tree planting program. With 2,000 trees already planted in calendar year 2000, the FY02 budget authorizes an additional 1,000 trees, further beautifying Boston neighborhoods. The urban forest of street and shade trees make neighborhoods more appealing and livable, and also contribute to improved property values. While every location is not

EX ¢e¢ Uti Ve

suitable for a street tree, the City is well positioned to respond to community groups seeking trees. In FY02, the Parks & Recreation Department will be partnering with community groups that wish to improve a neighborhoods streetscape.

Leading the Way

Affordable housing is one of the City’s top priorities. Leading the Way, the City’s comprehensive strategy to increase and protect Boston’s housing supply, lays the groundwork for the City to accomplish its goal to create more affordable housing. To meet the goals set forth in Leading the Way, the City is combining existing programs with new resources and initiatives. The Leading the Way strategy commits $33 million in City resources from the sale of surplus property. The first $13 million toward that commitment was appropriated during the current fiscal year. The City anticipates requesting an appropriation for the next $13 million during FY02, once the sale of 154 Berkeley Street has been finalized.

As articulated in Leading the Way, the City cannot solve a regional housing crisis without an increased commitment from the state and federal governments and strong collaborations with private partners.

The City is well on its way to successfully meet the housing goals expressed in Leading the Way. Overall housing production is ahead of what is needed for the City to meet the Leading the Way production goal of 7,500 new units.

PREVENTIVE HEALTH CAMPAIGNS ADDRESS CRITICAL NEEDS

FY02 Highlights:

¢ Boston's Public Health Commission (PHC) will expand mental health programs.

e PHC will launch a partnership with other City agencies to combat heroin use and improve access to substance abuse treatment.

e PHC will launch new programs to assist families transitioning otf of welfare.

The health of a City’s population is an important

indicator of its stability. The Boston Public Health

Commission (PHC) continues to fulfill its mission

to preserve, protect, and promote the health of the

people of Boston, particularly those who are most vulnerable. The PHC works collaboratively with

Summary 5

the residents of the City, as well as with area hospitals, community health centers and other community based-organizations to foster access to health services for the culturally and economically diverse communities of Boston. While the FY02 Budget funds initiatives critical to the health of Boston’s youth and adult population, the PHC nonetheless deserves praise for its ability to consistently shift resources to meet emerging needs. To promote a healthier teen population, the PHC will deliver expanded programs focusing on mental health and substance abuse prevention and treatment. One initiative will target improvement in mental health among young people in our city by promoting the best mental health care practices, increasing training for school staff and youth professionals, and initiating a public education campaign to reduce the stigma around mental health. During the current fiscal year PHC has expanded mental health services offered at school-based health centers. In FY02, the PHC will also embark on a partnership with other City agencies to combat heroin use among young Boston residents.

To improve the health of the adult population, PHC will continue to pursue its Healthy Heart Campaign, and expand its home visiting and outreach programs, which connect services with families most in need. In FY02 the PHC also will be conducting a concerted campaign to prevent human cases of West Nile Virus in Boston. The FY02 Budget provides for small grants to community groups for education, prevention and reduction of mosquito breeding sites.

CHANGING THE WAY GOVERNMENT WORKS

FY02 Highlights:

e Lstablishment of a Victim Assistance Unit and Financial and Computer Crimes Unit in the Boston Police Department.

e A new face-to-face consumer mediation program in the Mayor's Office of Consumer Affairs and Licensing.

e The newly appointed Recreation Director, using existing resources now spread across three City departments, will bring greater coordination, easier accessibility, and higher quality recreation opportunities to residents.

e Anew energy management working group will be formalized to maximize City government energy efficiency and realize cost savings.

At the end of his second term, Mayor Menino has

taken a number of innovative steps to improve

traditional functions of City government.

Departments and Cabinets are constantly

challenged to rethink existing programs, improve

service delivery, and pursue new opportunities and partnerships. The FY02 Budget reflects the reinvention that is underway in many City departments and begins the transition for additional changes to come.

The Fire Department began the process of reorganization and reform in earnest in calendar year 2000. The result is continued efforts to implement positive change. A new Chief of the Boston Fire Department was appointed. Reassignments within the command staff were made and, after the necessary notification and discussions with the labor unions, the Department is in the process of hiring its first Human Resources Director. That position will oversee both civilian and uniformed personnel functions. The Fire Department has also made successful efforts in correcting the excessive costs associated with injured on duty issues and overtime related to staffing. Further, management continues to negotiate with the Firefighters Union to gain improved contractual language that will allow opportunity for additional productivity and efficiency gains.

The Boston Police Department will also initiate new practices in FY02 to not only improve their ability to address cutting edge criminal justice issues, but also manage the Department better. The BPD will establish two new units in the Bureau of Investigative Services, the Victim Assistance Unit, and the Financial and Computer Crimes Unit. The BPD will also institute a new Round Table Review System of performance review for uniform personnel.

In FY02, significant multi-year investment to bring new cutting edge technology to the City’s Auditing Department is fully realized. This technology is enhancing the ability of the City to further reinvent government and improve service delivery and cost-effectiveness. For example, the Auditing department combined a new business practice

ES@ercrustiiivee® SeUamanteaanay

with the rollout of new technology to improve the payroll process. This improvement consolidated all wages earned in a pay period in one check, which results in the City saving resources previously spent in check processing. The combination of standardization of pay days and time and labor reporting with the new technology has eliminated manual calculation of earnings, reduced the number of printed checks, and reduced the time spent on check distribution. These resource savings are realized in all departments but most significantly in Auditing, Management Information Services, Treasury, and the Boston Public Schools.

During the FY02 budget process, the Mayor also ordered the examination of several inter-agency relationships in order to determine organizational alternatives that will improve outcomes and better serve the citizens of Boston.

The FY02 Budget continues the progress in improving the delivery of recreation services. The expertise of various departments and organizations will be working collaboratively to develop a strategic plan for how the City can deliver even higher quality recreation services. The FY01 Budget identified that the City of Boston was taking the first step to centralize the focus of the City’s recreation programs by creating a position that would coordinate the delivery of recreation. In January 2001, a Recreation Director joined the City’s team. During Phase II the Director will use the available resources to respond to the challenges of improving programming.

The FY02 Budget also lays the foundation for the City to think strategically about energy management. A City Hall Working Group, composed of players from various departments, will work in conjunction with an Energy Think Tank to address energy issues that range from ensuring a high level of service, obtaining affordable, competitive pricing, reducing demand and facing the challenge of conservation. The Energy Think Tank will create a partnership among industry officials, local government officials, and academics to assist and leverage the City’s role in energy management in the broader community.

As residents become more aware of their role as consumers, the demand for consumer services is

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increasing. In FY01, the Consumer Affairs & Licensing Department was expanded to facilitate a new consumer protection program to help consumers avoid falling victim to fraud. In FY02, Consumer Affairs and Licensing will launch a new “face to face” mediation program to help resolve consumer disputes.

Another area where Boston is leading the way under Menino’s leadership is after school programming. In FY02 the new initiative, Boston’s After School for All Partnership, leverages resources from a diverse group in the education, nonprofit, and business sectors to support high quality after-school activities. This initiative will provide Boston children with access to high- quality, affordable, safe, and engaging after-school opportunities that enhance their learning and overall development.

In response to the Mayor's recommendation, the City will assign management evaluation teams during FY02 to review additional service delivery systems and outcomes across City departments. In addition to the aforementioned energy issue, other service areas discussed for further study include recreation programming, after-school programming, street lighting and permitting.

Additional information about improving services can be found in the FY02 Budget and Performance Goals Chapter.

THE SOUTH BOSTON WATERFRONT - AN ECONOMIC ENGINE

The Boston Convention and Exhibition Center (BCEC) is the keystone of new waterfront development. The BCEC, which is on schedule for substantial completion in Spring 2004, is expected to attract thousands of new visitors and millions of new dollars into Massachusetts each year, and to serve as a Catalyst for the development of new hotels in the area. Residential character will be an essential ingredient in the South Boston Waterfront. Parcels in the district will also include new cultural facilities, open spaces, and gateways to Boston Harbor and the Islands.

The BCKC is an $800 million public investment exceeded in value only by the Central Artery project. For the project’s site acquisition and site preparation carried out by the BRA, the Convention Center Act allocates approximately 72% of the assumed maximum for this cost to the

Summary 7

City. The state is financially responsible for the full cost of construction, a significantly larger cost component of the project. Fundamental accomplishments to date include both on-time completion of site acquisition and continued on- time maintenance of the site preparation schedule, with the City’s projected annual debt service for the project remaining well below the projected annual estimates for the revenue sources earmarked to pay the debt in the City’s BCEC financial plan.

The City assumes that its current revenue base will not be utilized to fund the BCEC. The total of new revenues collected during the first three years that are earmarked to pay for the BCEC debt have exceeded the estimates in the financial plan submitted to City Council back in FY98. The key to this positive variance is the two largest supporting revenue sources, hotel excise from new hotels and the sale of hackney carriage licenses. The state, through the Massachusetts Convention Center Authority (MCCA), is financially responsible for the construction phase of the project. A fuller overview of the BCEC project and its financial implications can be found in the Capital Planning Chapter.

Budget Document Structure

The Operating Budget for FY02 and Five Year Capital Plan for FY02-06 is presented in three volumes.

Volume I is an overview of the City’s financial position and policy direction.

Volumes II and III, which are organized by cabinet, present the budget detail for each department's operating budget and capital authorizations. Refer to the chapter on Budget Organization and Glossary for an illustration of the City’s organizational chart.

The City’s Operating Budget is built at the program level for each department, which is the basis for budget planning. However, line item detail is only provided in this budget document at the department level. Program line item detail is available upon request.

In addition to line item expenditures, Volumes II and II] provide a mission statement, key objectives, as well as past and promised

performance levels for each department. For those departments with capital projects, a project profile is provided for every capital project, which includes authorization information as well as planned spending levels.

Definitions of the terms used throughout the budget document are presented in the glossary, which can be found in the chapter titled Budget Organization and Glossary.

Technical Note

The City of Boston’s combined FY02 Operating Budget and FY02-FY06 Capital Plan was published using Microsoft Word 2000. Graphics were generated using Microsoft Excel 2000. Hyperion Pillar 4.6.2, and Microsoft Access 97 were used for data management and analysis.

All production was done within the Office of Budget Management. Document production assistance was provided by the City of Boston Graphic Arts Department. Technical development and support was provided by MicroData Group, Inc.

Executive Summary

pe

us SI

summary Budget

OVERVIEW

The FY02 Budget of $1.770 billion in recurring revenue represents a $69.9 million or 4.1% increase over the FY01 Budget supported by recurring revenues. Included in the total FY02 Budget is $1.9 million in non-recurring revenue and expenditures. This Summary Budget section lays out the FY02 Budget and discusses trends in each category of the summary budget table. A detailed look at personnel trends as well as a review of major externally funded services is also presented. Finally, a projection of the major FY03 Budget categories will provide an informative look ahead.

Nearly three quarters of the City’s $69.9 million recurring revenue increase for FY02 comes from its largest revenue source, the property tax levy. This revenue growth provides the basis for planning FY02 appropriations and fixed costs to maintain a balanced budget. Selected FY02 Budgeted revenues compare with FY01 Budgeted revenues as follows: the property tax levy (without the overlay reserve) increases $53.1 million or 5.8%; excises are flat with a minor increase of 0.3%; interest on investments decreases one-half million dollars or -2.8%; miscellaneous department revenue increases $1.5 million or 4.5%; licenses and permits increase $700,000 or 2.9%; and state aid increases $12.2 million or 2.5%.

On the expenditure side of the budget, total departmental appropriations, including $1.9 million in non-recurring expenditures, increase by $39.3 million or 2.8% and fixed costs increase by $18.4 million or 6.1%. Selected budgeted FY02 appropriations compare with budgeted FY01 appropriations as follows: city departments , excluding nonrecurring expenditures, increase $19 million or 2.7%; the Boston Public Health Commission increases $400,000 or 0.7%; county appropriations have decreased by $1.7 million or 25.9%, based on the assumption that the City’s maintenance of effort requirement for the Sheriff's

Summary Budget

TEACHERS STATEAID PENSIONS 28.1% 2.3%

FINES 3.3% OTHER REVENUE 9.3% NET EXCISES PROPERTY 4.7% TAXLEVY 52.3% FY02 Estimated Recurring Revenue Figure 1 ers PENSIONS 7.4% 6.9% STATE rilicat ASSESS 3.8% SCHOOL CITYDEPTS DEPT

41.3%

PHC 3.5%

FY02 Estimated Expenditures of Recurring Revenue

Figure 2

Department will be reduced from 6.875% to 5% of the total Sheriff's budget; and the School Department increases $24.6 million or 4.0%. Budgeted FY02 fixed costs compare with budgeted FY01 fixed costs as follows: pensions increases $3.5 million or 2.7%; debt service increases $14.6 million or 13.6%; and state assessments increase $400,000 or 0.6%. (Figure 2.)

CITY OF BOSTON BUDGET SUMMARY

(Dollars in Millions)

FY99 FYOO FYO1 FYO2 Actual Actual Budget Budget REVENUES

Property Tax Levy B22 866.21 OTVe7S 970.89

Overlay Reserve (42.71) (41.23) (43.91) (46.23) Excises 68.02 68.91 82.10 82.35 Fines 47.48 55.94 58.43 59.27 Interest on Investments 17.42 21.89 20.00 19.45 Payments In Lieu of Taxes 26.55 18.89 21:20 21.62 Urban Redevelopment Chapter 121A 36:511 aT Aste, 37.94 38.84 Misc. Department Revenue 44.18 36.01 Shap ey 36.86 Licenses and Permits 20.88 28.63 24.35 25.06 Penalties & Interest 1k? 10.62 10'65 10.73 Available Funds 3.09 6.67 ihlsts. 11.78 State Aid 457.34 474.93 485.22 497.38 Teachers Pension Reimbursement S226 Sos/5 39.00 41.40 Total Recurring Revenue 1,549.43 1,623.86 1,699.66 1,769.58 Non-Recurring Revenue 0.00 0.00 14.00 1.88

Total Revenues 1,549.43 1,623.86 1:713.66 PA & 46

EXPENDITURES

City Departments } 656.80 Omit, 724.99 7132.24 Public Health Commission orOU O24 62.14 62.55 County 7.86 6.12 ee 4.84 School Department 543.37 579.18 611.94 636.56 Reserve for Collective Bargaining 2.00 8.50 6.22 15.02 Total Appropriations 1,263.54 1,323.59 Tia eZ 1,451.17 Pensions {PAG 7hs, 128.59 127.48 130.94 Debt Service 92.32 96.48 107225 121.84 State Assessments Cora i 66.99 SY £4 67.54 Reserve 0.00 0.00 0.00 0.00 Total Fixed Costs 278.14 292.07 301.84 320.29 Total Expenditures 154 -OOmesO4oLDO 197 13266 1,771.46 Surplus (Deficit) TAT pat Be20) 0.00 0.00

Numbers may not add due to rounding

Summary Budget

REVENUE

Consistent revenue growth has allowed the City to

record 15 consecutive operating budget surpluses through FY00. Strong revenue growth in FY01 has again, put the City in a position to show another surplus. (Figure 3.)

Millions

$9

$8

$7

$6

$5

$4

$3

$2

$1

$0

91 92 "93 94 '95 "96 97 98 '99 '00 Surpluses FY91-FYOO

Figure 3

The FY02 Budget is balanced on the following revenue projections.

Property Tax Levy

A detailed discussion of the property tax levy is provided in the Revenue Estimates and Analysis chapter of this volume. Below is a brief summary.

The property tax levy has been the City’s most

dependable source of major revenue growth during

the past seventeen years. The increases were steady and consistent from FY85 to FY01, ranging from $28 million to $52 million. However, because of the increasing property tax levy base, the $29.9 million increase in FY85 represented an 8.9% increase, while the $51.9 million increase in FY01 represented only 6.0% growth. Property tax levy growth is fundamental to the financial health of the City since it provides over half of all City revenue.

Proposition 2 1/2 has been the overwhelming factor affecting the City’s property tax levy since being passed in 1980. Proposition 2 1/2 limits the property tax levy in a city or town to no more than 2.5% of the total fair cash value of all taxable real

Summary Budget

and personal property. It also limits the total property tax levy to no more than a 2.5% increase over the prior year’s total levy with certain provisions for new growth and construction. Finally, Proposition 2 1/2 provides for local overrides of the levy limit and a local option to exclude certain debt from the limit. The City of Boston, however, has not voted to either override the levy limitations or to exclude any debt from the limit.

In each year since FY85, the City has increased its levy by the allowable 2.5%. During these same years, the levy has also been positively impacted by taxable new value. Taxable new value is expected to be $30.2 million in FY02. The combined effect of the allowable 2.5% increase and the taxable new value is an average annual levy increase from FY98 through FY01 of $42.2 million or 5.2%, and a projected increase in FY02 of $53.1 million or 5.8%. The property tax levy totaled $822.4 million in FY99, $866.2 million in FY00, and $917.7 million in FY01. The property tax levy is estimated to be $970.9 million in FY02.

Property values in Boston have been rising steadily. During FY01, the City conducted the seventh parcel-specific revaluation that established values as of January 1, 2000 at $50.5 billion, an increase of 26% over the prior year’s market indexed valuation of $39.9 billion. (Figure 4.)

Billions

$60

$30

$20

$0

$0

2.93 04 9% GE 97 "98 “3 00 i

Total Assessed Property Value

FY92-FYO1 Figure 4

Excises

The Commonwealth imposes an excise on the registration of motor vehicles, the proceeds of which are received by the municipality of residence of the registered owner of each vehicle. The excise is a uniform rate of $25 per $1,000 of vehicle valuation. Valuations are determined by a statutory depreciation schedule based on the manufacturer’s list price and the year of manufacture. As employment and consumer confidence increased over the past few years, more people returned to the market for new cars.

Motor vehicle excise revenue totaled $29.4 million in FY99 and $37.0 million in FY00. The City expects motor vehicle excise revenue to come in well above the midyear budget estimate of $37.0 million in FYO1 and climb to $40.0 million in FY02.

