Boston Ends FY20 With $15.3M Surplus

City benefits from conservative budgeting and strong property tax base

Reflecting a long history of conservative budgeting, FY20 marks the 35th consecutive year that the City of Boston has produced a surplus. The City ended FY20 with a $15.3M General Fund operating surplus, which represents 0.4% of the City’s total FY20 spending ($3.5B). The City’s strong reserves and practice of conservative budgeting put Boston in a stronger position than most other major metropolitan areas as the City faces financial uncertainties in the current fiscal year.

FY20 General Fund Summary ($M)

  Budget Actual ($)
Revenue $3,493.5 $3,500.0 $6.5
Expenditures $3,493.5 $3,484.8 ($8.8)
Surplus $0.0 $15.3 $15.3

Revenue – Boston’s property tax base remained strong in FY20 with revenue from property taxes coming in at $2.5B, $5.4M (0.22%) more than originally budgeted. Revenue from building permits increased by 55%, or $24.6M over the $45M budgeted. The City collected 93% of the total $69.6M in FY20 building permit revenue by mid-March ahead of the pandemic-related moratorium on construction. Building permit collections over the concluding months of FY20 reflect investor confidence in the development market in the early stage of the pandemic and expectations that restrictions on construction would be temporary.

In addition to increased revenue from building permits, the city saw higher than projected excise tax revenue. The City collected $32.5M in airplane fuel excise, $9.5M (41.2%) above budget, and $2.3M (2.3%) over the $97.0M budgeted for room occupancy excise. Though these two categories exceeded expectations, revenue from meals excise and parking fines fell below what was budgeted. Meals excise revenue came in $1.6M (5.2%) below the $30.5M budgeted and parking fines at $2.6M (4%) below the $65.3M budgeted. Both point to the start of the economic downturn as the Boston workforce moved to remote work and the city entered the first months of lockdown. PILOT collections also saw a decrease as some institutions did not pay their second annual installments (usually paid in April/May) before the close of the fiscal year. Since the start of FY21 on July 1 most have paid the remainder of their FY20 request.

Select Revenue Accounts ($M)

Budget Actual ($)
Property Tax (net) $2,461.4 $2,466.8 $5.4
State Aid $464.2 $458.8 ($5.4)
Other Excise Rev. $164.0 $177.2 $13.2
Payments-in-Lieu-of-Taxes $49.0 $44.9 ($4.1)
Building Permits $45.0 $69.6 $24.6
Fines $69.1 $67.3 ($1.9)
Motor Vehicle Ex. $52.0 $62.8 $10.8
Investment Interest $15.0 $29.4 $14.5

Boston received $5.4M less in state aid than budgeted, mostly due to $3.1M less than budgeted revenues from unrestricted aid (UGGA) and $2.0M less in charter school reimbursement. The decrease in UGGA was due to an error in state payments to the city, which was corrected at the start of FY21 when the state gave the missing funds to the City. Favorable market activity and high interest rates generated a $14.5M surplus in investment interest. This is 96.5% above the budgeted amount. Continuing a multi-year trend, funds from the Cemetery Trust ($950,000), Parking Meters ($23.9M) and Fund Balance ($40.0M) were included in the revenue budget but not tapped in FY20.

Expenditures – Total expenditures were under budget by $8.8M or 0.25% in FY20. The Boston Public Schools (BPS), public safety (police and fire), Public Health Commission (BPHC), and Public Works accounted for 62.0% ($2.2B) of all spending ($3.5B). Continuing a multi-year trend, the Police Department spent $11.3M over what was budgeted in FY20. This was mostly due to significant unbudgeted overtime expenditures. BPD spent $13.9M – or 23.0% – more on overtime than the $60.8M budgeted. This highlights the challenges the City will face in meeting its goal to reduce the BPD overtime budget by $12M in FY21 and the importance of structural changes, not just budget cuts, to rein in overtime use. Fire Department spending was over budget by $5.4M, including $1.9M in overtime spending over budget. Public Works closed out the year $7.5M under budget. This is attributed to a scaled back seasonal labor program in the spring and a reduction in snow removal spending.

FY20 Select Spending Accounts ($M)

Budget Actual $
BPS $1,178.6 $1,178.6 $0.0
Public Works  $130.8  $123.3 ($7.5)
Fire  $271.6  $277.0 $5.4
Police  $414.2  $425.6 $11.3
BPHC  $93.4  $93.4 $0.0
Bargaining Reserve  $2.2  $2.2 $0.0
Other Dept’l  $346.2  $352.1 $5.9

Total spending on personnel services in FY20 was $9.8M (0.54%) over the $1.8B budgeted due to $18.9M in unbudgeted overtime spending, concentrated mostly in public safety spending, and significantly higher part-time employee expenditures over what was budgeted ($5.5M – or 32.4% – over budget). Part-time employee spending is exclusively concentrated in BPS.

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