Tuesday’s Lowell City Council meeting mostly involved adopting the city’s fiscal year 2026 budget. Today, I’ll highlight some of the discussions that took place and otherwise share some thoughts on city finances. For those who want more granular information, City Manager Tom Golden’s overview of the budget and the detailed budget proposal are both on the city’s website.

To me, the most surprising occurrence Tuesday night was a motion by Councilor John Descoteaux that $2 million from the city’s stabilization fund be allocated to the Lowell Public Schools to supplement the city manager’s proposed LPS appropriation. Recall that School Superintendent Liam Skinner recently came before the council and explained that the city manager’s initial proposal for school funding contained $4 million less in cash than was needed and that if that reduction stood, more than 50 school department employees would lose their jobs with the accompanying harm to the students who depended on those employees for needed services.

Tuesday’s discussion on Descoteaux’s motion was less about the merits of the proposed increase than it was about the potential harm to the city’s bond rating that might result from taking annual operating funds from the stabilization fund, a practice frowned upon by rating agencies. CFO Conor Baldwin explained that if the stabilization fund was replenished by the end of the fiscal year from the city’s “free cash” then this action should not have an adverse effect on the bond rating.

Here’s how I understand free cash: Sometime this fall, the city will balance its books for FY25 which ends on June 30. There’s a complex calculation that adds up money that was appropriated for FY25 but was not spent plus revenue collected by the city that exceeded estimated revenue then subtracts encumbrances from FY25 that have not yet been paid. The sum of that formula constitutes “free cash.” The Massachusetts Department of Revenue then “certifies” the city’s free cash calculation. Once that’s done, the free cash constitutes one-time, non-recurring revenue that can be used by the city for many purposes such as funding capital projects, paying down debt, supplementing the operating budget, mitigating tax increases, or adding to the city’s stabilization fund.

All councilors who spoke Tuesday supported the Descoteaux motion (Mayor Dan Rourke was absent from the meeting which was chaired by Vice Chair Paul Ratha Yem) and the roll call vote at the end was unanimous in support of the $2 million expenditure.

While I’m pleased that the School Department received some much-needed relief, I was also confused by how it happened. For as long as I’ve followed the Lowell City Council, it was my understanding that it was the city manager and not city councilors who had the legal authority to initiate the expenditure of funds. I also believed that when it came to the city’s budget, councilors could only ratify or reduce expenditures initiated by the city manager; they could not add to the budget. Yet here, it was a city councilor who initiated this expenditure with all the other councilors present agreeing to it. I kept waiting for someone to ask, “Is this legal?” but no one did.

As I said, I support giving more money to the schools but if councilors are now able to dip into the city’s stabilization fund and dictate how money from that fund is to be spent, it could lead to unintended and unfortunate consequences.

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One withdrawal from the stabilization fund that was recommended by the city manager transferred $2.4 million from the stabilization fund to the parking enterprise fund.

Under Massachusetts law, a city may create “enterprise funds” for things like water, wastewater and parking (which are the three enterprise funds in Lowell). The purpose of an enterprise fund is to operate a service more like a business so that fees paid by the users of the service cover the cost of providing the service rather than having all taxpayers subsidize services that primarily benefit specific users.

The proposed FY26 budget for Lowell’s parking enterprise fund devotes $615,205 to salaries; $5,086,058 to “ordinary expenses” which I assume is mostly the contract with LAZ which operates the city’s parking garages; and $5,157,726 for debt service which repays the bonds used to raise the money to construct the garages.

Several councilors expressed concern about the deficit in the parking enterprise fund. CFO Baldwin responded that both garage revenue and revenue from curbside kiosks are trending upwards and are nearing amounts seen before the Covid pandemic. But he cautioned that the amount of debt service “was looming over the forecast” and that continuing to subsidize parking from the stabilization fund was “not a sustainable way to operate.”

Both Baldwin and City Manager Golden framed the subsidy as an economic development investment since you first need a parking garage in place before you can attract new employers (and their employees who will fill up the garages and pay parking fees), so there is a multi-year lag between the start of bond repayment and the arrival of sufficient garage patrons to generate the revenue needed to repay the bonds.