The local room occupancy excise amounts to 4% of the total amount of rent for each hotel or motel room occupancy (in addition to the state excise). Boston’s occupancy and average room rates are among the highest in the country and the most recent data on tourism continues to show an increasing number of visitors coming to Boston. The growth of this revenue source tends to mirror the economy. As the economy grew stronger over the last few years, room occupancy excise receipts

Millions $90

$80

$70

$60

$50

$40

$30

$20

$0

$0

93 '94 95 "96 '97 98 99 00 01 02 Excise Revenue FY93 - FY02

Figure 5

increased steadily; room occupancy excise revenue totaled $22.8 million in FY99 and $23.9 million in FY00. The City’s room occupancy excise tax receipts are expected to reach the midyear budget

2

estimate of $25.2 million in FY01 and are projected at $25.8 million in FY02.

Room occupancy excise revenue from the significant number of new hotel rooms planned, already in construction, or recently constructed is earmarked to pay a significant portion of the City’s planned debt for the new Boston Convention and Exhibition Center. Therefore, future growth in room occupancy excise in the general fund depends strictly upon increases in room rates and room occupancy in the 1997 base of hotel rooms.

The excise on the sale of jet fuel is 5% of the sales price, but not less than five cents per gallon. One reason that the jet fuel excise has tended to increase slowly is that with jet fuel selling consistently below $1.00 per gallon, the five cents per gallon minimum tax has generally been the operative rate. Another underlying factor that limits jet fuel excise growth is the increased fuel efficiency of commercial aircraft that use Logan Airport. Because fuel is such a major portion of their expenditures, airlines have steadily improved the fuel efficiency of their fleet. Since FY97, an increase in air traffic has begun to cause an increase in the sale of jet fuel. Jet-fuel excise revenue totaled $15.5 million in FY99, an increase of 2.6%. In FY00 jet-fuel excise totaled $7.6 million due to a late payment by the Department of Revenue whom collects the tax. The City expects this revenue source to come in significantly above the midyear projection of $19.6 million in FY01 (including the late payment from the prior year) and projects $15.8 million in FY02. (Figure 5.)

Fines

Over the last three years, the City has issued an average of 1.62 million parking tickets per year and has for several years maintained a high rate of collection on its tickets. The major factors contributing to the City’s successful collection rate include non-renewal of violator’s registrations and licenses by the Registry of Motor Vehicles until penalties are paid, booting and towing of vehicles, increased ability to get fine payments from rental agencies, and systematic collection of fines for company cars. The City collected parking fine revenue of $45.1 million in FY99 and $53.6 million in FY00. The unusually large increase between FY99 and FY00 is largely due to a fine increase, the first major increase since FY91. Parking fine

Summary Budget

revenue is expected to fall slightly short of the mid-year budget estimate of $56.1 million in FYO1. The FY02 projection of $56.3 million is based upon a planned diversion of traffic enforcement personnel to the Mayor’s Lets get Moving campaign to clear congested city streets during peak traffic hours coupled with the higher parking fines put in place at the beginning of FY00 and an expansion of regular street cleaning routes to new neighborhoods.

Interest On Investments

In general, the City’s level of investment income is a function of the level of prevailing short-term interest rates and daily cash balances. Cash balances have been rising steadily for the last 3 years while interest rates had been steady but have been fluctuating over the past year and are expected to continue to do so as the Federal Reserve adjusts interest rates to keep the economy out of recession. Interest income totaled $17.4 million in FY99, $21.9 million in FY00, and is expected to easily exceed the conservative midyear budget estimate of $20 million in FY01. As the Federal Reserve continues to lower short-term interests through the first half of the fiscal year, the City projects interest income to be $19.5 million in FY02 as a result.

Payments In Lieu of Taxes

Payments in lieu of taxes (PILOT’s) are payments made by tax-exempt institutions located in the City, including hospitals, universities and cultural institutions, as a voluntary contribution for the municipal services that the City provides to them such as police, fire and snow removal. The Massachusetts Port Authority will provide almost half of the PILOT revenue the City expects in FY02. Growth in PILOT’s comes from new PILOT agreements, contract escalations that adjust the payments for inflation, or re-negotiation of a current contract. Recently, several previously negotiated contract escalations have taken place or are due to occur in FY02. Payments in lieu of taxes totaled $26.5 million in FY99 and $18.9 million in FY00. When a building is sold by a tax- exempt entity to a taxable entity a Section 2C payment in lieu of tax is made for the period between the sale date and the date that the building goes on the tax rolls. In FY99, a Section 2C payment of $5.4 million was made as a gap payment in lieu of tax on the sale of a large office

SuUe me mit ante Yau Gl Undp Ov EFL

building sold by a tax-exempt entity, accounting for the high amount of total PILOT revenue in that year. The City expects this revenue source to come in slightly below the midyear budget estimate of $21.2 million for FY01 and has projected $21.8 million for FY02.

Urban Redevelopment Chapter 121A

The Chapter 121A legislation allows local governments to suspend the imposition of property taxes at their normal levels in order to encourage redevelopment. In recent years, the City used this mechanism to encourage development of the Seaport Hotel and the World Trade Center office buildings. Chapter 121A revenues are based on two separate sections of the law as described below.

The Urban Redevelopment Corporation excise is a municipal excise in-lieu-of-tax for which the Commonwealth acts as the collector and distributor. In most cases, the formula for the 121A, Section 10 excise in-lieu-of-tax is $10 per $1,000 of the current fair cash value plus 5% of current gross income. In FY99 and FY00, the City received Chapter 121A, Section 10 distributions of $27.1 million and $27.3 million. In FY01 and FY02, Chapter 121A Section 10 revenues are budgeted at $28.0 million and $28.7 million, respectively. In addition to the Section 10 payments collected by the Commonwealth described above, most 121A corporations have individual Section 6A agreements with the City that result in additional payments made directly to the City. These Section 6A agreements are complex, with actual amounts owed dependent on a formula that varies widely among the 121As. The City collected Section 6A payments of $9.4 million in FY99 and $10.4 million in FY00. The City expects FY01 Section 6A collections to be in line with the midyear budget estimate of $9.9 million and has a budget of $10.1 million for FY02.

Miscellaneous Department Revenue

This category contains twenty-one large accounts and many more small accounts. The largest revenue source in this revenue category is municipal medicaid reimbursements for school health services. This federal reimbursement, administered by the state, began in FY94. The City received $15.6 million in FY99 as payments caught up after a backlog. Collections totaled $10.9 million in FY00. Municipal medicaid

reimbursement is expected to exceed the midyear budget estimate of $8.4 million in FY01, and is budgeted at $12.0 million in FY02. There are three other accounts in this revenue category that are projected to exceed $2.5 million in FY02. Fire service fees are projected at $2.8 million, street and sidewalk occupancy fees are projected at $3.0 million, and fringe benefit & indirect grant allowances are projected at $3.3 million. Fringe benefit & indirect increases considerably this year due to administrative costs associated with grants moving to general fund revenue.

Licenses and Permits

The level of economic activity largely determines the level of many types of permitting and licensing done by City agencies. This category is dominated by building permit revenue, from which the City received $11.4 million and $18.5 million in FY99 and FY00 respectively. Building permit revenue should easily exceed the midyear budget estimate of $14.0 million in FY01. The City expects to receive $15.0 million in building permit revenue in FY02.

The next highest license and permit revenue is the cable television license fee from which the City received $2.6 million in FY99 and $2.8 million in FY00. The City has a budget of $2.9 million for FY01 with no significant growth expected in FY02.

Alcoholic beverage licenses are the only other revenue source in this category that regularly exceeds $2 million in annual revenue. Alcoholic beverage licenses are budgeted at $2.3 million in both FYO1 and FY02. These budgets follow actual revenue of $2.3 million in both FY99 and FY00.

Penalties and Interest

Taxpayers are assessed both a penalty and interest for late payments of property tax bills and motor vehicle excise bills. The City collected $11.0 million and $10.6 million in such penalties and interest in FY99 and FY00 respectively. Actual penalty and interest collections for FY01 fall short of the current midyear budget estimate of $10.7 million. The City expects collect $10.7 million in penalty and interest revenue in FY02.

14

Available Funds

Available funds are linked to a separate category of expenditure appropriation, that is, appropriations that are supported by immediately available special fund transfers. Most of the City’s general fund budget is raised and appropriated from the tax levy, which means it is supported by the revenues that are estimated to come in during the course of the fiscal year. This includes the property tax levy, excises, state aid and the various other categories of revenues described above. The only two significant available funds that the City budgets each year are parking meter revenues to support the Transportation Department, and cemetery trust monies which are used to support the City’s maintenance of its public cemeteries. The City transferred a total of $3.1 million and $6.7 million from these two sources combined in both FY99 and FY00 respectively. The City expects to transfer $10.0 million from the Parking Meter Fund to the General Fund in both FY01 and FY02. The City also plans to transfer $1.7 million from the Cemetery Trust Fund to the General Fund in FY01 and $1.8 million in FY02. These monies were available at the beginning of FY01 and also will be available at the beginning of FY02. Both of these special funds have fees collected during the course of the year. By transferring out less than what is collected, the City has built up these special fund and trust fund balances. Trust fund balances can also benefit from the opportunity to invest in securities offering a higher return than short-term fixed-income investments (see Financial Management section of Volume | for detail).

State Aid

A detailed discussion of state aid is provided in the Revenue Estimates and Analysis chapter of this volume. Below is a brief summary.

Over the last ten years, the Commonwealth has been successful in balancing its budget. This has given the Commonwealth the capacity to support and diversify the local revenue base for municipalities. This had served to reduce local reliance on property tax as a steady revenue base during earlier years of state aid fluctuations. But recently growth in state aid has slowed and municipalities are again more reliant on property tax for growth than before. The primary forms of local aid distributions from the state to municipal

Summary Budget

general revenues are Chapter 70 education aid, additional assistance and lottery. The amount of these funds to be distributed each year to an individual community is described on the “cherry sheet”, a listing of a city or town’s local aid that is printed on cherry-colored paper. Also listed on the cherry sheet are other relatively smaller Commonwealth programs such as library aid, school construction and transportation reimbursements, and highway funds.

Beginning in 1993 with the passage of the FY94 state budget, the Commonwealth embarked upon a multi-year commitment to increase and equalize funding for local education in its local aid distributions. This aid comes from the Commonwealth as Chapter 70 education aid.

The Governor’s budget for FY02 increases statewide education aid by $171 million, an increase of 5.8% over FY01. The City received Chapter 70 education aid totaling $178.2 million in FY99 and $186.2 million in FY00 and will receive $197.5 million in FY01. The City has a budget of $205.6 million in FY02, an increase of 4.1%. FY00 was the last year of the statutorily established funding schedule for education reform. There has yet to be established a post-FY00 funding schedule. A vital component in the City’s delivery of quality public education in the near-term is strong financial support from the Commonwealth.

The current education aid is delivered in tandem with state-mandated costs for charter schools. Charter schools are publicly funded schools administered independently from local school committee and teacher union rules and regulations and whose charters are granted by the State Board of Education. There are two kinds of charter schools, the Commonwealth charter school and the Horace Mann charter school. The former is a school outside the local public school system and the latter is part or all of a school in the public school system. In addition to the Board of Education, the local school committee and local bargaining agent must approve Horace Mann charter schools. In addition, Horace Mann charter schools budgets remain part of the public schools budget.

There are nine Commonwealth charter schools currently operating in Boston, three outside Boston available to Boston residents, and one more is scheduled to open in Boston in September

Summary Budget

2001. In addition to the Commonwealth charter schools, there are also two Horace Mann charter schools operating in Boston. There are currently 2,602 Boston resident students attending charter schools.

Before FY99, all charter school tuition was drawn directly from the City’s Chapter 70 aid. This draw on the City’s education aid totaled $10.9 million in FY98. Under recent amendments to the charter school law, the Commonwealth will pay to the City, as reimbursement for Chapter 70 aid reductions, 100% of tuition for new charter school students the first year, followed by 60% of tuition and tuition increases the second year, 40% of tuition and tuition increases the third year and 0% of tuition and tuition increases the fourth year. The net impact of the charter schools in FY00 was $12.1 million after a $5.2 million reimbursement from the Commonwealth. The City has budgeted $14.1 million to be the net impact of the charter schools in FY01 after receiving a $10.5 million reimbursement from the Commonwealth. The City expects $18.0 million to be the net impact in FY02 after a $10.5 million reimbursement, this assuming current law rather than the Governor's budget proposal to reduce reimbursement to 50% of charter school tuition in the first year only. If the Governor's proposal were to become law, the net impact of charter schools would increase to $26.4 million in FY02. In the long term, it is assumed that the charter schools that thrive will increase overall enrollment, which in succeeding years will increase funding for the school district in the Chapter 70 formula and mitigate the negative fiscal impact of charter schools on the City’s traditional public schools.

Lottery aid for the City, as for most municipalities, has grown steadily the last few years as a result of a state decision to phase-out the lottery cap and return all lottery profits to the cities and towns. The City’s lottery aid was $55.6 million in FY99 and $63.1 million in FY00. The City expects that FY01 lottery aid will meet the budget estimate of $60.4 million with an additional $4.0 million supplemental lottery aid distribution possible. The City expects to receive $64.4 million in lottery aid in FY02. The current lottery formula is not favorable for the City. The City receives a smaller percentage share of lottery aid than its share of the state population, and dramatically less than the share of lottery proceeds derived from sales in

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Boston. Nevertheless, lottery aid has been an important source of revenue growth, aiding the City’s efforts to sustain adequate municipal services. During the last four years, Boston’s lottery distribution has reflected both lottery profit growth and the phasing out of the diversion of lottery funds to the Commonwealth. However, beginning in FY01, growth in the City’s lottery distribution reflects only profit growth of the lottery.

Teachers’ Pension Reimbursement

Boston’s cherry sheet includes an item unique to the City, the teachers’ pension reimbursement for pension charges to the City. The pensions paid to retired teachers in all other cities and towns in Massachusetts come directly from the Commonwealth via the State-Teachers Retirement System. In a singular arrangement mandated by general law, pensions paid to retired Boston teachers are paid by the State-Boston Retirement System, which charges the City of Boston for this cost as part of its annual pension funding. The City is then reimbursed by the Commonwealth through the cherry sheet. In short, the Boston teachers’ pension payroll is administered locally, but, as with all other teachers’ pensions in Massachusetts, is the financial responsibility of the Commonwealth. The teachers’ pension reimbursement totaled $37.3 million in FY99, $38.8 million in FY00, and has already come im at $41.3 million in FY01. The teachers pension reimbursement is estimated at $41.4 million in FY02. The city could face the loss of this reimbursement in the future while retaining the liability for its teacher’s pensions if the language in the FY02 House Budget is enacted.

Non-recurring Revenue

Included in the FY02 Budget is $1.9 million in non- recurring revenue to be transferred from the surplus property disposition fund. The original source of these funds is the proceeds from the sale of central artery land to the Commonwealth for the central artery project. In maintaining its policy of not supporting recurring operating costs with non-recurring revenue, the City is limiting this transfer to an amount not greater than $1.0 million for the Risk Retention Reserve plus $876,000 for a one-time cost associated with after school

16

programs. (see Financial Management section of Volume I for more detail on this revenue source. )

EXPENDITURES

Expenditures are broken down into two primary groups: appropriations directly related to departmental services and fixed and mandated costs. FY02 appropriations are further subdivided into five categories:

City Departments, which includes all operating department appropriations, a risk retention reserve and a set-aside for tax title and annual audit expenses;

Boston Public Health Commission, the City appropriation for the quasi-independent authority and successor to the Department of Health and Hospitals;

County, which includes the City of Boston’s share of the operating budget for the Suffolk County Sheriff and the County share of Pensions and Annuities for payments to retired County officials who were not members of the contributory retirement system;

School Department, the City appropriation for the Boston Public Schools;

Reserve for Collective Bargaining, an appropriation for outstanding labor agreements.

City Departments The combined appropriations for City Departments as shown in the FY02 Summary

HOUSING& ENVIRON

NEIGHBOR- — SERV ECON DEV

0.2%

BASICCITY SERV 10.1% COO 8.5%

MAYOR 0.7%

EDUCATION 44.4%

FY02 Expenditures by Cabinet

Figure 6

Summary Budget

Budget have increased by 1.0% over the FY01 appropriations. Nearly 70% of this category covers four appropriations: Police, Fire, Public Works and Health Benefits. The Police Department's appropriation will increase by $4.9 million, or 2.3%. The increase is mainly driven by civilian collective bargaining increases and educational incentive payments to be made to eligible police officers as prescribed by M.G.L. c. 41s. 108L (the “Quinn Bill”). The City accepted the provisions of the Quinn Bill as part of the collective bargaining agreement with the Boston Police Patrolmen’s Association and as part of arbitration awards for the Boston Police Detectives Benevolent Society units (Detectives and Detective Superior Officers) and the Superior Officers’ Federation. The Fire Department will increase by $1.52 million, or 1.3%. As of the date of passage of the City’s FY02 Budget, the City and the Firefighters union, Local 718 had yet to reach a successor agreement to the collective bargaining agreement that expired on June 30, 1999. Salaries for members of that union as shown in the Fire Department’s budget do not include collective bargaining increases. Public Works will see an increase of approximately $1.1M or 1.7%. Health Benefits will increase by 12.6% over the FY01 appropriation, requiring an additional $11.3 million. The FY02 Health Benefits appropriation will include the cost of a full year of dental and vision coverage for employees who are eligible for coverage through collective bargaining agreements or executive order.

Appropriations can also be divided by cabinet, to better reflect the overall policy priorities and trends by service area. (Figure 6.)

Some of the highlights of FY01/FY02 changes by cabinet are as follows:

Mayor's Office

The cabinet will see a very slight decrease of .4%. The virtual net level funding in the cabinet as a whole is the result of a reduction in the amount appropriated for outside contracts in the Law Department. In FY02, the Office of New Bostonians will receive a general fund appropriation to cover the full salary of the Director. This will free up Baxter Fund resources to help address the Mayor’s commitment to helping new immigrants become proficient in the English language so that they can use the skills that they already have to enter the

Summary Budget

City’s job market. Other Mayoral departments will see increases mainly as the result of collective bargaining increases occurring during FY02. Boston 2:00 to 6:00 will be working closely with Boston Community Centers (BCC) on a new initiative that will focus on improving and expanding BCC after-school programs in partnership with the Boston Public Schools. The City’s General Fund resources currently are being stretched to the limit making the work of the Grants Administration program of Intergovernmental Relations, as it seeks to maximize the City’s access to external funding from state, federal and private sources, particularly important.

