City Council

City of Salem, Massachusetts “Know Your Rights Under the Open Meeting Law, M.G.L. c. 30A ss. 18-25 and City Ordinance Sections 2-2028 through 2-2033.” The City Council Committee on Administration and Finance co-posted with the Committee of the Whole met in the Council Chamber on _June 11, 2025______________ at ______6:00_______P.M. for the purpose of discussing the matters(s) listed below. Notice of this meeting was posted on ___ June 5, 2025__ at ___ 9:42 A.M.__________________ (This meeting is being recorded) ATTENDANCE A&F – Merkl (chair), Stott, Davis & Harvey. COW – Morsillo. From the city – Anna Freedman, Finance Director, Lisa Paterson, Chief of Staff, & James Leblanc, Director of Capital Planning. ABSENT WERE: COW – Cohen, Hapworth, Jerzylo, Prosniewski, Varela, Watson-Felt. SUBJECT(S) FY26 Capital Improvement Plan & Five-Year Capital Improvement Plan_____________________________________________ FY26 General Fund Capital Bond Order and Unspent Proceeds Appropriation________________________________________ FY26 Water/Sewer Funds Capital Bond Order and Unspent Proceeds Appropriation___________________________________ Short-Term CIP Appropriations______________________________________________________________________________ Receipts Reserved CIP Appropriation_________________________________________________________________________ Retained Earnings CIP Appropriations_________________________________________________________________________ Free Cash CIP Appropriations________________________________________________________________________________ STR Housing & Infrastructure Fund CIP Appropriation____________________________________________________________ Annual Revolving Funds Approval____________________________________________________________________________ Any other Misc. orders/appropriation_________________________________________________________________________ Merkl - We are starting tonight with the first item, the fiscal year 26 general fund capital bond order and unspent proceeds appropriation and to appropriate the amount of $10,026,020 for fiscal 2026 capital improvement projects. Freedman - This is typically annually filed before the Council to fund the larger projects in the upcoming fiscal year. Capital plan, a bond order. This year's bond order is a little bit different, because the bond order also is repurposing some unspent bond proceeds as part of our debt. Cleanup exercise. This is sort of continuing that exercise and we were able to identify over 2.5 million dollars’ worth of unspent proceeds. These are what we call getting stale and need to be repurposed. And so, these projects that were identified for them to be repurposed to will be spent on a sooner timeline, which is required for us to be in compliance with Federal IRS rules, and so all in all this will reduce. This will result in savings to taxpayers. So, the over 10 million dollars bond order of that 2.5 million will be funded with repurposed proceeds, and the remaining amount of a little over 7.5 million will be new debt to be financed. Going forward, identifying these proceeds and repurposing them will reduce the amount of debt service that taxpayers will pay in future years. If there's interest in the specific projects that are being repurposed, I can go through those, but otherwise that's the summary of what's occurring with this council order. Merkl – Thank you, as always, on your due diligence to finding and utilizing unspent funds. Stott – I would like to also thank you for cleaning up and utilizing the bond appropriation funds. Motion to adopt the fiscal year 26, general fund capital bond order and unspent proceeds appropriation to appropriate $10,026,020 for the fiscal year 2026 capital improvement projects, seconded by Harvey. Motion carries 4-0. Merkl - Next, we have the fiscal year 26 water sewer funds capital bond order and unsent proceeds appropriation to appropriate $9,450,000 for fiscal year,2026 capital improvement projects. Freedman - This item, similarly to the general fund, is for the water and sewer specific capital projects for FY 26. Additionally, this year we were also able to identify a little over $196,000 in unspent water sewer fund proceeds that could be applied to this borrowing for next year, and so ultimately it will reduce the overall amount that will be newly borrowed down to a little over 9.2 million dollars. Again, I’m happy to provide any feedback on the unspent proceeds that are being repurposed, but otherwise, it's the same mechanism as in the general fund. Stott - Motion to approve the fiscal year 26 water sewer funds capital bond order and unspent proceeds to appropriate $9,450,000 for fiscal year 2026 capital improvement projects, seconded by Harvey. Motion carries 4-0. Merkl - Next, we have the short-term CIP appropriations. This is to appropriate the sum of $5,703,457 for the fiscal year 2026 capital projects. Stott – Motion to amend the short-term CIP appropriation by striking $26,000 for the police plate readers for a new total of $5,677,457, seconded by Harvey. For anyone that might be listening along, we noticed during the department review, which also reviews the CIP appropriation review for each department that during the Police Department review there were 2-line items for the same item. So, there was a $26,000 appropriation in the department budget, and there was also a $26,000 appropriation in the CIP fund for the same item of police readers, which was an error so we asked which one it should stay in, and it was requested it stay in the department budget. So that is why we are removing it from the CIP line item, but it is still in the police department's budget as a line item. Amendment carries 4-0. Freedman - I could just briefly make a note, that the funding in the short-term capital plan that affords all these projects is funding that comes from the city's free cash