While I agree with that philosophy, it is fundamentally at odds with the use of an enterprise fund for parking. As things now stand in Lowell, there is constant push to raise parking rates to cover the cost of constructing garages built on spec to attract new businesses. That seems to me to be an investment that ultimately benefits all Lowell residents so equity suggests that all Lowell residents should bear the initial cost of garage construction. Instead, that burden falls upon the few people currently using the city’s parking garages. Having that small cohort of downtown residents and employees subsidize a big part of the city’s economic development strategy seems unfair with the predictable consequence of driving those few residents and businesses now living and operating downtown elsewhere.

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Several councilors voiced concerns over dramatic increases in salaries in many budget line items. City Manager Golden pushed back in several ways. He explained that when he arrived, many city salaries were not competitive compared to those offered by surrounding towns for comparable positions, so the city was losing good employees, many of whom the city had invested in with training and certifications, to other places. The council gave him the authority to make “retention” adjustments to reduce the financial incentive for employees to leave.

Golden then explained that the budgetary increases included both contractual step increases and negotiated cost of living adjustments. For those not working for state or local government, here’s how that works: Let’s say a person is hired as a clerk at a salary of $50,000 per year. Contractually, that position is in Grade 5 with a new employee starting at Step 1. On the first anniversary of the employee’s start date, they move from Step 1 to Step 2. If the step differential is $1,000, the employee’s salary would rise to $51,000. That would continue each year until the employee reached the top step in that grade.

In addition to step increases, employees also receive cost of living raises. Golden mentioned one contract that had recently been negotiated that included a 4% increase in the first year, a 3% increase in the second year, and a 2% increase in the third year. Let’s say that contract took effect the day our hypothetical employee was hired. Instead of earning $50,000, the salary, thanks of the 4% raise, would be $52,000. In year two, the employee’s salary would go up to $53,000 because of the step increase and then to $54,590 because of the 3% cost of living raise. Then in year three, the employee’s salary would go up to $55,590 because of the step increase and then to $56,702 with the 2% cost of living raise.

However, employee contracts are rarely negotiated in advance. More likely, they are finalized in the middle or at the end of the new contractual term. In that case, the new contract would be applied retroactively. In the budget, the salary shown for the position in FY25 would be $50,000 while the salary for the same position in FY26 would be shown as $55,000. Mathematically, that’s a 10% increase in a single year. But contractually, the jump is spread out by several years of retroactive raises suddenly realized in a single budget year. In other words, there is a disconnect between the budgetary increase of a salary and the contractual increase in that same salary.

Still, math is math, and the rate of increase is not sustainable unless more revenue is raised or something else is cut. Because much of the city’s budget goes to salaries and benefits, that means cutting the number of employees. As the remaining employees earn more, the salaries of departed employees whose positions are not filled can be devoted to paying the higher salaries of those who remain. That’s not sustainable in the long term either but it is a necessary interim step to keep salary costs from exploding. However, it seems the city is going in the opposite direction by continuing to add new positions to the city’s workforce.

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A frequent refrain on Tuesday night from both councilors and the city manager was that tough fiscal times are coming. I agree. The trickle-down impact of the coming Trump Tax Cut Bill working its way through Congress will be devastating to the Massachusetts state budget, especially when it comes to health care costs. That will prompt Governor Healey to impose emergency cuts in the middle of the fiscal year that will descend on Lowell and all other communities in the Commonwealth. Though the council acknowledged that looming fiscal crisis, it ratified a budget that did not make any meaningful cuts. Instead, it kicked the can down the road which sets the city up for a bigger fall once the fiscal crisis hits.

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This spring’s Lowell Cemetery tours will be held on Saturday, June 7, and on Sunday, June 8. Both begin at 10 am inside the Lawrence Street gate. They are free and require no advance registration. Plenty of parking is available within the cemetery.

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This week on richardhowe.com:

Dave Perry, formerly of the Lowell Sun and Vinyl Destination record store, wrote about his exploration of the record collection of the late Mary Travers, of Peter, Paul and Mary fame.

Leo Racicot fondly remembered influential teachers from St. Patrick’s, Lowell High, and ULowell from the 1960s and 1970s.

Cameron DaCosta wrote about the next chapter for Lowell’s Saint Jean Baptiste Church as a center for all things Jack Kerouac.

Louise Peloquin translated a 1924 article from L’Etoile about the annual pilgrimage of Lowell’s Catholic Association to St. Joseph’s Cemetery, an event that drew more than 5000 participants.