Chief Operating Officer

Excluding health insurance, this cabinet will see a slight decrease in its FY02 appropriation. The majority of the decrease relates to the elimination of the Management Fund appropriation. With limited resources available the Administration has decided to redirect the funding historically used for this discretionary fund to more basic city services. The largest increase in this cabinet will go to the Graphic Arts Department to allow the transfer of two employees from the Library’s bindery operation to Graphic Arts. The Library Bindery has been phased out as a result of the City’s effort to streamline its bindery operations by consolidating the City run portion of the Library work in Graphic Arts. The City will continue its investment in technology; the Management & Information Systems (MIS) budget includes funding for the City’s hardware and software needs as well as in-house technical support for all departments.

Chief Financial Officer

After excluding tax title funding from the FY01 appropriation, the net percentage increase in this cabinet is 8.7%. The net increase is solely due to the large increase in the Auditing Department’s budget. The Auditing Department plays a major role in the support of the City’s financial/human resource/payroll system (the BAIS project); this appropriation will allow the Auditing Department to continue to fulfill that role in FY02.

ed

Public Safety

The majority of the increase in this cabinet is related to the Police Department’s education incentive payments to be made pursuant to the Quinn Bill and civilian collective bargaining agreements. The Police Department’s appropriation includes the cost of a class to be added in the second half of FY02. The class will allow the department to continue to provide an appropriate level of staffing. During FY00 the Mayor appointed a commission (the “O’Toole Commission”) to review the operations and organization of the Fire Department. The FY02 Fire Department Budget will allow the department to continue to address the recommendations made in the O’Toole Commission report. The FY02 Budget also contains funding for a class of firefighters at the start of FY02 to replace employees lost through retirements.

Economic Development

This cabinet will show a significant decrease in total appropriations from those funds appropriated in FYO1. In FY02 the general fund budget will not include an appropriation for the Boston Redevelopment Authority (BRA). The City’s commitment to centralizing planning for the City within the Boston Redevelopment Authority will be funded fully with BRA revenues in FY02. The increase in the request for the Minority/Women Business Office includes funding to begin a study that will include the demographics of the 2000 Census and the impact, if any, on business practices in the City. The study will be conducted in partnership with other agencies such as the Boston Housing Authority and the Boston Water & Sewer Commission.

Basic Services

After excluding the state funding included in the FY01 Library appropriation, the combined appropriations for this cabinet show a slight net increase. The most significant percentage increases in this cabinet occur in the Parks Department and Consumer Affairs and Licensing with both at approximately 6%. Funding has been reallocated to Parks to allow the department to continue its strategic planning and collaboration with Community Centers and other organizations to ensure that the recreation services being

18

delivered by the City are of the highest quality and that those services are being delivered in the most cost effective manner. The Parks Department Budget also includes the annualized cost of staffing for Millenium Park. The Mayor’s Office of Consumer Affairs & Licensing will continue partnering with various City Departments, including Police, Inspectional Services and the Department of Neighborhood Development (DND), on the Home Improvement Contracting and Deceptive and Fraudulent Auto Dealership programs begun in FY01 as well as begin a new Face to Face Mediation Program. The Library opened a new branch in Allston this past June; the appropriation for FY02 includes funding for a full year of operations for the Allston Branch. Also of note in this cabinet is the significant decrease in the Youth Fund appropriation. The decrease is solely related to the fact that a $2.2M supplemental appropriation was approved for the Youth Fund in FY01 to cover the shortfall in state funding for the Summer Jobs program. The FY02 Youth Fund appropriation assumes that the final State budget will show a renewed commitment to the City’s youth and will restore funding for the City’s summer jobs program reducing the general fund appropriation needed for the Youth Fund. The City’s summer job program in FY02 will include an education component that will require students to work on basic math, reading and writing skills each day before they begin working a regular job. The Youth Fund appropriation also provides centralized funding for the support of the Mayor’s Youthline.

Environmental Services

The majority of the $1.2 million increase is split between the Transportation Department and the Inspectional Services Department. Collective bargaining increases and inflationary increases in fixed costs are driving the increases in both departments. The focus of the Transportation Departmental will continue to be maintaining public safety (with a particular emphasis on neighborhood traffic safety), traffic flow and parking turnover. Along with all of its mandatory inspection activities, the Inspectional Services will continue the Home Improvement Contracting Program in FY02 in partnership with Consumer Affairs & Licensing and the Department of Neighborhood Development.

SU mim any Bauvdsovet

Human Services

The Elderly Commission will be allocated additional funding in FY02 — an 8.2% increase over the FY01 appropriation. The Commissioner continues to look at re-inventing the way the department provides services, especially in response to the information gathered through “Seniors Count” — the Commission’s citywide outreach effort to seniors 65 and older. Efforts to improve community relations and public information dispersal as well as to increase partnerships with the private sector will continue in FY02. The department will also focus on intergenerational programs. In the area of improving direct customer service, the Commissioner has proposed the utilization of a new Senior Shuttle tracking and scheduling system that will improve the Commission’s dispatching capabilities and decrease downtime of drivers. In order to begin shifting the mission of Boston Community Centers away from recreation and more toward education, the FY02 Budget includes $1M to fund a new initiative to address the Mayor’s goal, as articulated in his State of the City address, to put the City’s 2:00 to 6:00 After School programs in every Community Center, linking them to the Boston Public School curriculum.

Housing and Neighborhood Development This cabinet is showing a very slight increase from the FY01 appropriation, net of the Leading the Way appropriation that is supported by nonrecurring revenue. The Department of Neighborhood Development (DND) continues to streamline its administrative operations to achieve savings and redirect its existing resources toward addressing the Mayor's commitment to community renewal and public investment in the City’s neighborhoods. The Department continues to strive toward making the Mayor's affordable housing production goals a reality. The Mayor is committed to funding a Leading the Way appropriation in FY02 once the revenue from the sale of the former Police Headquarters building is realized. (see Surplus Property Disposition Fund in Financial Management section of Volume I.)

Public Health Commission

The Commission is responsible for providing the public health operations formerly provided by the Department of Health and Hospitals (DHH) and

Summary Budget

Trustees of Health and Hospitals (THH). It is a principal component of the Boston Public Health Network which includes the Public Health Commission, Community Health Centers, and Boston Medical Center. Through Boston Emergency Medical Services, the Commission also provides pre-hospital emergency care.

The FY02 appropriation for the Public Health Commission shows an increase of .7%. However, the Public Health Commission Budget covers a $12 million direct payment to the Boston Medical Center (BMC) required by the agreement reached when the City consolidated Boston City Hospital and Boston University Medical Center Hospital. Since FY02 marks the sixth year post-merger, the payment to BMC has been reduced by $1M as a payment for non-recurring consolidation costs that was required in the first five years following the merger will no longer be necessary. Comparing the FY02 appropriation request to the FY01 appropriation net of that $1M payment yields a 2.3% increase in FY02. The appropriation funds an Emergency Medical Services (EMS) subsidy of $8.1 million. In addition, the FY02 appropriation funds initiatives critical to the health of Boston’s youth and adult populations including an expansion of mental health programs and new programs to assist families transitioning off welfare. The Public Health Commission will also launch a partnership with other city agencies to combat heroin use and improve access to substance abuse treatment.

County Departments

Prior to FY93, state support of county corrections for Suffolk County was by means of state aid into the City’s general fund. In FY93, the Commonwealth shifted its support of county corrections from the City’s general fund to directly funding the Sheriffs Department. In FY96, the City was responsible for funding 12.5% of the Sheriffs Department Budget with the Commonwealth funding the rest. Because this was close to double the percentage of the FY96 statewide local contribution over statewide county corrections spending, the City received a reduction for FY97 to 8.75% of the Sheriff's Budget and a subsequent reduction in FY99 to 6.875%. The City strongly favors a continuation of the trend toward a fairer level of local contribution to the Sheriff's Department. Based on the most current

1.9

information on the status of the State budget, the FY02 Budget for the Sheriff's Department assumes the City’s maintenance of effort requirement, will be lowered to 5%.

School Department

The FY02 School Department Budget contains a 4% increase from the FY01 appropriation, increasing by $24.6 million. The FY02 Budget request allows for increases in fixed costs, inflation, and salary adjustments. The School Department will continue to implement the School Committee’s Five-year Education Reform Plan, A Focus on Children.

The FY02 Budget also includes substantial resources to sustain and expand the Transition Program and Math Support Plan, class size reductions at all schools, support for developing small learning communities in high schools and funding for instructional materials in art. (See the Education chapter of this volume for more details. )

Reserve for Collective Bargaining

A collective bargaining reserve has been established as a provision for the cost of unsettled collective bargaining agreements for City departments.

Pensions

The City’s pension expense has increased modestly over the last several years. The City’s annual pension funding requirement was $120.3 million in FY99, $128.6 million in FYO0 and $127.5 million in FYO1 (after the July 2000 revaluation). The City expects the FY02 pension funding requirement to be $130.9 million. These numbers do not include pension costs allocated to the budgets of the Sheriff's Department or the Public Health Commission. Meanwhile, the percentage of the City’s overall pension liability that has been funded has improved from 52.0% in FY95 to 78.9% in FY00. There are two reasons for this. First, the average annual rate of return on assets in recent years has significantly exceeded the 8% rate of return assumed in the City’s pension funding schedule. Second, the increased percentage set aside for pension funding which has risen from 6% for employees hired in the early 70’s and before, to

20

greater than 8% for more recent hires, continues to aid the system’s trend toward full funding.

The impact of these two items is incorporated into the City’s pension funding schedule each time the pension system does a full valuation. State law calls for full valuations at least every three years. The most recent valuation was approved during FY01 and the pension system is therefore required to do another full valuation during FY04.

A fundamental shift regarding the liability for pension cost-of-living-adjustments was reflected in the valuation of FY98. The Commonwealth no longer funds cost-of-living-adjustments as they had since the enactment of Proposition 2 1/2. The City has opted to accept the responsibility for future cost-of-living-adjustments for its retirees.

Debt Service

The City had expenditures for debt service of $92.32 million in FY99 and $96.48 million in FY00. The City has a budget of $107.25 million for debt service in FY01 and expects to spend $121.84 million on debt service in FY02. The increase in debt service in recent years reflects the increasing amounts that were borrowed in FY99 ($120 million), FYO0 ($120 million), and FY01 ($120 million) and planned for in FY02 ($100 million). The higher borrowing level is a consequence of increased capital renovations and planned new construction for the Boston Publie Schools, which is partially reimbursed by the Commonwealth. FY02 gross debt will be slightly above the City’s traditional guideline of 7% of total expenditures. For further detail see the Capital Planning and Financial Management chapters of this volume.

State Assessments

Accompanying the local aid distributions on the cherry sheet are several charges to the City from the Commonwealth. All but the state assessment for the Massachusetts Bay Transportation Authority (MBTA) are relatively small. In accordance with Proposition 2 1/2, these charges, on a statewide basis, cannot increase annually by more than 2.5%. The City’s state assessment actually declined from $67.1 million in FY00 to an estimated $66.7 million in FY01 due to reduced costs in some of the smaller assessments. The City

Siu mim airiyv> Biuldio lect

Appropriations by Cabinet

FY99 FYOO FYO1 FY02 Inc/(Dec)

Department Expenditure Expenditure Appropriation Appropriation 02 vs 01

Mayor's Office Boston 2 to 6 366,996 544,013 567,068 567,514 446 Intergovernmental Relations 871,263 916,200 947 588 994,255 46,667

(1) Law Department 3,757,260 3,875,695 5,288,392 5,130,858 -157 534

Mayor's Office 1,788,826 1,793,242 1,882,159 1,874,040 -8,119

Neighborhood Services 881,962 947,138 1,082,286 1,114,761 32,475

Office of New Bostonians 0 0 39,600 77,685 38,085

Public Information 779,232 786,774 884,341 887,027 2,686

Total 8,445,539 8,863,062 10,691,434 10,646,140 -45 294

Chief Operating Officer Chief Operating Officer 840,958 822,527 1,016,529 988,226 -28,303 Graphic Arts Department 1,292,205 1,379,746 1,504,855 1,613,268 108,413

Health Insurance 75,011,348 78,846,781 89,430,000 100,731,590 11,301,590

Human Resources 2,560,428 2,672,685 2,842,279 2,910,407 68,128

Labor Relations 897,349 1,041,811 955,920 908,033 -47 887

Management & Information Svs 9,081,634 9,240,418 11,034,699 11,045,586 10,887

Management Fund 225,000 225,000 225,000 0 -225,000

Unemployment Compensation 15,659 SEL 50,000 50,000 0

Workers’ Compensation Fund 4,290,992 4,069,294 3,400,000 3,400,000 0

Total 94,215,573 98,301,981 110,459,282 121,647,110 11,187,828

Chief Financial Officer Assessing Department 5,061,740 5,321,149 5,674,442 5,305,425 -369,017 Auditing Department 1,481,524 B971,,213 3,676,734 6,316,870 2,640,136

Budget Management 2,596,867 2,240,084 2,319,483 2,319,483 (6)

Execution of Courts 8,101,946 6,202,391 4,100,000 4,100,000 0

Medicare Payments 2,928,601 3,201,330 3,113,783 3,500,000 386,217

Pensions & Annuities 6,300,000 5,933,645 6,300,000 5,965,000 -335,000

Purchasing Division 1,088,748 1,140,433 1,193,720 1,299,143 105,423

Taxpayer Referral & Assistance 364,369 379,704 460,242 438,901 -21,341

Treasury Department 3,447,204 3,303,808 3,992,445 3,401,342 -591,103

Total 31,370,999 31,693,757 30,830,849 32,646,164 1,615,310

Public Safety Fire Department 115,911,697 118,751,346 1A 78 5/112 119,098,152 1,519,440 Police Department 194,218,469 200,756,488 214,389,278 219,253,853 4,864,575

Total 310,130,166 319,507 834 331,967,990 338,352,005 6,384,015

Education Boston Public Schools 543,372,457 579,180,939 611,943,050 636,563,231 24,620,181 Total 543,372,457 579,180,939 611,943,050 636 563,231 24,620,181

Economic Development Boston Redevelopment Authority 0 8) 725,000 0 -725,000 Boston Residents Job Policy 397,893 401,336 448,354 469,335 20,981

Minority/Women Business 532,981 540,969 625,952 662,335 36,383

Special Events & Tourism 1,642,751 EW eS Ver fa Ie 1,794,255 1,270,425 -523,830

Total 2,573,625 2,414,022 3,593,561 2,402,095 -1,191 466

Basic Services Central Fleet Maintenance 1,626,522 1:063;555 2,020,785 2,075,670 54,885 Consumer Affairs & Licensing 390,754 358,346 452,602 479,677 27,075

Election Department 3,045,666 3,476,439 3,337,098 3,362,494 25,396

(2) Library Department 27,416,387 28,160,254 29,937,903 28,701,485 -1,236,418

Parks & Recreation Department 12,481,942 13,064,983 14,039,756 14,870,972 831,216

Property Management 14,858,005 15,660,725 17,933,088 17,923,249 -9,839

Public Works Department 59,393,800 63,133,179 64,569,826 65,660,154 1,090,328

Registry Division 798,528 783,064 867,842 895,802 27,960

Snow Removal 7,468,963 6,018,565 4,405,561 4,462,060 56,499

Youth Fund 4,883,153 6,199,168 8,589,738 6,408,767 -2,180,971

Total 132,363,720 138,418,078 146,154,199 144,840,330 -1,313,869

Environmental Services Environment Department 884,004 879,260 943,723 980,917 37,194 Inspectional Services Dept 11,142,824 11,270,550 12,845,346 13,307,525 462,179

Transportation Department 25,174,085 26,164,999 28,468,788 29,168,028 699,240

Total 37,200,913 38,314,809 42,257,857 43,456,470 1,198,613

Human Services Boston Community Centers 13,659,577 14,591,205 15,063,685 15,964,364 900,679 Civil Rights 278,949 382,761 466,461 434,290 -32,171

Community Partnership 1,488,910 1,704,243 1,584,269 1,627,947 43,678

Cultural Affairs 557,278 725,614 1,028,374 1,100,893 72,519

Elderly Commission 2,222,019 2,415,041 2,609,504 2,823,460 213,956

Emergency Shelter Commission 412,701 585,443 631,062 599,947 -31,115

Veterans Ser ces Department 2,138,566 2,005,224 2,605,078 2,371,400 -233,678

Women's Commission 142,705 149,370 173,662 166,156 -7 506

Total 20,900,705 22,558,901 24,162,095 25,088,457 926 362

Neighborhood Development Neighborhood Development 3,483,928 4,716,344 4,762,514 4,873,518 111,004 Leading the Way 6) ie) 13,000,000 8) -13,000,000

Rental Housing Resource Center 731,264 682,918 831,796 744,293 -87 ,503

Total 4,215,192 5,399,262 18,594,310 5,617,811 -12,976,499

Public Health Public Health Commission 53,502,504 58,212,620 62,141,493 62,550,630 409,137 Total 53,502,504 58,212,620 62,141,493 62,550,630 409,137

Non-Mayoral Departments City Clerk 773,809 806,889 867,499 893,034 25,555 (1) City Council 3,070,633 3,288,550 3,490,710 3,930,923 440,213

Finance Commission 175,740 170,914 185,892 192,316 6,424

Licensing Board 523,683 548,078 630,896 590,525 -40,371

Registry of Deeds 1,779,490 (6) 0 0 0

Suffolk County Sheriffs Dept 5,584,200 5,854,066 6,029,688 4,536,850 -1,492 838

Total 11,907,555 10,668 497 11,204,685 10,143,648 -1,061 ,037

Grand Total 1,250,198,948 1,285,143,813 1,404,000,805 1,433,954,091 29,953,286

(1) The FY02 amounts shown include supplemental appropriations passed by the City Council on July 13, 2001. (2) The FY02 Library appropriation does not include anticipated State Library of Last Recourse funds yet to be appropriated.

