On Monday, 10/23/17, Mayor Gray submitted Administrative Order 2017-05 to the City Council, "City of Amesbury Financial Policies: A Community Compact Initiative." This was a welcome submission.
The Massachusetts Department of Revenue's Division of Local Services (DOR-DLS) has long encouraged cities and towns in the Commonwealth to establish in writing policies and procedures to guide financial practices and decision-making. In fact, the DOR-DLS website has a number of fact sheets summarizing what 'best practice' policies would look like and achieve - you can find these fact sheets HERE. Bond raters like to see that a community has a sound set of explicit management policies, as well, as a part of evaluating how good of a 'bet' a community's bond issue is for investors and issuing a rating for that issue.
Apart from some relevant sections of our Home Rule Charter that articulate some financial standards, policies, and process, Amesbury has long operated without written, formal financial policies in a number of key areas, including: treatment of unexpended funds, capital planning, debt management, reserve accounts, etc. This is NOT to say that Amesbury has been operating without policies in these areas, just that they were not written down, for use by the executive and legislative branches to guide decision-making. In fact, for years, the reports that bond rating agencies produce when Amesbury prepares a bond issue have noted this, that we have policies, just not written up (and publicly available).
For example, from a 2013 Standard and Poor report for Amesbury: "Budget assumptions are done conservatively and reserves are managed in accordance with Amesbury's stated policy. The fund balance policy seeks a minimum fund balance in stabilization of 5% of expenditures. The city does not have a formal debt management policy but targets total debt service at no more than 5%-10% of general fund expenditures." So, we have had policies in place, but in an informal state.
As a City Councilor serving under two Mayors, this lack of written policies has always presented challenges. The City Council plays a crucial role in our form of government of evaluating and then modifying, rejecting, or approving a wide variety of appropriations, from the annual operating budget, to spending out of reserve accounts, the funding of reserve accounts, use of unexpended funds (such as 'free cash') on capital and other costs, and the approval of debt. This amounts to tends of millions of dollars in expenditures annually that the Council acts upon, as initiated from the Mayor. The absence of written policies contributes to something of an ad-hoc approach decision-making, without a set of reference points/policies to work from.
If you take that responsibility seriously, then you need to have coherent and sound guidelines in place to make those decisions. I've long had my own standards in place for making my decisions and in this year I've had opportunity to partner with colleagues to express those standards in the context of specific spending requests. You can read about all that HERE.
In early 2016, the City accepted a 'Community Compact' grant from the Commonwealth; one of the things that this grant funded was for the City to engage with a consultant (The Abrahams Group) to develop written financial management policies. Work on these policies proceeded without any participation from the Council and it was indicated that the product in draft form would not be made available for review or discussion. Closing in on the final months of the current Council session and with both Councilor Lavoie and me not standing for re-election, we were highly motivated to see some financial policies in place by the end of our terms in office. We partnered with Councilor Stanganelli to develop our own set of proposed financial policies for the City; we filed with with the City Clerk for our October 2017 meeting. With the Mayor's policies submitted, we plan on withdrawing our proposal in November, as a redundant document. You can read our filing HERE.
A few final words. There is a lot to like in what the Mayor submitted and there is a LOT of common ground between our sets of policies. Both articulate policies in key areas: reserves, free cash, stabilization funds, capital planning, and debt management. Both set targets to fund reserve accounts at levels higher than currently funded. The Mayor's policies goes beyond what we submitted and calls for the establishment of a 'Capital Stabilization Fund' in order to retain and reserve fund appropriated for capital projects into future years, in order to support a 'pay-as-you-go' approach to capital spending.
For our submission, we consulted (and borrowed from) financial policies from other Massachusetts small cities. Similarly, the Mayor worked with a consultant who has also produced policies for othe towns and cities in Massachusetts. In fact, it looks like we all used some of the same sources, as there is some verbatim language that appears in both our documents.
All this to say, Councilors Lavoie, Stanganelli and me were all pleased to receive the Mayor's administrative order. We will likely offer some feedback on the document but only with some suggestions for improvement.
And now, the next step will be for the Mayor and the Council to put the policies into action and use them productively to guide financial decision making moving forward.
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