that's certified annually as part of the city's free cash policy additionally this year, and I think next year and potentially for FY27, and then potentially a little bit for FY28. We also identified interest that had been collected on the city's ARPA grant, which we were allowed, which is general fund money, and that was also moved over into the short-term capital to provide additional opportunity, since that is one time revenue, to use that for projects. That is how we were able to afford a larger than usual amount from the short-term capital fund, which also reduces potential debt service payments for taxpayers because we were able to use that to pay for these projects instead of borrowing. Stott - Motion to approve the short-term CIP to appropriate the new sum of $5,677,457 for fiscal 26 capital projects, seconded by Harvey. Motion carries 4-0. Merkl - Next, we move on to receipts reserved CIP appropriations in the amount of $48,718 from the receipts reserved for appropriation golf course account to the Parks and Rec golf course. Equipment accounts for costs associated with the purchase of a John Deere pro Gator pursuant of the fiscal year 2026 Capital improvement. Freedman - The receipts reserved for appropriation for the golf course. Those are funds that are paid by those utilizing the golf course, and so those funds build up, and from time to time are used to purchase, make equipment or other capital purchases for infrastructure needs at the golf course. So, this is directly being paid for from users who are paying fees at the golf course. Stott - Motion to approve the appropriation of $48,718 from the receipts reserved for appropriation golf course account to the Parks and Rec golf course. Equipment account for costs associated with the John Deere Pro Gator, seconded by Harvey. Motion carries 4-0. Merkl - Next, we move on to the retained earnings CIP appropriations and we are going to start with an amendment from Stott. It's $689,938 from the retained earnings water and sewer fund to the capital improvement plan. There was a typo on the council order where the amount is fully written, not the numbers amount. This is that the council order reads where it is written, and where it is written out in the numbers, reads $689,938, and we thought best practice was to make an amendment so, the written-out number is also correct. Stott - Motion to amend the typo in the council order, where the written-out amount is incorrect, the written amount and the numerical amount now reads $689,938, seconded by Harvey. Motion carries 4-0. Freedman - The retained earnings that are funding these water and sewer retained earnings projects are similar to free cash, for the general fund retained. Earnings are the same for water and sewer funds where they are revenues that have come in above projections, and any spending that has turned back and over time that accumulates so utilizing some retained earnings on an annual basis to fund one-time capital projects reduces the amount that the fund needs to borrow. It reduces the amount that the rates may have to go up in the future to pay for debt service. We've been working to identify every year a couple smaller projects to fund with retained earnings to reduce that debt service portfolio on the water sewer fund as well. Stott - Motion that we recommend approval on the vote to appropriate FY26 on the retained earnings CIP appropriation of $689,938 from the retained earnings water sewer fund account to the fiscal year 2026 water sewer capital improvement plan projects, seconded by Harvey. Motion carries 4-0. Merkl - We now move on to free cash CIP appropriations. Freedman - This $750,000 that is proposed to be transferred from the from free cash to the short-term capital fund will just further basically capitalize that fund. There are sufficient funds to afford the projects that were listed in the prior council order. Stott - Motion that we recommend approval of the free cash CIP appropriation of $750,000 from free cash to the short-term capital funds, seconded by Harvey. Motion carries 4-0. Merkl – Now we move on to STR housing and infrastructure fund CIP appropriation. Freedman - Several years ago the City Council adopted a local option under Mass General Law to collect a short-term rental community impact fee. The city has been collecting that fee since fiscal year 2023. Half of the impact fees are general fund revenue, and the other half by law and by vote of city council are collected in a housing and infrastructure fund for capital investments. They must be used for specifically for capital investments over time. The past couple of years that fund has been accumulating, finally, a healthy balance, and so the balance is up over $200,000, and so for FY26, we're proposing to utilize $200,000 within that available balance to support an FY26 traffic calming capital investments which is consistent with the allowable use of the fees for local infrastructure projects. We anticipate. maybe not every year, but every other year, enough would be in the fund to reinvest that back into local infrastructure projects. This is the 1st iteration of looking to utilize those funds. Merkl – I am happy to see these funds being collected and how they are going to be used. Stott - Motion that we recommend approval on the short-term rental housing and infrastructure fund CIP appropriation of $200,000 to fund the traffic calming pilot programs, seconded by Harvey. Motion carries 4-0. Merkl – Next, we have the annual revolving funds approval. Freeman - Under Mass General Law, there's a certain fund called a revolving fund that requires annual authorization by city council to set expenditure ceilings. Revolving funds are a special type of fund that are itemized under law. What types of programs can utilize revolving funds? They're intended to be self-sufficient. They're typically for programming where there's a