Summary Budget 21

expects growth in assessments to $67.5 in FY02 as a result of a new schedule of MBTA assessments passed with last year’s state budget that will lower the MBTA statewide assessment in the future. The new schedule allows cities and towns serviced by the MBTA to deduct the cost of operating Regional Transit Authorities from their assessment. Since the City has no such system and therefore no deduction, the net effect is a higher assessment as the City pays a higher share of a lower statewide assessment. In the past, the cost of operating the MBTA has traditionally grown at a much faster pace than the allowable 2.5% increase in state assessments and consequently so has the Commonwealth’s annual subsidy to the MBTA. Along with this new MBTA assessment schedule, the Commonwealth has given the MBTA a budget instead of covering their annual shortfalls with a subsidy.

Reserve

The City is required by law to maintain a reserve on its balance sheet of 2.5% of the prior year appropriations, not including the School Department, which has its own separate reserve. The current balance of this reserve is $18.7 million. Due to the significant reduction in FY97 of non-school departmental appropriations as a result of the removal of hospital operations from the budget, this reserve is already fully funded through the end of FY01. The reserve can be used to provide for extraordinary and unforeseen expenditures and the Mayor may make drafts or transfers against this fund with City Council approval only in the month of June. Since the establishment of this reserve, the City has yet to make any drafts or transfers from the reserve. FY02 marks the first year since FY95 the City will be required to show an increase in this reserve to satisfy the statutorily obligated funding level. The City expects to fulfill the Tregor Reserve requirement to add $1.1 million to the reserve before the close of FY01. (see Financial Management section of Volume I for detail.)

Note:

The City prepares its financial statements in accordance with generally accepted accounting principles (GAAP) and publishes them annually in its Comprehensive Annual Financial Report

7 hs

(CAFR) and as an appendix in all bond prospectuses issued by the City. However, the budgetary basis accounting practices established by the Massachusetts Department of Revenue are used in constructing each year’s proposed budget, during the budget approval process, and in monitoring the budget throughout the year. Therefore all numbers used in this budget document are on a budgetary basis. There are no descriptions or discussions of separate funds because one major way in which budgetary basis accounting differs from GAAP is that while certain activities and transactions (e.g. debt service) are presented in separate funds in GAAP, they are components of the general fund using budgetary basis accounting. For a fuller understanding of the differences, a walk-through table demonstrating the City’s revenue and expenditure totals for FY00 in budgetary basis accounting versus GAAP is presented at the end of the Financial Management chapter.

Tregor Reserve Fund

Beginning Ending

Fiscal Year Funds Funds’ Year

Year Balance In Out Balance FY95 16-925e" 0.755 0:000 18.680 FY96 18.680 0.000 0.000 18.680 FY97 18.680 0.000 0.000 18.680 FY98 18.680 0.000 0.000 18.680 FY99 18.680 0.000 0.000 18.680 FYOO 18.680 0.000 0.000 18.680 *FY01 18.680 1.100 0.000 19.780 *FY02 19.780 0.000 0.000 19.780

Notes: ($millions), *projected

PERSONNEL CHANGES

The following table shows a four year comparison of city funded full-time equivalent (FTE) positions. (This includes both permanent and emergency employees.) The numbers used for FY02 are estimates based on the current level of employees, current vacancies that are expected to be filled, as well as any plans for new positions. (It should be noted that the FTE number for BPS in this table does not include employees out on Long Term Leave and Workers Compensation. The table in the Education chapter lists these categories in the Employees by Category table. )

FY00- FY01 Changes - The total net increase of 159.3 positions from January 1, 2000 to January 1, 2001 was mainly the result of increases in the

Summary Budget

School Department. Of the 186.8 FTE increase in the School Department, over 100 were teacher and instructional support positions and approximately 60 were bus monitors. The increases in many of the City departments were actually much lower than those projected in the FY01 Budget Document. Those lower than projected increases were largely due to the timing of the new Police class (added in March), a lower number of hourly Election Department workers on the payroll in January, 2001 (timing issue) as well as the tight job market. The strong economy has made it difficult for some of the basic service departments such as Public Works to hire laborers — a key component of their workforce.

FY01-FY02 Changes — The City expects to have minimal FTE growth in most departments between FY01 and FY02. Overall the increase is expected to be 178, with over half of that growth coming in Public Safety (mainly a timing issue) and Education combined.

The number of positions in the Mayor's Office cabinet is expected to increase by 4 in FY02. Of those, 2 will be in the Boston 2:00 to 6:00 Office as the Director fills two existing vacancies in order to help make the Mayor's after school program goals reality.

In the Chief Operating Officer’s cabinet, the FTE count is expected to grow by 6. Management & Information Services Department is projected to grow by 2 as the department aggressively seeks to fill current vacancies and strengthen its technical support staff to better serve the expanding technological needs of other departments. Graphic Arts will increase by 2 as the Library’s in- house bindery operations are consolidated with the Graphic Arts Department operations resulting in the transfer of 2 Library employees.

Almost half of the projected increase in Finance Cabinet positions from January 1, 2000 to January 1, 2001 is the result of expected hiring in the Auditing Department in order to fulfill its supporting role to the BAIS project.

The numbers of Public Safety employees on the payroll as of January 1 of any year fluctuate with the timing of classes and to a lesser degree, the timing of retirements. After considering the current number of filled positions, expected retirements and the timing of replacement classes,

Summary Budget

the net increase projected for Public Safety FTEs is approximately 46.

{ducation is projected to increase by about 42 FTEs from January 2001 to January 2002. The growth in positions can be attributed to two primary factors: class size reduction and increased support for the Transition Program and the Math Support Plan.

The projected increase in the Basic Services Cabinet will be the result of increases in three departments — Library, Parks and Public Works. The Library opened the Allston Branch library this spring, requiring 7 additional positions. The Parks Department added 2 new positions for Millenium Park after January 1, 2001; another position will be transferred to Parks from Community Centers to work on recreation issues. The Public Works Department will continue to try to fill essential positions, vacant on January 1, 2001; the projection of an increase of 21 positions is based on the hope that the Department will be

successful.

The projected increase of 16 in the Human Services Cabinet is largely the result of positions that are expected to be filled in Community Centers by January 1, 2002. In FY02 there are two items of note that have staffing issues. The Vine Street facility will be coming on line and will need staffing assigned to it. In addition, 3 new positions were included in the Department’s budget for the new $1M After School Program Initiative. In FY02 Community Centers will be taking a hard look at the most efficient and equitable way to staff its Community Centers and continue to address the Mayor's education priorities.

The Public Health Commission is requesting 17 new positions. Approximately 7 of these FTEs will be added to the Child, Adolescent & Family Health Bureau. The remaining 10 positions will be scattered throughout various bureaus including Infectious Diseases, Homeless Services and Administration.

FTE growth in the Economic Development, Environmental Services and Housing & Neighborhood Development cabinets is expected to remain relatively stable in FY02. Small increases shown in any one department in these cabinets are mainly the result of the timing of filling vacancies

23

Personnel Summary

1/1/99 1/1/00 1/1/01 1/1/02 Projected FTE Projected Inc/(Dec) Office of the Mayor Boston 2 to 6 : 5.(0,

Intergovernmental Relations 10.0 10.0 8.0 10.0 2.0 Law Department 46.0 43.0 47.0 47.0 - Mayor's Office 215 28.0 29.0 28.0 (1.0) Neighborhood Services 19.5 20.5 23.0 23.0 - Office of New Bostonians - - - 1.0 1.0 Public Information qlF ATS) ae 19.0 19.0 - Total 123.5 124.0 130.0 134.0 4.0 Chief Operating Officer Chief Operating Officer 9.5 9.0 9.0 10.0 1.0 Graphic Arts 37.0 38.5 37.0 39.0 2.0 Human Resources oil te 53:5 54.0 55.0 1.0 Labor Relations 11.0 i\2as ZO 14120 - Management Info Svcs 82.0 83.0 83.0 85.0 2.0 Total 191.0 196.5 194.0 200.0 6.0 Chief Financial Officer Assessing Department 92.0 91.0 90.0 90.0 Auditing Department Slee 58.0 52.0 60.0 8.0 Budget Management 27.0 30.0 27.6 27.6 Purchasing Division 21.0 18.0 20.0 20 1.0 Retirement Board - - - - Taxpayer Referral & Assistance 10.0 10.0 9.0 10.0 1.0 Treasury Department 59.5 54.5 58.0 60.0 2.0 Total 261.0 261.5 256.6 268.6 12.0 Public Safety Fire Department 1,755.5 eS OLO 1,732.0 1,719.0 (13.0) Police Department 3,024.5 3,005.0 2,958.3 3,017.0 58.7 Total 4,780.0 4,735.0 4,690.3 4,736.0 45.7 Education School Department 7,914.8 8,091.7 8,278.5 8,320.7 42.2 Total 7,914.8 8,091.7 8,278.5 8,320.7 42.2 Economic Development Minority\Women Business 8.0 8.0 8.0 8.0 - Office of Boston RJP 9.0 9.0 10.0 10.0 : Special Events & Tourism 9.0 8.0 9.0 9.0 Total 26.0 25.0 27.0 27.0 - Basic City Services Central Fleet Maintenance 47.0 45.0 48.0 48.0 ‘ Consumer Affairs & Licensing 8.5 8.5 9.0 9.0 Election 57.9 64.2 44.7 44.7 - Library Department 559.7 541.4 558.7 565.7 7.0 Parks and Recreation 244.0 ZOD 235.0 238.0 3.0 Property Management 277.0 PEAVY) 278.8 278.8 . Public Works Department 420.5 409.5 389.0 410.0 21.0 ~ Registry Division 2185 20.5 21.0 21.0 - Youth Fund 1.0 2.0 4.0 4.0 Total 1,637.1 1,597.6 1,588.2 1,619.2 31.0 Environmental Services Environment 13.0 15.0 16.0 16.0 - Inspectional Services 2225 225.0 237.6 237.6 - Transportation 379.0 441.5 438.0 440.0 2.0 Total 614.5 680.0 691.6 693.6 2.0 Human Services Civil Rights 7s 6.5 8.0 8.0 - Community Centers 378.5 383.5 370.2 382.2 12.0 Community Partnerships 8.0 11.0 12.0 12.0 . Cultural Affairs 6.0 9.5 8.0 10.0 2.0 Elderly Commission 59.5 58.0 61.0 63.0 2.0 Emergency Shelter 4.0 6.0 6.0 6.0 - Veterans Services 19.0 17.0 17.0 ‘WAe) Women's Commission 2.0 3.0 3.0 3.0 Total 484.5 494.5 485.2 501.2 16.0 Neighborhood Development Neighborhood Development 113.5 SiO 111.0 113.0 2.0 Rental Housing Resource Center 16.5 15.5 15.8 15.8 - Total 130.0 130.5 126.8 128.8 2.0 Public Health Public Health Commission 741.0 TEM TS TAstette) 773.0 5 We Total 741.0 731.7 755.9 773.0 Aza Non-Mayoral ity Clerk 14. (Bo es} nD! 15.0 - City Council 67.0 66.5 70.2 70.2 - Finance Commission 4.0 4.0 4.0 4.0 - Licensing Board 10.0 11.0 11.0 11.0 - Registry of Deeds 56.0 - - - - Sheriffs Department - - - - - Total 151.0 97.0 100.2 100.2 - “Grand Total. StC~C—tCsC ne OA die ad 2, 166mm] fb04.0 came 2) D020 eee

2 4 Summary Budget

EXTERNAL FUNDS

Supplementing the services that are provided by the City’s $1.8 billion general fund budget is approximately $359.5 million in external funds. These funds consist mostly of federal, state and private funding earmarked for specific purposes. Education, housing, economic development, health, and county corrections are some of the largest areas for which these funds are targeted.

Twenty departments receive federal, state or other forms of external funding. Since there are hundreds of grants and many of them are small, the focus here is on the largest grants. Approximately 95% of the City’s external funds are

plan for those four years so that longer term budget planning can take place in a timely manner. Note: FY00 external fund expenditures for the School Department differ from those shown in Volume II due to timing differences between the City’s Auditing Department and the School Department as to what period grant expenditures are reported. Volume | expenditures are those as

reported by the Auditing Department.

Federal and State Grants

Some of the larger federal grants received by the City have been a vital source of funding for many years, For example, in FY02, the School

External Funds

FYO0O Expenditure

Boston Public Schools Neighborhood Development

Suffolk County Sheriff Public Health Commission Library Department

Police Department

Other

303,537,964

found in six of the twenty departments. These six departments are the School Department, Neighborhood Development, Sheriff's Department, Public Health Commission, Library Department, and Police Department. Other departments that also have significant grant funding are the Elderly Commission and the Transportation Department. Descriptions and amounts for grants by department can be found in Volumes II and II].

State funding provided for the Central Artery / Third Harbor Tunnel (CA/T) related City services is not mentioned below because this significant amount of funding is diffused among several City departments. As the purpose of the CA/T funding is project-specific, the duration of this funding will not go beyond the project itself. Departments providing the most significant CA/T-related services are Transportation, Fire, Police and the Public Health Commission. The City has a current agreement with the State’s Central Artery/Tunnel Project on a four year budget extension that runs through June 30, 20038. The City’s funding for that four-year period reflects a significant reduction as the project heads toward completion with limited resources. Each of the City departments involved in the project have been given a funding allocation

Summary Budget

93,287,940 58,469,124 82,405,299 28,054,857

9,070,510

159205100 24,323,484

FY01 FY02 Estimated Estimated

114,025,303 70,682,552 90,277,402 29,245,938

9511735782 8,948,689 23,419,343

113,504,517 73,200,243 96,082,882 42,571,791

9,703,287 6,473,930 Wi 19 77205

345,773,009 359,456,355

Department is expected to receive $26 million in Title I entitlement, a grant that the City has been receiving for a number of years. This funding has supplemented education programs in schools with significant populations of low-income students. The City has also received for many years Community Development Block Grant (CDBG) funding for a variety of neighborhood development activities. Other sources of federal funding received by the City address diverse needs and/or creative approaches such as community policing, housing support for the homeless, and investment in the City’s empowerment zone.

State grant funding for the City has grown most significantly over the last few years in the area of corrections. In FY94, the state funded approximately 74% of the Suffolk County Sheriffs Budget. By FY99 the amount was 93.125% of a growing budget. Over the long-term, state support for the City’s Library system has also grown. The state’s largest contribution for local services is in the area of K-12 education. However, most of this funding is direct to the City’s general fund, in which the major requirement for receipt of the funds relates to a minimum general fund school budget. For FY02, the state is projected to

29

distribute $204.6 million to Boston directly to the City’s general fund in Chapter 70 educational reform aid.

A description of the largest federal and state supported programs in the six departments managing the bulk of the City’s external fund resources is given below.

Neighborhood Development

The Community Development Block Grant (CDBG) is a sizeable annual grant from the U.S. Department of Housing and Urban Development (HUD) to the City of Boston designed to fund a variety of neighborhood development activities. The City expended approximately $26.9 million in CDBG funding in FY00, and estimates spending $36.2 million in FY01 and $35 million in FY02. At least 70% of CDBG funds must be used to benefit low and moderate-income households. CDBG funds are used to produce and preserve affordable housing, revitalize neighborhood commercial districts, assist the renovation of non-profit facilities, improve vacant lots, promote and monitor fair housing activities, and assist non- profit organizations in the operation of emergency shelters, health care, youth and adult literacy programs. CDBG funds cannot be used for general government services and cannot replace funding cuts from existing public service activities. CDBG funding is also being utilized as a security for Section 108 loans. ;

Emergency Shelter Grant/Shelter Plus Care/Supportive Housing - These three federally funded grants are administered by HUD. FY01 funding will be $13.3 million while another $11.7 million is expected for FY02. Funding decisions on these three competitive grant applications will be announced in the fall. The Emergency Shelter Grant supports the development and operations of emergency shelters for the homeless. The Shelter Plus Care grant program provides rental assistance for homeless people with disabilities, primarily those with serious mental illness, chronic problems with alcohol and/or drugs, and AIDS. Other federal, state or local sources provide the support services that must match the value of the rental assistance. The Supportive Housing Program provides service, operating and/or capital funds for a broad range of housing and social service projects. The program requires that

26

applicants match the amount of supportive housing acquisition and development funds requested with an equal amount of funding from other sources.

HOME Investment Partnership - The HOME Partnership Program is a grant from HUD to support the development of affordable housing. The City expended $5.7 million in this program in FY00 and estimates spending $7.69 million in FY01. Projected spending for FY02 is $7.98 million. Eligible activities include new construction or rehabilitation of housing, tenant-based rental assistance for up to two years, and assistance to first-time home buyers. All HOME funds must be used to benefit low and moderate-income households. Fifteen percent of HOME funds are set aside for projects sponsored by Community Housing Development Organizations and five percent is set aside for operating costs for Community Housing Development Organizations.

Section 108 Loan Project/Economic Development Initiative - Section 108 funds are available to eligible cities from HUD on an application basis. The City, through a pledge of its current and future CDBG grant awards, secures Section 108 funds. These funds can only be used for economic development projects. The Economic Development Initiative Program is a special HUD program that makes available grants to cities to spur economic opportunity. This initiative also promotes community development through a long-term strategy: a) establishing community-based partnerships; b) training residents for new job opportunities; c) developing a plan for responding to community needs by integrating economic, physical human, and other strategies. The City received two multi year grants of $22 million each for these two programs for use within the Empowerment Zone. (Another $3 million was reserved for social service activities in the Empowerment Zone). The funds are used to assist new or existing smaller scale neighborhood commercial enterprises and larger scale commercial and/or industrial development projects. These funds must be used to lower the cost or lower the risk to the City on Section 108 loans made to eligible economic development projects. Spend down of these funds has been spread over the past several years.

Summary Budget

School Department The School Department’s FY02 General Fund

Budget of $635.1 million is supplemented with approximately $113.5 million in external funds. There are four main categories of funding: formula grants, competitive grants, reimbursements and other (private resources for the most part). Title | Entitlement and the School Lunch Reimbursement program are the two largest. external funding items and make up the bulk of federal support.

Community Partnerships for Children - The Community Partnerships Program funding is the largest competitive grant received by the School Department. This is a State program to create an early education system in the City of Boston with Head Start Centers, Private Day Care Centers, and Family Based Day Care. The amount budgeted by the School Department for this program is $15.1 million and $15.1 million in FY01 and FY02, respectively.

