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Springfield Councilors Pass FY25 Budget, but Tax Implications Linger…

Buono Sarno

Mayor Sarno and CAFO Buono serving up fresh budget to councilors on May 28. (WMP&I)

SPRINGFIELD—Despite a lengthy debate and reasonable fears about how the city’s principal revenue stream affects residents, the City Council approved the fiscal year 2025 budget. It passed last week with no modifications and no dissent. This was also the first annual spending document presented under the new Chief Administrative & Financial Officer, Cathy Buono.

Looming over this budget are escalating property tax bills. As property values have surged, the city faces no immediate risk of hitting its maximum level of taxation. Rather, Springfield has seen the property tax levy grow. Yet, this growth is uneven. State property tax law may shift the burden from commercial property onto homeowners. Simultaneously, Springfield has little room to cut after services recovered from their nadir during the Control Board era.

Mayor Domenic Sarno presented the $928.7 million spending document on May 8.

Last Tuesday, the competition between services and taxes was on display as multiple councilors thanked Sarno and Buono for listening to concerns about the pinch facing taxpayers. They invoked residents who pleaded for relief at last year’s rate-setting meeting. While tax rates play a role, most bureaucrats and electeds understand no relief is plausible without changing the budget.

This was only the second budget presentation to the Council in-person since the shroud of the coronavirus fell upon Springfield. Yet, the event is largely the same as in the Beforetimes. Department heads, finance staff and some other officials fill the Council chamber. The mayor speaks, with the CAFO close by.

Councilors came and went throughout the meeting. Ward 1 Councilor Maria Perez was the only member absent throughout. Councilors Sean Curran and Tracye Whitfield participated virtually, although the latter logged on later in the meeting. Technical difficulties still haunt Council meetings. On Tuesday, the audio of remote councilors did not come through clearly.

Aside from concerns about tax bills, the hearing lacked the usual airing of grievances many budget votes have. Indeed, councilors had few comments about what the city was actually doing with its money.

Domenic Sarno

Déjà vu? Last year, as in many budgets before, Sarno also announced no use of reserves or layoffs. He said that could change next year,  (still via YouTube/Focus Springfield)

Sarno feted, as he has for several fiscal years now, that the budget did not tap into reserves nor require layoffs. As usual, he noted that little of the budget is discretionary, a slippery but correct assessment. However, he also said that he and the Finance Department urged department heads to limit their wish lists this year.

Still, since fiscal year 2022, the budget has grown $173 million. The FY2025 budget alone, which begins July 1, is 5.8% or $51 million larger than the previous year’s budget. Of the growth from FY2024 to FY2025, four-fifths is from the school budget.

(The School Committee writes the budget, but the topline education figure is largely a function of state appropriations. Some non-school categories grew faster year over year than the schools, including parks & recreation, administration & finance and vaguely-described general government.)

The city side of the budget grew only 3.9% in FY2025, a decrease from the prior year when it grew 5.8%. Spending growth including schools is slower this year compared to last year, when it was 7.9%.

Costs generally have risen, whether due directly to inflation or previously agreed-to cost-of-living increases. Buono and Sarno indicated that while this budget was secure, next year’s could be a problem. They did not identify a specific cause, but worried dipping into reserves may be necessary.

“I do worry. Cathy will tell you too. I do worry about FY26. That’s when we would utilize those rainy-day funds,” the mayor said.

Uncertainty may explain these fears. While the economy appears stable for now, the state’s revenues have fluctuated wildly. In addition, increases in spending may outstrip the city’s statutory capacity to raise taxes.

Yet, this leads to another complication. As property values have raced up amid increased demand and low supply, residential tax bills have climbed, too. For several years now, residential values have risen as commercial values have stagnated. That inevitably puts more pressure on homeowners. Anticipated property tax revenue in the city will reach nearly $277 million. That is nearly $40 million more than what it raised three years ago.

To address this, Sarno told councilors he was allocating $2 million from investments and another $1 million from free cash to reduce the amount raised from property taxes. The city anticipates nearly $5 million more in free cash or unexpected funds from prior fiscal years. The city has earmarked it to repair storm damage from last year, though. Appeals are underway, but the Federal Emergency Management Administration denied Springfield’s reimbursement request for now.

Tim Allen

Councilor Allen said he got a commitment for more savings, but what will the impact be? (still via YouTube/Focus Springfield)

Ward 7 Councilor and Finance Committee chair Timothy Allen announced that he had reached an agreement with Buono and the mayor to find another $750,000 in savings by not filling 17 open positions. These positions have not been identified. Rather, Buono will meet with department heads to identity them. Public safety will not be affected.

“It’s a hard conversation,” Allen said in his remarks, describing the meetings and correspondence he had in recent weeks. “We found kind of a middle ground.”

Yet, this means the total allocation of funds to reduce the property tax levy this year will be $3.75 million, or just over half the amount allocated last year.

Last year, Patrick Greenhalgh, the Chair of the Board of Assessors, said that $1 million in reduced levy translates into an average of $15 in relief on property tax bills. Therefore, even if FEMA were to reverse itself and free up more free cash, it would likely be insufficient to bring down tax bills to anyone’s satisfaction.

This year Greenhalgh warned of another pressure point. Like Boston, Springfield is closing in on the statutory limit on how much it can shift the tax burden to commercial property owners.

The difference in property and residential tax bills is often expressed when the Council sets the two rates for residential and commercial property. However, the Council actually votes on a factor that allocates how much of the levy commercial properties bear. If Springfield hits that limit, it necessarily means more of the burden will shift back to residential taxpayers unless residences fall in value.

Councilors briefly discussed this issue, mentioning a document Richard Allen, the former chair of the board of assessors and brother to Councilor Allen, had sent to councilors. However, the conversation did not go on for long and tended to focus on seniors. For the administration’s part, Greenhalgh said the city was trying to enroll more homeowners into the state’s circuit breaker tax program.

The budget ultimately passed 11-0. Whitfield was absent for that vote. Three funds, essential but nominally separate components of the budget, received approval without dissent as well. Some councilors did miss these procedural votes, though.