The City Council discusses options for paying off the sewer deficit during its meeting.
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HOLYOKE — The City Council gathered for a special meeting Dec. 16 to vote on a shift factor to determine the tax rate for residential and commercial properties and discuss a sewer receipts deficit.
The City Council first discussed the sewer deficit and a proposed solution, and Mayor Joshua Garcia introduced to the City Council a few critical orders to address the sewer deficit and to ensure the city invests in future capital needs.
The current sewer deficit is $927,778 and Garcia explained that without an updated sewer rate, this deficit is likely to persist annually.
He also said that last year’s deficit was subsidized through taxation due to significant breaks in the sewer collection system and this year the deficit is the result of contract terms requiring the city to pay a premium when flows exceed an agreed-upon baseline.
“Fortunately, this is the final year of the existing long-term contract, and the new agreement will prevent such financial surprises,” Garcia stated.
The City Council has expressed a preference to avoid resolving the deficit through taxation and Garcia said he agreed with the City Council and proposed a third path that avoids burdening taxpayers, protects the city’s bond rating and preserves our stabilization account.
He explained, “We want to continue this habit of not relying on ARPA money to balance our budget or lower the levy. This solution allows us to clear the deficit responsibly while ensuring fiscal stability.”
Since the fiscal year began on July 1, the general stabilization account has earned approximately $1.1 million in interest.
Garcia proposed utilizing these earnings to cover the sewer deficit and to invest in essential capital projects that Garcia said the council will discuss later.
Garcia explained, “There are some needs that are coming forward. I’m probably going to propose it around January time. The DPW in particular do need plow truck replacement and it’s going to cost a little over $300 grand so that, the $1.1 million, $900,000 plus goes towards the deficit and around $200,000 plus will go towards the capital stabilization that will supplement what’s existing in there currently so that we can take care of these capital needs.”
City Councilor Patti Devine said, “I think this is a very good order. We’re using interest, we’re not using taxpayer money, this is interest that has been accumulated and I think it’s a good idea to have this go to capital stabilization so that we can take care of that sewer deficit.”
Another option the Finance Committee discussed subsidizing the revenue of the sewer enterprise budget from the tax levy in fiscal year 2025 by $927,778 and the remainder funded by sewer receipts.
The Finance Committee recommended that the order be denied by a 4-1 vote, which the full City Council voted yes to also deny.
City Councilor Kevin Jourdain explained why this option was denied.
He said, “We’re going to discuss options as we reconcile the [fiscal year 2025] budget so we can set the tax rate. One of the options that the committee considered was adding it to the tax levy itself and so the four to one majority vote of the Finance Committee decided not to do that but to pursue having it funded from reserves.”
Jourdain also discussed that he wished the transfer was for the exact $927,000 amount instead of the proposed $1.1 million amount. Other City Councilors agreed with this statement.
Although the City Council voted 8-5 to approve the transfer of approximately $1.1 million from the general stabilization to the capital stabilization, the motion did not pass.
City Auditor Tanya Wdowiak explained that the City Council can still vote for a tax rate shift, but the city cannot balance the budget and submit the tax recap without a vote to cover the sewer deficit.
She said, “Depending on a vote or if there’s not a vote, the number will change on the recap form depending on how everything goes but you can vote on the shift. You’re just voting on the shift you’re not voting on the absolute number.”
The City Council was provided information from the assessor with the deficit being covered by the stabilization fund and voted 7-6 to table the final two items to their regularly scheduled meeting to gather more information on the potential tax rate and subsidizing the revenue of the sewer budget and possibly receive a new motion from Garcia.
At its Dec. 17 City Council meeting, the City Council approved the new motion to transfer exactly $927,778 in the FY25 budget from general stabilization to the capital stabilization and subsidize the revenue of the sewer budget from the city capital stabilization fund, which balances the budget.
Garcia explained, “We didn’t want to do was raise and appropriate. That’s what we did last year to cure the deficit. There was strong interest from this council not put the burden on taxpayers, I fully agree, there’s unanimous support there so the path to take interest earned out of that stabilization.”