Class Size Reduction - The School Department expects to receive $4.77 million in FY02 from a federal grant program to increase staff in the classrooms — an increase of about $910,000 from the grant received in FY01. In FY02, the City will also receive a Class size reduction grant from the state in the amount of $4.1 million.

Title I Entitlement - This federal program supplements education in schools with significant populations of low-income students. This key source of funding for the Boston Public Schools makes up a large portion of the federal forrnula grant funding received. The School Department estimates spending levels for this program in FY01 and FY02 of $24 million and $26 million, respectively.

School Lunch - The School Lunch program, administered by the Department of Agriculture, reimburses local school districts on a per meal basis for the costs of breakfasts and lunches for low-income students. The School Department has budgeted this federally funded reimbursement program at $20.45 million for both FY01 and FY02.

SPED 94-142 Entitlement - This is a federal formula grant in support of special education programs. The amount budgeted by the School Department in this program area for FY01 and FY02 is $8.25 million and $9.78 million, respectively.

Summary Budget

Public Health Commission

Boston Healthy Start - The purpose of this project is to develop a comprehensive needs assessment and carry out a service plan to address those factors most affecting infant mortality in the City of Boston. Three project areas consist of those census tracts found to have both the highest numbers of infant deaths and the highest infant mortality rates in the City. Overall, the City has experienced significant improvement in this health area. Public Health Commission projects to receive $1.97 million for this program in FY02.

Ryan White Care Act - This funding supports delivery or enhancement of HIV-related outpatient and ambulatory health and support services and inpatient case management services that prevent unnecessary hospitalization or that expedite discharge, when medically appropriate, from inpatient facilities. The estimated level of spending for this federally funded program is $15 million for FY02.

Shelter: Long Island and Long Island Annex - This project provides homeless services in the form of shelter, food, clothing, health care, and social services for up to 360 homeless adult men and women. Of the 360 beds, 50 beds are reserved for women, 310 beds are reserved for men and one room for families in crisis. Guests arrive at the shelter via shuttle bus from the Boston Medical Center campus. In addition, the Public Health Commission receives state funding for the annex at Long Island Shelter. This funding provides homeless services for 100 homeless clients nightly, including food, shelter, case management, and health care. Overall, projected external funding for homeless services in the Public Health Commission Budget for FY02 totals $9.7 million.

Police Department The Police Department’s grant funding on both the

federal and state level has focused most upon adding police officers and community policing.

Same Cop, Same Neighborhood - This neighborhood policing program is based on the belief that police officers and private citizens working together can help address community problems related to crime. The program is supported with a grant awarded by the Massachusetts Executive Office of Public Safety. The total cost of the program supported by this grant was $2.5 million in FY00 while estimated

241

expenditures for FY01 are $2.4 million. For FY02 the Department has estimated funding of $2 million for this program.

BJA Block Grants - This federal program is awarded by the Bureau of Justice for the purpose of reducing crime and improving public safety through the purchase of police equipment, the use of police overtime, and to support community partnerships for community policing. The spending for this program was $2.2 million in FY00, and is estimated to be $1.97 million in FY01 and $3 million in FY02.

Judicial Oversight Demonstration Initiative - These funds, made available through the Violence Against Women Act and awarded by the U.S. Department of Justice, are being used to increase offender accountability and improve victim safety through the development and implementation of the Dorchester Domestic Violence Court. Spending from this grant is expected to be about $1 million in FYO1 and $431,000 in FY02.

Overall, the level of support from the federal government for local crime control has increased significantly during the past few years. Total projected spending for all grants in FY02 is conservatively estimated at $6.5 million (includes only grants that are definite) and is likely to exceed this amount. The nature of the grant programs has tended to be short-term funding that runs its course and serves its purpose amd is then supplanted by new programs.

Sheriff's Department

State funding for the Sheriff's Department is mainly composed of direct funding for the operation of the department from the state’s general fund. A relatively small additional piece of funding comes from Suffolk County’s portion of the state deeds excise tax.

Over time, the state has shifted the various costs of running counties from the municipalities to the state. This began in the 1970s when the cost of courthouse employees was shifted to the state. In 1985, the only courthouse employees not included in the earlier shift, the maintenance workers, became state employees. Due to the burden of an increasing jail population statewide, during the 1980's the state committed to building new jails and renovating current jails in order to expand the

28

number of cells statewide. Thus, the Suffolk County’s two old and relatively dilapidated jails were replaced with new and larger facilities. The construction costs were fully paid for by the state. The state also committed to cover, at a minimum, the growing costs of corrections for municipalities beyond the 2.5% growth that could be managed with allowable property tax growth. Over time, this meant the state was covering a larger and larger portion of the county corrections cost. For Suffolk County, this has culminated with the state covering over ninety percent of the Sheriff's Department’s expenses since FY97.

Direct state funding for the two jails operated by the Sheriff's Department has increased from $40.6 million in FY94 to $54.1 in FY96 to $84.7 million in FY01. Direct state funding for FY02 is estimated at $87.6M. This funding is further supplemented by $5 million in FYO1 and $6 million projected in FY02 in deeds excise revenue.

Library Department Total funding for the following three state grant

programs is estimated at $8.3 million for FY01 and $8.6 million FY02.

Library of Last Recourse - The Library of Last Recourse provides reference and research services for individual residents of the Commonwealth at the Boston Public Library through developing, maintaining, and preserving comprehensive collections of a research and archival nature to supplement library resources available throughout Massachusetts. The Library maintains the personal resources, expertise, and bibliographic skills needed to develop and provide access to reference and research collections.

Boston Regional Library - The Boston Regional Library System Program (BRLS), which has replaced the Eastern Regional Library System, is a cooperative organization of 105 public, academic, school and special (government, medical, non- profit, and corporate) libraries in the cities of Boston, Malden and Chelsea. Headquartered at the Boston Public Library, BRLS supports enhanced reference and information services, interlibrary loan and journal document delivery, continuing education and staff development, consulting on library operations and a variety of cooperative programs. The BRLS operates under a

Se uamMeMrda th Veu Bsuedegrert

cost reimbursement agreement granted by the Commonwealth of Massachusetts Board of Library Commissioners.

State Aid to Libraries - This funding is provided by the Commonwealth of Massachusetts Board of Library Commissioners to the Trustees of the Public Library of the City of Boston annually. The Library is required to meet certain minimum standards of free public library service established by the Board to be eligible to receive the grant.

FY02 - FY03 BUDGET PLAN

Introduction

In the FY97 Budget, a two-year financial projection was presented for the first time. While statutorily the City must maintain an annual budget process subject to the appropriating authority of the City Council, the second year projection provides a useful context for these decisions.

In projecting the City’s operating budget for FY03, the issue of state aid stands out as the most critical. FY00 is the last year of the statutorily established funding schedule for education reform. There has yet to be established a post- FY00 funding schedule. This leaves the City without a clear picture of the size of its Chapter 70 Education aid for FY08.

The budget for FY02 has been based on the most current available revenue picture. The FY03 plan reflects the best estimate of revenues as well as projecting the major components of expenditures given current policy and cost trends.

Revenue Trends The following pie chart displays the breakdown of revenue projected for FY03. (Figure 7.)

Major revenue trends for FY03 include:

Property Tax Levy: The 2.5% increase and a projected $30.0 million of new growth will result in $54.3 million or 5.6% in additional tax levy.

Excises: Excises are expected to increase $1.9 million or 2.3%, reflecting a slower motor vehicle excise receipts due to expected slower motor vehicle sales than in recent years.

Fines: Parking fine revenue is expected to increase $1.3 million or 2.3%. Additionally, an increase in code enforcement fines of $150,000 in

Summary Budget

FY02 is expected to continue as a result of increased collection efforts.

Interest on Investments: Interest income is expected to increase $1.5 million or 7.5% after short-term interest rates recover from projected reductions in FY02.

Payments in Lieu of Taxes: With no new agreements expected, PILOT revenue should increase $700,000 or 3.3%. This increase essentially captures the inflation in the current agreements.

Chapter 121A: Increases in payments are expected to total $1.0 million or 2.5%.

Miscellaneous Department Revenue: Projected from historical trends and conservative economic assumptions, miscellaneous department income should increase $1.5 million, or 4.1%.

Licenses and Permits: Constrained by a moderate increase of $0.6 million in building permits, we expect a $900,000 or 3.6% increase in FY03.

Penalties & Interest: Projected to be up slightly in FY08.

Available Funds: A small increase from FY02 of $100,000 is expected in FY03.

TEACHERS PENSIONS 2.3%

STATEAID 27.7%

FINES 3.3%

ocr OTHER PROPERTY REVENUE TAXLEVY 82% cis EXCISES

4.6%

FY03 Estimated Recurring Revenue

Figure 7

State Aid: Projected to increase $12.9 million or 2.6% due to large increases in charter school tuition offset by only modest expected increases in Chapter 70 education aid and charter school reimbursements. Additionally, an educational reimbursement of approximately $7.0 million by the state, in accordance with the terms of the

29

Quinn Bill is included. Note, the City’s lottery distribution in FY08 will again reflect only profit growth in the lottery.

Teachers’ Pension Reimbursement: A small increase in FY03 is based on the reimbursement. arrangement with the state and is reasonably predictable.

Non-Recurring Revenues: For FY08, as in FY02, $1.9 million will be applied to the risk retention reserve plus $876,000 to fund the costs associated with the after school initiative, through a transfer from the surplus property fund.

Total recurring revenues in FY03 are projected to increase by $75.8 million, or 4.38% over FY02 Budget projections. This increase is based on conservative revenue estimates and an assumption that the economy will continue its current level of growth for the 24 months from today to the end of FY03.

Expenditure Trends The following pie chart displays the allocation of expenditures projected for FY03. (Figure 8.)

Major expenditure trends for FY03 include:

City Departments: With no long-term recurring program increases on the horizon, the major impacts on City department appropriations will be collective bargaining and inflation. Based on current revenue projections for FY03 and the uncertainty of the level of Chapter 70 Education Aid, along with the increases projected for FY03 fixed costs, City Departments in total will be limited to a 4% increase over FY02 appropriations. Many of the city’s collective bargaining agreements are due to expire on June 30, 2002; any cost of living increases included in future collective bargaining agreements will have to be negotiated within the 4%. The outcome of current negotiations with the Firefighters Union and the impact of the educational incentive provision (the Quinn Bill) in Police Department contracts will play a significant part in the actual outcome for FY03. Inflationary cost increases continue to be particularly significant for large contractual service items in basic city services such as trash removal and alterations and repair contracts, for utilities costs, and employee health benefits.

3 0

OTHER

\| 42.0%

SCHOOL DEPT 35.9% PENSIONS DEBTSERV Seaee ec 7.2% STATE ASSESS

FY03 Estimated Expenditures as a Percentage of Recurring Revenue Figure 8

Public Health Commission: Projecting public health services and EMS at current levels, the City’s net subsidy to the PHC is projected to increase 3% over the FY02 Budget. Due to the non- operational costs included in PHC’s budget such as health benefits and pension costs the city will need to evaluate the feasibility of that 3% during the FY03 Budget formulation process.

County Departments: Again, the City’s position regarding the proposed state takeover of county functions argues for equalizing the local effort to 5%. Pending resolution of this issue at the state level, the FY03 projection conservatively assumes a 3% increase in this appropriation, but this is one item that is out of the control of City management.

School Department: As in previous years, programs with multi-year planning horizons are included in the FY02 Budget and will have an impact on planning for FY03. The current Boston Teachers Union contract runs through August 31, 2003. Both of these items will contribute to the projected increase of 4% in FY03. Funding of ongoing initiatives such as the Comprehensive Literacy and Math Initiative, reductions in student-teacher ratios, support for the Technology Initiative and bus purchases are factored in, as are inflationary impacts.

The total appropriations under these parameters would increase by $57.37 million in FY03 over the budget for FY02.

Fixed Costs: Given that the pension-funding schedule for the current city payroll, the debt

Summary Budget

CITYDEPTS

service policies followed in the City’s capital plan, and mandated state assessments are known, fixed costs can be predicted fairly accurately. In FY03, fixed costs will increase by $17.88 million or 5.6%, led by an $11.25 million or 9.2% increase in debt service due to borrowings to fund school construction and other capital projects and a $4.82 million or 3.7% increase in pensions costs.

Bottom line: Under these scenarios, the City’s Operating Budget would remain balanced.

Planning a Balanced Budget

Preparing a two-year planning horizon is useful because it provides time to make adjustments to relieve the cost pressures on certain services. It also promotes cost-saving or new programming alternatives to improve the financial position projected in the second year, and helps us to monitor changes in assumptions as new needs or innovations present themselves.

Much of the City’s budget remains fairly stable year-to-year, but variances as little as 1% could add up to an $18 million problem in the bottom line. Common areas of variance are snow removal, with year-to-year swings of millions of dollars; legal settlements, which the City attempts to reserve for but may need to absorb on a pay-as- you-go basis; public safety overtime, particularly if a significant event occurs (when the Red Sox win the championship, for example), or when dignitaries visit the City, or an outside source of funding is suddenly eliminated for an essential need.

The City’s fiscal controls are effective in reducing the chance for an unmanageable deficit. Managing position vacancies through the Office of Budget Management and the COO Office ensures that justifications to add personnel fit within the City’s fiscal parameters. The implementation of the City’s financial and human resources information system (BAIS) has raised the level of systematic controls that can be used to project and plan for personnel funding requirements.

Conclusion

This two-year overview is provided as a guide to understand the impacts of the decisions presented in the budget, and to provide a framework for future initiatives and financing proposals.

Summary Budget

Although it is not statutorily required, it is a useful tool in long-range planning and policy analysis.

From a budget planning and management standpoint, the parameters summarized here are being built upon through an interactive forecast model with key departments, to allow the development of multi-year scenarios for individual departments’ operations, set within the financial constraints affecting the City’s overall budget.

3 1

CITY OF BOSTON BUDGET SUMMARY

(Dollars in Millions)

REVENUES Property Tax Levy Overlay Reserve Excises Fines Interest on Investments Payments In Lieu of Taxes Urban Redevelopment Chapter 121A Misc. Department Revenue Licenses and Permits Penalties & Interest Available Funds State Aid Teachers Pension Reimbursement

Total Recurring Revenue Non-Recurring Revenue

Total Revenues

EXPENDITURES City Departments Public Health Commission County School Department Reserve for Collective Bargaining

Total Appropriations Pensions

Debt Service

State Assessments Reserve

Total Fixed Costs

Total Expenditures

Surplus (Deficit)

FYO2 FYO3 Budget Projected 970.89 1,025397 (46.23) (48.82)

3 Wns te) 84.24 59.27 60.64 19.45 20.90 Z1to2 22.55 38.84 39.81 36.86 38.31 25.06 25.96

1 Oar 14.210

ab ras! 11:8F7 497.38 510.30 41.40 42.80 1,769.58 1,844.83 1.88 1.88

1e 771246 1,846.70 [ievs P46 T7Tfi48 627505 64.43

4.84 4.99

636.56 662.02

15.02 0.00 17454807 1,508.54 130.94 135.76 121.84 133.08 67.51 68.75

0.00 0.56 320.29 338.16

1°77 1246 1,846.70 0.00 0.00

Numbers may not add due to rounding

Summary Budget

BO : CONDITA AD. S/fh en 1630. a

City Council Orders Filed by the Mayor

Operating Budget Orders:

e Appropriation and Tax Order for the Fiscal Year 2002

e Appropriation Order for the Boston Public Schools for Fiscal Year 2002

e Appropriation Order for the Law Department for Fiscal Year 2002

e Appropriation Order for the City Council for Fiscal Year 2002

Capital Plan Orders:

e Eleven loan orders authorized under the provisions of Chapter 44 of the General Laws

Public Building Construction

Remodeling and Extraordinary Repairs to Public Buildings - Various departments Remodeling and Extraordinary Repairs to Public Buildings — Fire department (currently pending final approval)

Bridge Construction / Reconstruction

Public Ways Construction / Extension / Widening

Departmental Equipment

Fire Boat Acquisition

Fire Alarm / Radio System Communication Installation

Fire Alarm / Radio System Communication Installation (currently pending final approval)

Outdoor Recreational and Athletic Facilities

Computer Hardware and Software

e One loan order: General Capital Improvements - authorized under the provisions of Chapter 642 of the Acts of 1966, as amended

e One loan order: School Projects - authorized under the provisions of Chapter 70B, as amended, and/or Chapter 642 of the Acts of 1966, as amended and/or Chapter 44, Section 7, Clauses (3) and (3A) for improvements, construction and repairs for various School Projects.

City Council Orders

CITY CF BOSTON. IN CITY COUNCIL

Appropriation and Tax Order for the fiscal year Commencing July 1, 2001 and ending June 30, 2002

ORDERED: I. That to meet the current expenses of the City of Boston and the County of Suffolk, im the fiscal year commerci=

July 1, 2001 and ending June 30, 2002, the respective sums of money specified in the schedules hereinafter set c:— be, and the same hereby are, appropriated for expenditure under the direction of the respective boards and offices severally specified, for the several specific purposes heremafter designated and, except for transfers lawfully m2c=. for such purposes only said appropriations, to the extent they are for the maimtenance and operation of parkinc meters, and the regulation of parking and other activities incident thereto (which is hereby determmed to be $10,000,000), being made out of the income from parking meters and, to the extent they are for other purposes, being made out of the proceeds from the sale of tax title possessions and receipts from tax title redemptions in addition to the total real and personal property taxes of prior years collected from July 1, 2000 up to and inciudine March 31, 2001, as certified by the City Auditor under Section 23 of Chapter 59 of the General Laws and the proceeds from the sale of surplus property to be transferred m an amount not to exceed $1,876,000 pursuant to t= provisions of Section 24 of Chapter 190 of the Acts of 1982 as amended by Section 4 of Chapter 701 of the Acts of 1986, and out of available funds on hand July 1, 2001, as certified by the Director of Accounts under said Sectio-= 23, and the balance of said appropriations to be raised by taxation pursuant to said Section 23:

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co — a)

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CITY OF BOSTON IN CITY COUNCIL

FURTHER ORDERED: Ul. That to meet so much of the expenses of maintaining, improving and embellishing in the fiscal period commencizs

July 1, 2001 and ending June 30,'2002, cemeteries owned by the City of Boston, or in its charge, as is not met by the income of deposits for perpetual care on hand December 31, 2000, the respective sum of money svecified in the subjoined schedule be, and the same hereby is, appropriated out of the fimd set up under Chapter 13 of the Acts of 195] the same to be expended under the direction of the Commissioner of Parks and Recreation:

400100

Cemetery Division tae Parks and Recreation Departent $1,778,400

a dn City Conseil ad 2601 £6 f ;

CITY OF BOSTON « MASSACHUSETTS

OFFICE OF THE MAYOR . THOMAS M. MENINO ‘

June 26, 2001

TO THE CITY COUNCIL Dear Councilors:

I retransmit herewith an appropriation order for the Boston Public Schools for FY02 in the amount of $636,563,231 submitted pursuant to the provisions of Chapter 224 of the Acts of 1936, as amended by Chapter 190 of the Acts of 1982, as further amended by Chapter 701 of the Acts of 1986, Chapter 613 of the Acts of 1987, and Chapter 108 of the Acts of 1991. This order contains an increase of $1.44M over the budget as originally submitted in April. The increase will fund the FY02 cost of the Administrative Guild’s collective bargaining contract that was settled after the April submission.

