Boston Municipal Research Bureau

 

 

The City’s Surplus Property Disposition Fund

by · September 12, 2016

A change in the traditional use raises concerns

At the request of the Mayor, the City Council unanimously approved the appropriation of $4M from the City’s Surplus Property Disposition Fund to support public safety services at the Boston Housing Authority (BHA) in FY17.  This Fund consists of the proceeds from the sale of city property and has primarily been used for capital or related one-time expenses.  Approving $4M from this Fund for a departmental operating expense is a new precedent, which is troubling.  A more appropriate revenue source to temporarily assist the BHA for this service would have been free cash, a General Fund revenue.  All other cities and towns in Massachusetts are prohibited from using municipal property sale proceeds for operating expenses.

Surplus Property Disposition Fund
The City’s allowable uses of the Fund’s proceeds are as follows:

  • The amount equivalent to the property’s debt and interest costs can only be used for capital purposes
  • Proceeds in excess of that amount are credited to the City’s capital fund, but the Mayor and Council can approve these funds for operating expenses

Previous Use of Funds
The City has followed the prudent rule that proceeds from the sale of a capital asset should only be used for capital or one-time expenses.  From FY01 to FY16, the City has appropriated proceeds from the Fund for capital infrastructure or housing purposes.  No funds were used for departmental operating expenses.

Examples of the use of these proceeds are:

  • Purchase and renovation of a building for the City Archives
  • Eliot School expansion and renovation
  • Site improvements to Winthrop Square Garage
  • Leading the Way housing program

BHA Public Safety Services
Federal cuts in HUD funding for Housing Authorities in recent years have forced the BHA to restructure, create public-private partnerships and seek assistance from the City for public safety expenses.  Previously, Winthrop Square Garage parking receipts were allocated to the BHA for this reason.  BHA has other options to pursue and should not expect city support on an ongoing basis.

Winthrop Square Garage Parcel
The precedent of applying Fund proceeds for an operating expense raises concerns given the expected proceeds to the Fund from the sale of the Winthrop Square Garage parcel.  The BRA selected Millennium Partners to develop the site with its bid of $150M.  The City has upcoming capital needs that will require use of Fund proceeds for capital purposes.  The expected recommendations from the school master facilities plan for major renovation of schools and the building of new schools will place a greater demand on capital funding over the next decade.

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