In November, the state certified that the city holds $21.2 million infree cash, money raised throughout the previous year on income generated through fees, such as from building permits, investment returns, as well as funds budgeted but not spent for a variety of reasons, like not filling vacant positions.
Free cash is typically used during the year to fund emergencies and unbudgeted expenses.
The City Council voted 11-0 Monday to approve four spending proposals worth $7.4 million. The move will leave the city with roughly $7 million remaining in free cash.
This year, $1.5 million will go to the police department to replace police cruisers, said Cathy Buono, chief administrative and financial officer for the city.
“They’d like to replace 20 vehicles a year and I would rather not bond for them this year,” Buono said.
The council also agreed to build up its stabilization account after making withdrawals over the summer. Of the $1.7 million deposited in the stabilization fund, the city’s savings account, $1.2 million was withdrawn to help the law department work on 11 lawsuits the city was facing. The other about $500,000 was used to boost the police retirement account, Buono said.
The other two expenses will reduce unfunded liabilities in the city’s pension and the other post-employment benefits accounts. The second mostly funds retirees’ health insurance, Buono said.
The city, which is required to fully fund the pension account by 2034, has to increase its payments into the fund by 9.2% annually. This year it had to allocate between $70 million and $80 million toward funding the liability, said City Councilor Timothy Allen, chairman of the Finance Committee.
A decade ago, the pension account was 26% funded, making it the worst-financed public pension system in the state. An aggressive schedule was set to catch up, he said.
One of the strategies the city developed is to place 10% of its free cash, or $2.1 million this year, into a pension stabilization account. That money is set aside so the city has something to tap into if the economy turns sour and it cannot keep up with the annual 9.2% increase in payments, Allen said.
The city’s pension system is still among the lowest in the state and is funded at about 40%, Allen said.
With the City Council’s vote, that pension reserve account has increased to a little over $19 million, Buono said.
The council also agreed to deposit $2.1 million into the benefits account, which is also underfunded, Buono said.
“It is an outstanding liability,” she said. “We have to address it once we address the pension liability.”
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