This budget, which is $24.9 million larger than FY01, continues my commitment to improving education. Because no other investment promises a greater return than that which we invest in children, similar to years past, the schools receive the lion’s share of new revenues. The FY02 operating budget continues funding for the City’s five-year plan of reform, “Focus on Children” aimed at improving school performance, and accomplishes a number of critical goals. The FY02 operating budget enables us to hire new teachers, reduce class sizes at all levels, and purchase new textbooks for art instruction and mathematics.

New dollars authorized in the FY02 operating budget will also enable the Schools to expand the Transition Program and Mathematics Support Plan. The expansion in FY02 will include after-school instruction to students who need it most, using the City’s very best math teachers. These two critical initiatives will help the City’s lowest-performing students meet the rigorous standards and high expectations that are the foundation of the School Committee’s promotion policy, the implementation of Focus on Children, and the Commonwealth’s graduation requirements.

BOSTON CITY HALL ¢ ONE CITY HALL PLAZA * BOSTON ¢ MASSACHUSETTS 02201 © 617/635-4000

ow G2 Printed on recycled paper

Over the past two months concern has been raised over funding for instructional materials. Recognizing that there are resources available to the School Department and in other City departments that can be utilized to address this issue, | have approved the following four-point plan:

e The School Department will earmark a portion of unanticipated educational grants from the State for replacement of instructional materials. Based on the current status of the State budget process it is now reasonable to assume that the School Department will receive this additional funding.

e The School Department will implement a new textbook inventory control system.

e The City will engage an outside auditor to conduct a management audit of textbook procurement and supply management practices currently being followed by the School Department.

e The Boston Public Library will work with the School Department to purchase textbooks out of its FY02 book budget for branch libraries throughout the City. The Library will also work with the School Department to explore the use of its e-book system as an alternative way to increase access to textbooks.

My commitment to schools is also illustrated through the City’s Five Year Capital Plan. The City of Boston FY02-FY06 Capital Plan includes authorization to begin design and acquisition for a major renovation and addition at the Burke High School. | continue to direct resources toward the improvement and maintenance of schools, including investment in school technology.

The Boston School Committee and the Superintendent have submitted a budget that balances competing priorities within available resources. This budget provides our students with the tools necessary to meet the standards that have been established by the Boston School Committee. | respectfully request your support of the FY02 appropriation for the Boston Public Schools.

Sincerely,

—_— a wee Dy

“= ee

a Thomas M. Menino

Mayor of Boston

CITY OF BOSTON IN CITY COUNCIL

ORDERED: That pursuant to Chapter 224 of the Acts of 1936, as amended by Chapter 190 of the Acts of 1982, and as further amended by Chapter 701 of the Acts of 1986, Chapter 613 of the Acts of 1987, and Chapter 108 of the Acts of 1991, to meet the current operating expenses of the School Department in the fiscal period commencing July 1, 2001 and ending June 30, 2002, the sum of SLX HUNDRED THIRTY SIX MILLION, FIVE HUNDRED SIXTY THREE THOUSAND TWO HUNDRED AND THIRTY ONE DOLLARS ($636,563,231) be, and the same hereby is, appropriated, said sum to be raised by taxation pursuant to Section 23 of Chapter 59 of the General Laws:

Boston School Department $636,563,231

| HEREBY CERTIFY THAT THE FOREGOING, IF PASSED IN THE ABOVE FORM, WILL BE IN y a WITH LAW. MERITA A. HOPKINS CORPORATION COUNSEL Gf

CITY OF BOSTON = 285%. IN CITY COUNCIL Me

ORDERED:

That in addition to the appropriations for the City of Boston and the County of Suffolk heretofore made for fiscal year 2002, to meet the current operating expenses of the Law Department in said fiscal year, the following sums be, and same hereby are appropriated, said sums to be raised by taxation pursuant to Section 23 of Chapter 59 of the General Laws:-

100-151000 Law Department Personnel Services $2,953,689 Contractual Services $1,970,049 Supplies & Materials $ 63,421 Current Charges & Obligations .$ 27,099 Equipment $ 116,600

IN CITY COUNCIL JULY 13, 2001. PASSED, YEAS EIGHT, NAYS FOUR. APPROVED BY THE MAYOR JULY 13, 2001.

ATTEST: | : A 7

ROSARTA SALERNO CITY CLERK

CITY OF BOSTON ob, oF Baste IN CITY COUNCIL ;

ORDERED:

That in addition to the appropriations heretofore made for fiscal year 2002, to meet the current operating expenses of the City Council in said fiscal year, the following sum be, and same hereby is appropriated, said sum to be raised by taxation pursuant to Section 23 of Chapter 59 of the General Laws:-

2002-100-112100-51000 City Council $60,000

IN CITY COUNCIL JULY 13, 2001. PASSED, YEAS EIGHT, NAYS ONE. APPROVED BY THE MAYOR JULY 13, 2001.

ATTEST: Z ,

ROSARIA SALERNO CITY CLERK

CITY OF BOSTON Docket: 0758

SubClass: 10417 DING Ye ULI Cs bi Program: 1006

ORDERED: That the sum of Five Hundred Ninety Five Thousand Dollars ($595,000) be, and hereby is, appropriated for acquiring land, or interests in land, for any purpose for which the City is, or may hereafter be, authorized to acquire land or interests therein; and for the construction of buildings, or for additions to such buildings where such additions increase the floor space of said buildings, including the cost of original equipment and furnishings of said buildings, for the purposes of the Fire and School Departments; and that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Clause (3) of Section 7 of Chapter 44 of the General Laws, to issue from time to time, with the approval of the Mayor, bonds, notes or certificates of indebtedness of the City up to said amount, provided that the appropriation authorized through this order be expended only on those projects as described by name attached herein. Be it further ordered:

ORDERED: That the Office of Budget Management and the managing department for each project shall issue written quarterly capital reports to the Boston City Council on all capital

construction projects funded by.this loan order, beginning on October 1, 2001 and subsequently on January 1, April 1 and July lof each project. These shall include the following ‘information:

Written description of rrikets summarizing activities for the last quarter including but not limited to: existing, current and future authorization detail, scope of project, current status of project, projected start date, projected milestones/benchmarks tied to construction schedule, projected completion date, projected on-line date, historical spending information, current year to date spending information up-fo: ‘Test dafé of reporting quarter, anticipated future spending, any information on anticipated “Gostiover-runs.

In City Council June 29, 2001. Read once and passed, yeas 13. In City Council August 8, 2001. Read a second time and again passed, yeas 13.

Approved by the Mayor August i7, 2001, he certifying on the original order

that the foregoing loan order is not n his opinio to meet a current expense Attest: ; 5 Jo

Rosaria Salerno City Clerk

September 7, 2001

I hereby certify that no petition, asking that the question or approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from August 17, 2001, and the order therefore becomes effective on September 7, 2001 in accordance with the provisions of

Chapter 108 of the Acts of 1039. Attest: ; pe 4,

Rosaria Salerno City Clerk

Attachment

1 - Fire Headquarters 2 Curtis Guild School

CITY OF BOSTON

IN CITY COUNCIL | Docket: 0755 SubClass: 10418 Program: 1007

ORDERED: That the sum of Fifty Nine Million Three Hundred Twenty Thousand Dollars ($59,320,000) be, and hereby is, appropriated for constructing and originally equipping structures and facilities and for remodeling, reconstructing, making extraordinary repairs and/or major alterations and additions to existing facilities including original equipment and landscaping, including the planting of shade trees, paving and other site improvements incidental or directly related to such remodeling, reconstruction or repair for the purposes of various city departments including the Community Centers, Fire, Library, Management Information Services, Neighborhood Development, Police, Property Management, Public Health Commission, Public Works and School Departments; and that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Clause (3A) of Section 7 of Chapter 44 of the General Laws or under the provisions of Chapter 642 of the Acts of 1966, as amended, to issue from time to time, with the approval of the Mayor, bonds, notes or certificates of indebtedness of the City up to said amount,

provided that the appropriation ‘authorized through this order be expended only on those projects as described by name aftached herein.. Be it further ordered:

ORDERED: That the Office of Budget Management and the managing department for each project shall issue written quart¢rly capital reports to'the Boston City Council on all capital construction projects funded bysthis loan order, beginning on October 1, 2001 and subsequently on January 1, April 1 and July 1 of each project. These shall include the following | information: fehaty ;

Written description of projééts summarizing ‘activities for the last quarter including but not limited to: existing, current'atidjfuture authorization detail, scope of project, current status of project, projected start date, projected milestones/benchmarks tied to construction schedule, projected completion date, projecté on-line date, historical spending information, current year to date spending information up toast date of reporting quarter, anticipated future spending, | any information on anticipated cost over-runs,

In City Council June 29, 2001. Read once and passed, yeas 13. In City Council August 8, 2001. Read a second time and again passed, yeas 12, nays

Approved by the Mayor August 17, 2001, he certifying on the original order that the foregoing loan order is not, in hi opinion, to meet a current expense.

Attest:

Rosaria Salerno City Clerk

September 7, 2001

I hereby certify that no petition, asking that the question of approving or -disapproving the foregoing order be submitted to the voters, was filed with _the City Clerk within twenty days from August 17, 2001, and the order therefore becomes effective on September 7, 2001 in accordance with the provisions of

Chapter 108 of the Acts of 1939. f Attest: ( . 4, f

Rosaria Salerno City Clerk

Attachment 1. Hyde Park Municipal Building 2. Mason Pool . Paris Street Pool . Roslindale Community Center Roof Critical Repairs Fund Engine 37 ~ . Engine 48 . Engine 51 . Engine 56 10. Engine 8 11. Critical Repairs Fund 12. Johnson Building Chiller 13. Johnson Building Fire Alarm Upgrade 14. Roof Repairs at 7 Branches 15. Roslindale Branch Library 16. South Boston Branch Library 17. MIS Computer Room 18. MIS Computer Room Security 19. Upgrade City Hall Riser Cable 20. 26 Court Street Fire Safety 21. Archives and Records Management Center 22. Long Island Switchgear 23% Remove/Replace Underground SNR Tanks 24. Area A-I Station 25. Area B-2 Station Roof 26. Area C- 11 Station 27. Area D-14 Station 28. HVAC Upgrades at Various Locations 29. 152 North Street 7 30. Animal Shelter 31. City Hall Electrical Panels 32. City Hall Fire Safety 33. Municipal Building Security Alarm Update 34. Veronica Smith Center Waterproofing 35. Critical Facility Repairs 36. Long Island Administration Building Roof 37. Long Island Facility Improvements 38. Long Island Window Replacement 39. McGilivary Basement Settlement 40. South Block Buildings I and 4 41. Central Maintenance Facility Floor Repairs 42. Central Maintenance Facility HVAC . 43. Central Maintenance Facility Vehicle Wash Roof 44. Central Maintenance Facility Vehicle Wash 45. Access Improvements at Various Schcols 11 46. Boston Arts Academy - Windows/Masonry 47. Bnghton High School Science Labs 48. Charlestown High School. 9, Humphrey O.R.C. 0. Madison Park High Fire Alarm 1, Masonry Repairs at 20 Schools 2. Mission Hill School Electrical 3. P.A. Shaw School 4. South Boston High School 11 5. Technolo ae FY02 56. Tynan School 57. Umana Bames/English High School 38. Window Balance panei

SO 09 NON) - U2

¥: Docket: 0718 Program: 1009 Sub-Class: 10419

CITY OF BOSTON

IN CITY COUNCIL ae

ORDERED: That the sum of Five Million Five Hundred Fifty Five Thousand Dollars. oer ne) ($5,555,000) be, and hereby is, appropriated for the construction or reconstruction of bridges of. < stone or concrete or of iron superstructure for the purposes of the Neighborhood Development and Public Works Departments; and that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Clause (4) of Section 7 of Chapter 44 of the General Laws, to issue from time to time, with the approval of the Mayor, bonds, notes or certificates of indebtedness of the City up to said amount, provided that the appropriation authorized through this order be expended only on those projects as described by name

attached herein. Be it further ordered:

ORDERED: That the Office of Budget Management and the managing department for each Droject shall issue written quarterly capital reports to the Boston City Council on all capital construction projects funded by this loan order, beginning on October 1, 2001 and subsequently cn January 1, April 1 and July 1 GH each project. These shall include the following

information: .

Written description of projects summarizing activities for the last quarter including but not limited to: existing, current and future authorization detail, scope of project, current status of project, projected start date, projected milestones/benchmarks tied to construction schedule, projected completion date, projected on-line. date, historical spending information, current year to date spending information up to last date of reporting quarter, anticipated future spending, any information on anticipated cost over-runs.

In City Council June 29, 2001. Read once and passed, yeas thirteen.

In City Council July 18, 2001. Read a second time and again passed, yeas eleven, nays two. :

‘ Approved by the Mayor July 26, 2001, he certifying on the original order that the foregoing loan order is not, in his opinion, to meet a

current expense. Attest: . ye

Rosaria Salerno City Clerk

August 16, 2001

I hereby certify that no petition, asking that the question of approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from July 26, 2001, and the order therefore becomes effective on August 16, 2001 in accordance with the provisions of Chapter 108 of the Acts of 1939.

Attest: Rosaria Salerno City Clerk

Attaciiment

NM We

Long Island Bridge Critical Repairs Long Island Bridge Embankment Long Island Bridge Rehabilitation Bridge Engineering Overview FY02 Bridge Repairs FY02

McArdle Bridge -

CITY OF BOSTON es

IN CITY COUNCIL ' SubClass: 10420 Program: 1010

ORDERED: That the sum of Nine Million Eight Hundred Two Thousand Dollars

~ ($9,802,000) be, and hereby is, appropriated for the original construction of public ways or the extension or widening thereof, including land damages and the cost of pavement and sidewalks laid at the time of said construction, or for the construction of stone, block, brick, cement concrete, bituminous concrete, bituminous macadam or other permanent pavement of similar lasting character for the purposes of the Public Works and Transportation Departments; and that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Clause (5) of Section 7 of Chapter 44 of the General

Laws, to issue from time to time, with the approval of the Mayor, bonds, notes or certificates of indebtedness of the City upto said amouni, provided that the appropriation authorized’ through this order be expended only on those projects as described by name attached herein. Be it further ordered: |

ORDERED: That the Office of Bijdget Management and the managing department for each project shall issue written quarterly‘capital reports to thé Boston City Council on all capital construction projects funded by this-loan order, beginning on October 1, 2001 and subsequent!y on January 1, April 1 and July yt of. each pIciece Theselshall include the following information:

Written description of projects suramarizing activities for the last quarter including but not limited to: existing, current and future authorization detail, scope of project, current status of project, projected start date, projected milestones/benchmarks tied to construction schedule, projected completion date, projectédgn-ling: date, histdtical spending information, current year to date spending information up fo ltest date of reporting quarter, anticipated future spending,

any information on anticipated costeyver-runs. In City Council June 29, 2001. Read once and passed, yeas 13.

In City Council August 8, 2001. Read a second time and again passed, yeas 13.

Approved by the Mayor August 17, 2001, he certifying on the original order that the foregoing loan order is not, in ae opinion, to meet a current

expense. . Attest: ( | | ae

' Rosaria Salerno City Clerk

September 7, 2001

I hereby certify that no petition, asking that the question of approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from August 1/7, 2001, and the order therefore becomes effective on September 7, 2001 in accordance with the provisions of

Chapter 108 of the Acts of 1939. Attest:

- Rosaria Salerno City Clerk

Attachment

Alexander the Great Square Improvements Back Streets Program

BHA Roadway Design ; Cambridge, Washington, Tremont Streets Center Street ‘ Commonwealth Ave Segment A

Roadway Reconstruction FY2001

Grove Hall Parking Facility

CITY OF BOSTON Docket: 0757

IN CITY COUNCIL SubClass: 10421 Program: 1014

ORDERED: That the sum of Five Million Four Hundred Sixty One Thousand Dollars ($5,461,000) be, and hereby is, appropriated for the cost of departmental equipment for the purposes of the Fire, Library, Management Information Services, Parks and Recreation, and School Departments; and that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Clause (9) of Section 7 of Chapter 44 of the General Laws, to issue from time to time, with the epproval of the Mayor, bonds, notes or certificates of indebtedness of the City up to said amount, provided that the appropriation authorized through this order be expended only on those projects as described by name attached herein. Be it further ordered:

ORDERED: That the Office of Budget Management and the managing department for each project shal] issue written quarterly capital reports to the Boston City Council on all capital construction projects funded by this loan order, beginning on October 1, 2001 and subsequently on January 1, April 1 and July | &f each project. These shall include the following

information: .

Written description of projects summarizing abtivities for the last quarter including but not limited to: existing, current anid future 2uthorizatibn detail, scope of project, current status of project, projected start date, pedjected mijestones/henchmarks tied to construction schedule, projected completion date, projected on-liné date, historical spending information, current year to date spending information up to last date‘of reporting quarter, anticipated future spending, any information on anticipated Sesfpver-rpas. |

In City Council June 29, 2001. Read once and passed, yeas 13. In City Council August 8, 2001. Read a second time and again passed, yeas 13.

