Conor Baldwin, CFO, City of Lowell

What are the key budget priorities for the City of Lowell in 2024, and how are you ensuring that resources are allocated efficiently to support the city’s major initiatives like the LINC project and Lowell Forward 2040 master plan?

The City of Lowell’s key priorities are driven by the goals of the City Council. The City Manager promulgates these priorities to the various Department Heads throughout the budget process. The high-level priorities for 2024 are: Economic Development, Quality of Life, Investment in Infrastructure, and Commitment to Sustainability. 

In a Gateway City like Lowell, where affordability and responsible tax policy are also a key priority; it is a challenge to fund the many worthy projects and programs that are proposed each year in the budget process. However, the City Manager and his Administration allocate resources based on conservative revenue estimates for the next year, while examining areas for efficiencies in City operations. Through constant monitoring of department expenses and operations throughout the year, the Administration works collaboratively with the Department Heads to identify, in real time, opportunities for efficiencies or more effective service delivery. 

The Lowell Forward 2040 master plan is the overarching beacon for managing and measuring performance each year in the budget. Department Heads, along with their monetary requests for each account, are asked to submit their goals and performance measures, which are intended to align with the goals of the master plan and ensure steady progress towards 2040. The Lowell Innovation Network Corridor (“LINC”) Project, while still in its early stages, is also an emerging component of the city’s economic development strategy and the city intends to support the development through grants and technical expertise to UMass Lowell. 

What are the key budgetary challenges Lowell faces, particularly in managing rising costs and maintaining financial stability amid inflationary pressures?

For Lowell the major budgetary challenges are primarily associated with the city’s fixed costs, such as retirement and health insurance, and the associated long-term liabilities for Pension and Other Post Employment Benefits (“OPEB). Other notable challenges include the rising costs for state assessments, known in Massachusetts as “cherry sheet” charges.

Of the “cherry sheet” charges, the single largest pressure on the budget comes from the city’s assessment for Charter Schools. When a student moves from a traditional district to a charter school, the amount of funding spent by the district for that child follows the child in the form of a charter school tuition payment. The state provides some transitional aid to communities as they face these new costs. That funding, however, is temporary and has been significantly underfunded in the state budget, historically. Thus, the school district and City Administration must find ways to cover the new tuition payment expense. Because students leave from different grades and schools, it is not easy—if at all possible—to reduce the number of classes in a district. Without closing classes, a district cannot eliminate teacher salaries, which are its biggest expense. In FY20, the total cost of the city’s “cherry sheet” assessments was $20.2 million, in FY24, the assessment was $44.9 million.

The pension assessment for retired city employees has also grown exponentially, but the city has been on a trajectory to meet the unfunded pension liability by the year 2037, and to meet that schedule must absorb several significant increases along the way. For example, the pension assessment in FY20 was $27.2 million, and in FY24 it had grown to $32.8 million. 

Each year, the Administration must balance the requests for new programs or positions with meeting the rising fixed costs of existing liabilities. The city’s tax levy represents only about one-third of the total revenue from the city and in Massachusetts, communities are limited by the “Proposition 2 ½” law in how much additional revenue can be raised by property taxes from year-to-year. A balanced budget is required by law in Massachusetts and is achieved through careful fiscal management and constant examination of revenues and expenses.  

Lowell High School’s construction has been a major focus of the city’s bond issuance. How is the Finance Department ensuring that these educational infrastructure projects remain financially viable, and what are the expected outcomes for students and the community?

The Lowell High School project has been a major topic of Lowell’s public discourse since 2014, and the cost of the construction and associated debt service has been part of the city’s long term financial forecasting throughout the process. The city has had great success securing grants from the Massachusetts School Building Authority (“MSBA”) for the Lowell High School project, as well as through the MSBA’s Accelerated Repair Program (“ARP”) to continue the historic level of investment in the city’s school system. 

These investments are helping to create a better educational environment for the children and young adults of Lowell and to make sure they have the best facilities and equipment to prepare them for the jobs of tomorrow. For example, the new Lowell High School has state-of-the-art “maker space” and science labs to prepare the students for STEM jobs and a career in science and technology. The School Department is closely tracking outcomes to better align the educational programing with the changing workforce markets in the Northeast. 

The city has committed to hiring additional police officers and firefighters in 2024. How are you balancing these public safety investments with the need to maintain fiscal responsibility, particularly as personnel costs rise?

The additional public safety investments are within the current budget allocation for personnel in the Lowell Police and Lowell Fire Departments. However, for several years the city has struggled to sustain the number of sworn police officers and uniformed fire personnel and attract new recruits to the ranks, to backfill positions lost due to retirement. 

A few of the strategies the city has employed to maintain our fiscal responsibility to the taxpayers has been to commission a third-party audit of overtime in the Lowell Fire Department, to determine opportunities for efficiencies in the operation, and by seeking grant funding from the Commonwealth and the federal government for staffing, to help offset the burden on the taxpayers. The Lowell Police Department’s Office of Research and Development in 2023 received approximately $3.6 million in federal and state grants.

How is Lowell managing the balance between maintaining competitive tax rates and generating enough revenue to fund essential services and projects? Are there any plans to adjust tax rates in 2024 to meet the city’s growing financial needs?

The City Administration strives to achieve this balance by employing a moderate, incremental increase each year to the tax levy as part of the strategy to expand services and keep pace with inflation, while maintaining strong fiscal discipline in the operating budget and being mindful of the need to keep Lowell’s tax base affordable for the residents. As of FY24, the average single family tax bill is $5,365, as compared to the state-wide average single family tax bill of $7,399. The Administration has also taken a comprehensive look at the business-type activities of the city for water, sewer, trash, and parking, and made necessary adjustments in 2024 and 2025 so that the revenue is better suited to keep pace with rising costs. 

As Lowell continues to grow and attract new investments, what measures are you putting in place to ensure long-term financial resilience?

The finance team’s strategy towards long-term fiscal resilience is a multi-pronged approach which includes building the city’s reserve position, continuing to seek development opportunities which will expand the tax base, and continuing employ best practices in fiscal management, such as long-term fiscal forecasting and capital planning, to ensure that the budget is both flexible and resilient. According to the credit rating agency, Standard & Poor’s (“S&P”), Lowell has been successful in doing so, as they have rated our fiscal management as “very strong” according to their scoring rubric used to examine municipal credit.