Approved by the Mayor August 17, 2001, he certifying on the original order that

the foregoing loan order is not, <n his inion, to Dep current expense.

osaria Salerno City Clerk

Attest:

September 7, 2001

I hereby certify that no petition, asking that the question of approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from August 17, 2001, and the order therefore becomes effective on September 7, 2001 in accordance with the provisions of

Chapter 108 of the Acts of 1939. ; Attest: - 4, 4,

Rosaria Salerno City Clerk

Attachment

l Apparatus Replacement 2 Book Security System 3 Fiber Ring Phase II

4 Park Equipment

5

Humphrey O.R C Vocation Equipment

CITY OF BOSTON “Docket: 0752

SubClass: 10422 IN CITY COUNCIL Program: 1018

ORDERED: That the sum of Two Million Seven Hundred Twenty Seven Thousand Dollars ($2,727,000) be, and hereby is, appropriated for the acquisition of fire boats for the purposes of the Fire Department; and that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Clause (13) of Section 7 of Chapter 44 of the General Laws, to issue from time to time, with the approval of the Mayor, bonds, notes or certificates of indebtedness of the City up to said amount, provided that the appropriation authorized through this order be expended only on those projects as described by name attached herein.

Be it further ordered:

GRDERED: That the Office of Budget Management and the managing department for each project shall issue written quarterly capital reports to the Boston City Council on all capital construction projects funded by this loan order, beginning on October 1, 2001 and subsequently on January 1, April 1 and July 1 of each project. These shall include the following

information:

Written description of projects Summiarizing activities for the last quarter including but not limited to: existing, current and future authorization detail, scope of project, current status of project, projected start date, projected milestones/benchmarks tied to construction schedule, projected completion date, projected on-line date, historical spending information, current year to date spending information up te: last date of reporting quarter, anticipated future spending, any information on anticipated cost over-runs. |

In City Council June 29, 2001. Read once and passed, yeas 13. In City Council August 8, 2001. Read a second time and again passed, yeas 13.

Approved by the Mayor August 17, 2001, he certifying on the original order that the foregoing loan order is not, in his opinion, to meet a current

expense. Attest:

Rosaria Salerno City Clerk

September 7, 2001

I hereby certify that no petition, asking that the question of approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from August 17, 2001, and the order therefore becomes effective on September 7, 2001 in accordance with the provisions of

Chapter 108 of the Acts of 1939. Attest: bia 3c A, s

Rosaria Salerno City Clerk

Attachment

l Fire Boat

CITY OF BOSTON Docket: 0751

SubClass: 10423 LIM IN CITY COUNCIL Program: 1019

ORDERED: That the sum of Two Hundred Fifty Two Thousand Five Hundred Dollars ($252,500) be, and hereby is, appropriated for fire alarm communication installations and for the purpose of extending and improving such installations; and that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Clause (14) of Section 7 of Chapter 44 of the General Laws, to issue from time to time, with the approval of the Mayor, bonds, notes or certificates. of indebtedness of the City up to said amount, provided that the appropriation authorized through this order be expended only on those projects as described by name attached herein. Be it further ordered:

ORDERED: That the Office of Budget Management and the managing department for each project shall issue written quarterly capital reports to the Boston City Council on all capital construction projects funded by this loan order, beginning on October 1, 2001 and subsequently on January 1, April 1 and July 1 of each project. These shall include the following information:

Written description of projects summarizing activities for the last quarter including but not limited to: existing, current and future authorizatio# detail, scope of project, current status of project, projected start date, projected milestones/benchmarks tied to construction schedule, . projected completion date, projected on-line date, historical spending information, current year to date spending information up to last date of reporting quarter, anticipated future spending, any information on anticipated cost over-runs.

In City Council June 29, 2001. Read once and passed, yeas 13.

In City Council August 8, 2001. Read a second time and again passed, yeas 13.

Approved by the Mayor August.17, 2001, he certifying on the original order that the foregoing loan order, is not, in his opinion, : to meet a current

expense. | Attest: ae

Rosaria: Salerno City Clerk

September 7, 2001

I hereby certify that no petition, asking that the question of approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from August 17, 2001, and the order therefore becomes effective on September 7, 2001 in accordance with the provisions of

Chapter 108 of the Acts of 1939. Attest: Ae ”

Rosaria Salerno City Clerk

Attachment

] Radio System Phase III

CITY OF BOSTON HEC ES

IN CITY COUNCIL SubClass: 10424 Program: 1029

ORDERED: That the sum of Fifteen Million Two hundred Thirty Five Thousand Dollars ($15,235,000) be, and hereby is, appropriated for the construction of municipal outdoor. recreational and athletic facilities, including the acquisition and development of land and the construction and reconstruction of such facilities, for the purposes of the Environment, Parks

_ and Recreation and Schoo! Departments; and that to meet said appropriation the Collector/Treasurer be, and. hereby is, authorized under the provisions of Clause (25) of Section 7 of Chapter 44 of the General Laws, to issue from time to time, with the approval of the Mayor, bonds, notes or certificates of indebtedness of the City up to said amount, provided that the appropriation authorized through this order be expended only on those projects as described by name attached herein. Be it further ordered: | rae’ |

ORDERED: That the Office of Budget Management and the managing department for each project shall issue written quarterly capital reports to the Boston City Council on all capital construction projects funded by this loan order, beginning on October 1, 2001 and subsequently on January 1, April 1 and July lfof each project. These shall include the following information:

Written description of projects summarizing activities for the last quarter including but not limited to: existing, current and future Zuthorizatjon detail, scope of project, current status of project, projected start date, projected milestones/benchmarks tied to construction schedule, projected completion date, projected on-line date, hiStorical spending information, current year to date spending information upt6-last date of reporting quarter, anticipated future spending, any information on anticipated cas over-fins. |

In City Council June 29, 2001. Read once and passed, yeas 13.

In City Council August 8, 2001. Read a second time and again passed, yeas 13.

Approved by the Mayor August 17, 2001, he certifying on the original order that the foregoing loan order is nots; in his opinion, to meet a current expens

Attest:

Rosaria Salerno City Clerk

September 7, 2001

I hereby certify that no petition, asking that the question or approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from August 17, 2001, and the order therefore becomes effective on September 7, 2001 in accordance with the provisions of

Chapter 108 of the Acts of 1939. ; Attest: :

-Rosaria Salerno City Clerk

At.achment

1 Condor Street/Belle Island Fish Company Remediation 2. Boston Common 3. Boston Common Playground 4. Chandler Pond 5. Courageous Sailing Center - 6. Dennis Street Park

7. Franklin Park Golf Course . Garvey Park

9. General Parks Improvements FYO I - 04 10. George Wright Golf Course

11. Hazardous Remediation

12. Hemenway Ballfield

13. Hiscock Park

14, Historic Cemeteries FY02 - 04 15. Joe Moakley Park Synthetic Turf 16. John Harvard Mall

17. Liberty Tree

18. Miranda Park

19. North End Park/Puopolo Ballfield O'Day Playground . Ohrenberger School Field . Peters Park . Portsmouth Balifteld . Portsmouth Playground . Public Garden, Comm. Ave. Mall . Ramler Park . Shipyard Park . Statler Park Trotter Playground

Union Park

Walker Playground

[ee]

Nw WW Ww WN =i OV. th — 49 WW = ©

ee

Www ws WwW NM WN WN WV bP oo

nN —

. School Yard Improvement Fund

CITY OF BOSTON hope saa

: SubClass: 10425 r a nats - Program: 1032, 1033

ORDERED: That the sum of One Million Ninety Thousand Dollars ($1,090,000) be, and hereby is, appropriated for the development, design, purchase, installation and operation of computer hardware, computer software, other data processing equipment and computer assisted integrated financial management and accounting systems, for the purpose of the Management Information Services Department; and that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Clause (28) and/or (29) of Section 7 of Chapter 44 of the General Laws, to issue from time to time, with the approval of the Mayor, bonds, notes or certificates of indebtedness of the City up to said amount, provided that the appropriation authorized be expended eels on those projects as described by name attached

herein. Be it further ordered:

ORDERED: That the Office of Budget Management and the managing department for each project shall issue written quarterly capital reports to the Boston City Council on all capital construction projects funded by fais loan order, beginning on October 1, 2001 and subsequently on January 1, April 1 and July 16% each project. Thesf shall include the following . information:

Written description of projects summarizing a¢tivities for the last quarter including but not limited to: existing, current and future authorization detail, scope of project, current status of project, projected start date, projected milestones/benchmarks tied to construction schedule, projected completion date, projected on-line date , historical spending information, current year to date spending information up to last date of reporting quarter, anticipated future spending, any information on anticipated cost-Over-runs.

In City Council June 29, 2001. Read once and passed, yeas 13. In City Council August 8, 2001. Read a second time and again passed, yeas 13.

Approved by the Mayor August 17, 2001, he certifying on the original order that the foregoing loan order is not, in his opinion, to meet a current

expense. Attest: :

Rosaria Salerno City Clerk

September 7, 2001

I hereby certify that no petition, asking that the question of approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from August 17, 2001, and the order therefore becomes effective on September 7, 2001 in accordance with the provisions of

Chapter 108 of the Acts of 1939. Attest: Se ae

Rosaria Salerno City Clerk

’ Attachment

Sn OP ee DO

IBM Disk Upgrade

Imaging and Work Flow System Storage Area Network

Tape Backup System

CITY OF BOSTON ~:~ Sane ae IN CITY COUNCIL Ppt bie tetig CSTA , Program: : ” SubClass:

ORDER OF COUNCILLOR DA VIS “MULLEN

ORDERED: That the sum of Two Million Four Hundred Sixty Thousand Dollars ($2,460,000) be, and hereby is, appropriated for the planning, designing, acquiring land for, constructing and originally equipping structures and facilities and for remodeling, reconstructing, or making major alterations, additions and major repairs to existing facilities including onginal equipment and landscaping, including the planting of shade trees, paving and other site improvements incidental or directly related to such remodeling, reconstruction or repair for the purposes of various city departments including the Neighborhood Deve lopment, Office of Budget Management and Parks and Recreation Departments, and

that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Chapter 642 of the Acts of 1966, as amended, to issue from time to time, with the epproval of the Mayor, bonds, notes or certificates of indebtedness of the City up to said emount, provided that the appropriation authorized through this order be expended only on the project as described by name attached herein. Be it further ordered:

ORDERED: That the ne of Budget Managentent and the managing department for each project shall issue written quarterly capital reports to the Boston City Council on all capital construction projects funded by this loan order, beginning on October 1, 2001 and subsequently on January 1, April 1 and ay 1 of each peal: These shall include the following information:

Written description of proj ects summarizing activities for the last quarter including but not limited to: existing, current and future authorization detail, scope of project, current status of project, projected start date: “projected milestones/benchmarks tied to construction schedule, projected completion date, projected on-line date, historical spending information, current year to date spending information ap to last date of reporting quarter, anticipated future spending, any information on Se oe eot over-runs, ;

IN CITY COUNCIL JUNE 29, 2001. “READ ONCE AND PASSED, YEAS THIRTEEN.

IN CITY COUNCIL AUGUST 8, 2001. READ A SECOND TIME AND AGAIN PASSED, YEAS TWELVE, NAYS 0.

APPROVED BY THE MAYOR AUGUST 17, 2001, HE CERTIFYING ON THE ORIGINAL ORDER THAT THE FOREGOING LOAN ORDER IS NOT, IN HIS OPINION, TO MEET A CURRENT EXPENSE.

ATTEST: V | Age

ROSARIA SALERNO CITY CLERK

0754 1070, 10426

106¢

/ ‘Attachment

l Long Island Power Plant Embankment 2 Marine Docking Facility

: Capital Asset Study

4

Street Tree Planting FY02 - 04

CITY OF BOSTON nes EE

SubClass: IN CITY COUNCIL Program: 1066

ORDERED: That the sum of Eleven Million Six Hundred Seventy Thousand Dollars ($11,670,000) be, and hereby is, appropriated for school projects, including the planning, designing, acquiring land for, constructing and originally equipping structures and facilities and for remodeling, reconstructing, or making major alterations, additions and major repairs to existing facilities including original equipment and landscaping, including the planting of shade trees, paving and other site improvements incidental or directly related to such remodeling, reconstruction or repair for the purpose of the School Department; and that to mee said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Chapter 70-B, as amended, or under the provisions of Chapter 642 of the Acts of 1966, as amended, or under the provisions of Clauses (3) and/or (3A) of Section 7 of Chapter 44 of the General Laws, to issue from time to time, with the approval of the Mayor, bonds, notes or certificates of indebtedness of the City up to said amount, provided that the appropriation authorized be expended only on those projects as described by name attached herein. Be it

further ordered:

ORDERED: That the Office of Budget Management and the managing department for each project shall issue written quarterly’capital reports to tHe Boston City Council on all capital construction projects funded by this loan order, beginning on October 1, 2001 and subsequently on January 1, Apri] 1 and July 1 of each project. These shall include the following information:

Written description of projects summarizing activities for the last quarter including but “not limited to: existing, current and fgture ailthorizatiqn detail, Scope of project, current status . projected completion date, proj jectestbn-line date, histirical spending information, current eK to Gate spending information up f6 last date of reporting quarter, anticipated future Seen as any information on anticipated cost ever-runs.

In City Council June 29, 2001. Read once and passed, yeas 13. . In City Council August 8, 2001. Read a second time and again passed, yeas 13.

Approved by the Mayor August 17, 2001, he certifying on the original order

that the foregoing loan order is not, his opinion, fo meet a current expens Attest: f

Rosaria Salerno City Clerk

September 7, 2001

I hereby certify that no petition, asking that the question of approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from August 17, 2001, and the order therefore

becomes effective on September 7, 2001 ccordance J, the provisions of

Chapter 108 of the Acts of 1939. Rosaria Salerno

Attest: City Clerk

Attaciunent

Boston Latin School Brunswick Gardens New Middle School Burke High School Renovation

IS (vt) of By

Mildred Avenue New Middle School ROE Ee A

CITYOFBOSTON kn 7,

Yi ea FY

IN CITY COUNCIL Docket: 0395 Sub-Class: 10414 Program: 1007

ORDERED: That the sum of Two Million Four Hundred Twenty Four Thousand Dollars ($2,424,000) be, and hereby is, appropriated for remodeling, reconstructing, or making extraordinary repairs to public buildings owned by the City, including original equipment and landscaping, paving and other site improvements incidental or directly related to such remodeling, reconstruction or repair for the purposes of the Fire Department, and that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the provisions of Clauses (3A) of Section 7 of Chapter 44 of the General Laws, to issue from time to time, on request of the Mayor, bonds, notes or certificates of indebtedness of the City up to said amount, provided that the appropriation authorized through this order be expended only on

those projects as described by name attached herein.

In City Council March 14, 2001. Read once and passed - yeas twelve, nays none In City Council March 28, 2001. Read a second time and again passed - yeas eleven, nays none Approved by the Mayor, Aprii’10, 2001, -he.certifying’.on the original order that the foregoing loan order is not, in his opinion, to meet a current expenses.

Attest: -

Rosaria Salerno City Clerk

I hereby certify that no-petition, :-asking.that.the question of approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from

April 10, 2001, and the order therefore becomes effective on

May I, 2001 in accordance with the provisions of chapter 108 of the

Acts of 1939. ; Attest: ae ws

Rosaria Salerno City Clerk

Attachment

1. Bathroom Renovations

GIIVORBOSTON 2°"

IN CITY COUNCIL eg

Docket: 0394 Sub-Class: 10413 Program: 1019

ORDERED: That the sum of One Million Nine Hundred Sixty Nine Thousand Five Hundred Dollars ($1,969,500) be, and hereby is, appropriated for fire alarm communication installations and for the purpose of extending and improving such installations; and that to meet said appropriation the Collector/Treasurer be, and hereby is, authorized under the . provisions of Clause (14) of Section 7 of Chapter 44 of the General Laws, to issue from time to time, on request of the Mayor, bonds, notes or certificates of indebtedness of the City up to said amount, provided that the appropriation authorized through this order be expended only

on those projects as described by name attached herein.

In City Council March 14, 2001. Read once and Passed - yeas twelve, nays none In City Council March 28, 2001. Read a second time and again passed - yeas 11, nays none Approved by the Mayor April 10, 2001, he certifying on the original order that the foregoing loan order is not, in his opinion, to meet a current expenses.

Attest: a .

Rosaria Salerno City Clerk

I hereby certify that no petition, asking that the question of approving or disapproving the foregoing order be submitted to the voters, was filed with the City Clerk within twenty days from April 10, 2001, and the order therefore becomes effective on

May 1, 2001 in accordance with the provisions of chapter 108 of the

Acts of 1939.

Rosaria Salerno City Clerk

Attest:

il

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Revenue Estimates and Analysis

OVERVIEW

The FY02 Budget is supported with $1.770 billion in recurring revenue, an increase of 4.1% over the FY01 Budget (excluding non-recurring revenue). The budget also includes $1.9 million in non- recurring revenue. FY02 will represent the ninth straight year of revenue growth for the City after adjusting years FY96 and prior for the loss of City hospital revenue. (Figure 1.) The trend of positive revenue growth for Boston is linked directly to continued strong property development in the City and growth in the state, regional and national economies.

% Change 8%

6%

4%

2%

0%

-2%

993 '94 '95 '96 '97 '98 '99 ‘00 ‘01 ‘02

Annual Change in City Revenues

FY93 - FY02 Recurring Revenues “Adjusted for DHH Figure 1

This chapter begins with a review of national and state economic trends that will impact Boston in FY02 and beyond. It is followed by an analysis of recent state budget trends and related implications for state aid, the City’s second largest revenue source. Finally, a detailed discussion of the property tax levy, the City’s largest revenue source, is presented. Net property tax and state aid together make up 80.3% of total City revenues and their continued stability is becoming more and

Revenue Estimates

and

FY'96* FY'02 OTHER REVENUE

NET PROPERTY TAX LEVY & STATE AID

Net Property Tax Levy and State Aid as a Percent of Total Revenue

*includes DHH

Figure 2

more critical in determining the City’s ability to deliver adequate services. (Figure 2.)

THE NATION

The United States is currently experiencing a period of economic uncertainty with falling stock indexes, flagging consumer confidence, fluctuating short-term interest rates, and a large income tax cut now in effect. Real gross domestic product (GDP, preliminary) grew only 0.2% in the second quarter of 2001, down dramatically from 5.7% in the second quarter of 2000. Real GDP is expected to remain flat or decline further over the course of 2001 before recovering in 2002. The seasonally adjusted unemployment rate in the U.S. was 4.5% in June 2001, sharply up from 4.0% a year earlier (Figure 3.). The U.S. consumer price index rose 3.3% in the year ending June 2001, down somewhat from 3.7% for the year ending June 2000. The largest increase came in the form of higher fuel and utility prices across the nation, which were up 12.2% compared to only 6.8% over the same period last year.

The Federal Reserve was able to detect imbalances in the economy in 2000 that would

Analysis 719

bring inflation if left unchecked. Therefore, last year the Federal Reserve began raising short-term interest rates to slow the growth of the economy and lower the risk of inflation. Since then it appears that the increase may have been too much as the Federal Reserve has decreased short-term interest rates three percentage points since December 2000, the federal funds rate now stands at 3.75% in June, and the Fed appears poised to implement further cuts to stimulate the economy and avoid recession. The Federal Reserve action may be more or less aggressive depending on the combined effects of tax rebate checks mailed to taxpayers this summer, the delayed effects of earlier Fed actions, and the continued mild increases of consumer prices.

Lower interest rates speed the economy by making money less expensive to borrow for such things as home purchases. The conventional 30-year fixed- rate mortgage in June 2001 was 7.12%, down from 8.06% a year earlier. Mortgage rates could continue to fall if the Federal Reserve lowers interest rates again. Mortgage rates are historically very low which will hopefully help extend the recent healthy real estate market trend which is helping to keep the economy out of recession.

Due to the recent health of the national economy, federal tax revenues have been very strong over the last couple of years. Much of the old issue of how to eliminate the federal budget deficit has been replaced by debate around how to spend the surpluses that will be available. The Congress and the Bush administration agreed on nearly $1.4 trillion in tax cuts over ten years, starting with tax rebate checks to be mailed to taxpayers over the summer totalling nearly $40 billion. Depending on whose projections are correct, the states may have to worry about less federal funds coming in the future due to surpluses not materializing as a result of a slowing economy and shrinking federal revenues.

THE COMMONWEALTH

Overall, economic growth in Massachusetts during 2001 has slowed and employment growth has slowed as a result. Massachusetts seasonally adjusted non-farm payrolls showed a gain of 50,100 jobs in June 2001, or 1.5% over the prior June, but

8 0

Revenue

only .4% over December 2000. This is down from an annual gain of 87,800 jobs in 2000.

The Massachusetts seasonally adjusted unemployment rate for June 2001 was 3.4%, up from 2.7% a year earlier. (Figure 3. )

5.0% 4.8% 4.6% po 4.4% = oh AUnited States j ft Tee EN Nak a ary NN. 4.0% MMA. pl

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Massachusetts

Jun-98

Jun-99 Jun-00 Jun-01

Unemployment Rates FY97-FYO1 Seasonally Adjusted

Figure 3

In 2001 through June, there were also sharp changes in the Massachusetts construction industry. An index of the value of construction contracts in Massachusetts declined 54% from a spike in June 2000 and settling to a more normal level close to the average of the prior three years. Nonresidential construction contract values declined by 62% while residential contract values grew by 37%. The residential growth was stronger than the .4% annual increase from 1999 to 2000, and much stronger than the 18% percent decline in annual growth in 1999.

Massachusetts personal income continued to rise through 2001. Earnings growth by industry were strongest in construction followed by services and then transportation and utilities, with the first two showing double-digit percentage gains. Massachusetts seasonally adjusted total personal income growth was 6.5% in the first quarter of 2001 over the same quarter of 2000, significantly below the 10.8% growth recorded a year earlier, and the same as the growth of 6.5% in the first quarter of 1999. Most of this change has been driven by the wage and salary component of personal income.

ErSttuinmednt sess

and Analysis

The Massachusetts economy has been changing from an economy dependent on defense and other types of manufacturing to a service economy. In 1980, manufacturing industry employment accounted for approximately 25% of total non-farm employment in Massachusetts, by 1990 it accounted for 17.5%, and by 2000 it accounted for only 13.1%. Meanwhile, in 2000, employment in the finance, insurance, real estate, and services industries accounted for 43.3% of total non-farm employment in Massachusetts, up from 37.8% in 1990 and 30% in 1980.

At the cutting edge of the service economy are some of Massachusetts strongest growth sectors: high technology, biotech, health care, financial services, and education. Route 128 has become well known nationally as a leading high technology area while Boston and Cambridge have become home to several leading biotech companies. Massachusetts has always been a leader in health care, from the first public demonstration of anesthesia at Massachusetts General Hospital in 1846 to the proliferation of managed care. Recently, several hospital expansions, alliances and mergers have occurred, ensuring a future leadership role in health care for Massachusetts.

The Commonwealth is also home to many leading financial service institutions including John Hancock Mutual Life Insurance, Putnam Investments, the Prudential Insurance Company, and Fidelity Investments. Beginning with the first mutual fund in the United States, which was started in Boston, the Commonwealth has attracted leading mutual fund and other financial services companies.

The Massachusetts economy is helped immensely by the numerous public and private colleges and universities within its borders. The largest of these institutions are Harvard University, Massachusetts Institute of Technology, Boston College, Boston University, Northeastern University, and the University of Massachusetts. With the national movement toward a service economy requiring advanced education, Massachusetts is well positioned for the future.

THE COMMONWEALTH BUDGET

Over the last nine years, the Commonwealth has been successful in balancing its budget. This has given the Commonwealth the capacity to support an adequate and diversified local revenue base for

Reerve eeneuves Eysitriimbaitrers

and

municipalities although recently growth in state aid has slowed and municipalities are primarily reliant on property tax for revenue growth. The following summarizes the Commonwealth’s budget situation with the purpose of reflecting upon the Commonwealth’s capacity to continue to provide growth in its local aid program for cities, towns and regional school districts.

The state legislature has not agreed on a final FY02 Budget. Indications are that the House and Senate have some important issues to finalize before passage. In addition, concerns over the economy and stalling state tax revenue may result in difficulty setting priorities and executing spending cuts. The City’s budget is based on the Governor’s budget submitted in January and the City may be at risk of losing substantial funds if parts of the House budget remain intact in the final state budget. The City continues to carefully monitor budget negotiations as they progress.

The Commonwealth has tended to build its budgets cautiously the last several years by being relatively conservative in its revenue estimates. This definitely has played a role in the strong financial condition of the Commonwealth. According to the Governor’s FY02 Proposed Budget, total FY02 revenues are expected to be $22.639 billion, an increase of $579 million from FY01 projected revenues of $22.060 billion. This growth is net of tax cuts valued at nearly $700 million in FY02.

With the Commonwealth running large budget surpluses over the past few years, tax cuts continue to occur. In July 1998, the Legislature and the Governor worked out a tax cut that included a doubling of the personal exemption and a reduction in the unearned income tax rate from 12% to 5.95%. In the FY00 Budget, the Governor signed into law a reduction of the income tax rate from 5.95% to 5.75% over three tax years. The Governor’s FY01 Budget recommended a reduction in the tax rate on earned income and the interest and dividend components of unearned income to 5.0% over three tax years, which was later passed by referendum in November of 2000. The FY02 Budget includes the above rate cut and some smaller targeted tax cuts taking effect in tax year 2001 such as; a refundable local property tax credit for low income senior citizens, an increase in the rental deduction, a new deduction for

Avniay ity: sits 8 1

charitable donations, and a credit for developers of low income housing.

On the expenditure side, the Commonwealth has built its FY02 Budget with conservative spending plans. In the Governor’s proposed FY02 Budget, projected expenditures in FY02 total $22.550 billion, a $1.073 billion increase over FY01 GAAP basis expenditures of $21.477 billion.

In the Governor’s proposed FY02 Budget, Chapter 70 education aid increases $171 million, a 5.8% increase over actual FYO1 aid. In FY93, Commonwealth officials, driven by practical considerations and availability of resources, reinstated increases in local aid in the form of aid earmarked for education. This period of increases followed three years of significant local aid reductions which played a key role in the Commonwealth's return to a balanced budget. The Commonwealth’s annual expenditure for direct local aid has increased from $2.091 billion in FY92 to the $5.172 billion proposed in the Governor's FY02 Budget, an increase of 147%. Over the same time period, Boston’s local aid increased 51.4%. The following section looks at Boston’s experience with local aid in detail.

STATE LOCAL AID

Local aid refers primarily to distributions from the Commonwealth to municipal general revenues for Chapter 70 education aid, additional assistance and lottery aid. The amount of these funds to be distributed is listed on each community’s cherry sheet (a listing of a city or town’s local aid that is printed on cherry-colored paper) along with other relatively smaller Commonwealth programs such as library aid, school construction and transportation reimbursements, and highway funds. The City received local aid from the Commonwealth totaling $457.3 million in FY99, $474.9 million in FY00, and has a budget of $485.2 million in FY01. The City expects $497.4 million of local aid in FY02.

Since FY82, there have been three distinct phases in state local aid funding policy. From FY82 through FY89, local aid policy was essentially a revenue sharing response to Proposition 2 1/2, the statewide cap on local property tax rates and levies. A reasonable annual increase in local aid became an essential component in the financial

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planning for municipalities. This phase was followed by significant state aid reductions implemented during the FY90, FY91 and FY92 budgets. During this period, the Governor and the Legislature sharply reduced state revenue sharing with cities, towns, and regional school districts in order to help balance the state budget. Between FY89 and FY92, statewide cherry sheet aid declined $602 million or 20% while all other state spending increased by $1.5 billion or 15%.

Beginning in 1993 with the passage of the FY94 state budget, the Commonwealth embarked upon a multi-year commitment to increase and equalize funding for local education in its local aid distributions. In general, state local aid during the FY94-FY01 period has been less favorable for Boston than the revenue sharing arrangement during the FY83-FY89 period. To illustrate, the City’s total state aid between FY92 and expected FY02 increased by $169 million or 51.4%, while its total state aid between FY82 and FY89 increased by $214.8 million or 111.1%. The City’s expected FY02 state aid increase of $12.4 million represents a 2.6% increase over FY01, up slightly from a $10 million or 2.1% increase in FY01 and down from the $17.6 million or 3.8% increase received in FY00.

The Governor's budget for FY02 increases education aid by $171 million, an increase of 5.8% over FY01. The City received Chapter 70 education aid totaling $178.2 million in FY99 and $186.2 million in FY00 and $197.5 million in FY01. The City will receive $205.6 million in FY02, an increase of 4.1%. FY00 was the last year of the statutorily established funding schedule for education reform. There has yet to be established a post-FY00 funding schedule. A vital component in the City’s delivery of quality public education in the near-term is strong financial support from the Commonwealth.

A key component of the Commonwealth's education reform efforts are the charter schools. The current educational aid is delivered in tandem with state-mandated costs for charter schools. Charter schools, which are granted charters by the State Board of Education, are publicly funded schools administered independently from local school committee and teacher union rules and regulations. There are two kinds of charter schools, the Commonwealth charter school and

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the Horace Mann charter school. The former is a school outside the local public school system and the latter is part or all of a school in the public school system. Unlike a Commonwealth Charter school, Horace Mann charter school budgets remain part of the public school budget. In addition to the Board of Education, the local school committee and local bargaining agent must approve Horace Mann charter schools.

There are nine Commonwealth charter schools currently operating in Boston, three outside Boston available to Boston residents, and one more is scheduled to open in Boston in September 2001. In addition to the Commonwealth charter schools, there are also two Horace Mann charter schools operating in Boston. There are currently 2,602 Boston resident students attending charter schools and the City expects that number to grow to approximately 3,040 in FY02.

Before FY99, all charter school tuition was drawn directly from the City’s Chapter 70 aid. This draw on the City’s education aid totaled $10.9 million in FY98. Under recent amendments to the charter school law, the Commonwealth will pay to the City, as reimbursement for Chapter 70 aid reductions, 100% of tuition for new charter school students the first year, followed by 60% of tuition and tuition increases the second year, 40% of tuition and tuition increases the third year and 0% of tuition and tuition increases thereafter. The net expenditure impact of the charter schools in FY00 was $12.1 million after a $5.2 million reimbursement from the Commonwealth. The City has budgeted $14.1 million to be the net expenditure impact of the charter schools in FY01 after receiving a $10.5 million reimbursement from the Commonwealth. The City expects $18.0 million to be the net expenditure impact in FY02 after a $10.5 million reimbursement, this assumes current law rather than the Governor’s budget proposal to reduce reimbursement to 50% of charter school tuition in the first year only. In the long term, it is assumed that the charter schools that thrive will increase overall enrollment, which in succeeding years will increase funding for the school district in the Chapter 70 formula and mitigate the negative fiscal impact of charter schools on the City’s traditional public schools.

Lottery aid for the City, as for most municipalities, has grown steadily over the last few years as a result of a state decision to phase-out the lottery

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cap and reverting to the practice of returning all lottery profits to the cities and towns. FY00 was the fifth and final year of the state’s plan. The City’s lottery aid was $55.6 million in FY99 and $63.1 million in FY00. The City expects that FY01 lottery aid will exceed the budget estimate of $60.7 million due to a $4.5 million supplemental lottery aid distribution. The City expects to receive $64.4 million in lottery aid in FY02. The current lottery formula is not favorable to the City because it distributes lottery aid increases based inversely upon each municipality's relative per capita property wealth. The City receives a smaller percentage share of lottery aid than its share of the state population, and dramatically less than the share of lottery proceeds derived from sales in Boston. Nevertheless, lottery aid has been an important source of revenue growth, aiding the City’s efforts to sustain adequate municipal services. During the last four years, Boston’s lottery distribution has reflected both lottery profit growth and the phasing out of the diversion of lottery funds to the Commonwealth. Beginning in FY01, the City’s lottery distribution reflects only profit growth in the lottery.

PROPERTY TAX LEVY

The property tax levy has been the City’s largest and most dependable source of revenue growth during the past 17 years. In FY01, the net property tax levy was $873.8 million, providing 51.6% of all City recurring revenue, with an increase to $924.7 million expected in FY02. According to current estimates, the net property tax levy will account for 52.3% of total recurring revenue in FY02.

The increases in the property tax levy have been steady and consistent from FY85 to FY01, ranging from $28 million to $52 million. However, because of the increasing property tax levy base, the $29.9 million increase in FY85 represented an 8.9% increase, while the $51.9 million rise in FY01 represented 6.0% growth. It is important for the financial health of the City that the property tax levy continue to grow but its future growth, as explained in more detail below, is not guaranteed.

Proposition 2 1/2 has been the overwhelming factor affecting the City’s property tax levy since being passed in 1980. Proposition 2 1/2 limits the property tax levy in a city or town to no more than 2.5% of the total fair cash value of all taxable real and personal property. It also limits the total

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property tax levy to no more than a 2.5% increase over the prior year’s total levy with certain provisions for new growth and construction. Finally, Proposition 2 1/2 provides for local overrides of the levy limit and a local option to exclude certain debt from the limit. The City of Boston, however, has not voted to either override the levy limitations or exclude any debt from the limit.

Proposition 2 1/2, as amended in 1991, allows growth in the levy beyond the 2.5% limit for any new properties and any increases in property valuations that are not related to municipal-wide revaluations. This limitation is more flexible than the original limitations on allowable new growth and has helped to strengthen revenue growth in a budget that does not have a very diversified revenue base.

In each year since FY85, the City has increased its levy by the allowable 2.5%. These increases have grown as the levy has grown, beginning in FY85 at $8.4 million and reaching $21.6 million in FYO1. During these same years, the levy has also been positively impacted by taxable new value, especially from new construction that has added to the tax base. The amount levied from taxable new value is estimated at $30.2 million in FY02. The combined effect of the allowable 2.5% increase and the taxable new value is an average annual levy increase from FY98 through FY01 of $42:2 million or 5.2%, and a projected increase in FY02 of $53.1 million or 5.8%.

From FY85 through FY89, assessed property values in Boston increased at an average annual rate of about 22%, far outpacing the capped growth in the levy. Most of this increase was due to appreciation in the value of existing properties. This disparity between value appreciation and levy growth caused a significant downward trend in the property tax rate. The City’s effective property tax rate in FY84 was 2.5%. By FY89, the effective property tax rate had fallen to 1.4%. When the disparity between growth in value and growth in the levy flows in this direction, the City’s property tax base becomes more protected (i.e. more distant from the 2.5% limit).

What occurred in the Boston real estate market beginning in 1988 significantly reversed the FY85 through FY89 property tax trends described above

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(which reflect real estate activity in calendar years 1983 through 1987). As economic activity slowed, Boston’s real estate values leveled off. Then, as the New England region experienced a deep recession, activity in both the commercial and residential markets slowed more dramatically. Office vacancy rates increased and downtown development came to a near standstill.

All of this was reflected in the fourth citywide revaluation, establishing values as of January 1, 1991 at $29.8 billion. This represented an 18.1% decline from the prior years total taxable value. This was followed by an 8.4% trending down for January 1, 1992 values at $27.8 billion and a 1.9% decline for January 1, 1993 to $26.8 billion. The January 1, 1994 values, established by the fifth citywide revaluation, showed a 5.0% increase to $28.1 billion. This was followed by increases in taxable value of 4.5% and 5.5% in the following two years. The sixth citywide revaluation that established values as of January 1, 1997, showed a 9.0% increase to $33.8 billion. This was followed by increases in taxable value of 6.8% to $36.1 billion in FY99 and 10.8% to $39.9 billion in FY00. The seventh citywide valuation that established values as of January 1, 2001, showed a remarkable 26% increase to $50.5 billion in FYO1. These last seven measures of taxable City property values have demonstrated recovery and strength in the City’s real estate market since the significant fall in values in the early part of the 1990's.

As values decreased in the early 1990s, the City continued each year to maximize the allowable levy increase under Proposition 2 1/2. Between FY90 and FY94, the levy increased each year by an average of 6.4%. The dramatic decrease in values brought the effective tax rate (levy / taxable value) from its healthy low point of 1.4% in FY89 to