LAWRENCE — The city is headed toward an "inevitable fiscal crisis," and Mayor Michael Sullivan said he's working quickly to avoid a meltdown that could result in a state takeover of Lawrence government.
As one of his first steps, Sullivan will ask city councilors to approve the hiring of a chief administrative officer who would take "full responsibility" for all day-to-day City Hall operations and earn up to $130,000 per year. Sullivan said he believes Finance Director Mark Andrews, who makes $93,000, is perfect for the job.
The new position comes strongly recommended by the state Department of Revenue. At Sullivan's request, the agency conducted a financial management review and has now issued a troubling new report about the city's finances.
The report said that Lawrence improved its finances after a near meltdown in the early 1990s. But it "returned to poor financial management practices" in 2003.
Those practices include dipping into reserve funds to balance the budget. The use of reserve fund money "is a red flag and merely diverts attention from the deeper and inevitable fiscal crisis that lies ahead," the state report said.
"It reflects a decision to take the easier route and raises serious concerns at DOR about the future ability of the city to balance its budget when all possible reserves are depleted."
During the financial crisis of the 1990s, a state-mandated oversight board helped manage city finances for almost eight years, though the board had few real powers.
In the new report, the Department of Revenue warned that "further state involvement, requested or otherwise" could result in a complete takeover of city finances by a state board with sweeping powers like those held by the board that took control of Springfield finances when that city was on the brink of bankruptcy in 2004.
Mayor requested report
Sullivan said he found no surprises in the DOR report.
"I asked them to come in. I wanted them to come in," Sullivan said. "The weakest part of my administration is what you've been reading about."
He said management of city finances has not been his strong suit during his tenure as mayor — he pointed to other achievements, including a new high school, City Hall restorations, four new ball fields and a reduction in crime and unemployment rates.
The study points to a number of reasons for the city's budget woes — mismanagement, overspending, mistakes, rapid turnover in various departments and a lack of training. It also cites contention between Sullivan and the City Council during past budget seasons.
"For its part, the City Council has engaged in budget disputes and determined not to approve the annual budget before July 1," the DOR wrote in the report.
"Overall, we found that many of the problems identified in this report are long-standing and continue to hinder the city's fiscal operations," the DOR concluded.
The state agency said it intends to keep close tabs on the city finances for the short term, "to take stock of city officials' willingness to act deliberatively, intelligently and cooperatively in managing the city's finances."
Sullivan, mayor since 2002, said he's confident the city can steer its way out of the budget crisis with Andrews' help before his term ends in 2010.
"I've got 19 months left, and the clock is ticking. I feel so good about where the city is going because Mark is here," Sullivan said.
Andrews, hired by the city last September, has 27 years of experience in financial management. He is the former economic development director for the city of Haverhill. He's also worked at the Massachusetts Statehouse and in a financial capacity at Northern Essex Community College in Haverhill.
His work is praised in the DOR report in several sections, and during an interview with the Eagle-Tribune editorial board on Friday, Andrews said he's committed to his work in the city.
Since 2000, however, five different people held the job of finance director, with 22 months being the longest time served by one individual. Similarly, since 2007, four persons have served as comptroller.
"As a result, the administration has not been consistent in its efforts to monitor and control spending," according to the DOR.
Andrews said the city will apply the DOR recommendations to its budget process, both short- and long-term. Department heads are also asked to be on the lookout for any and all cost-saving measures. Approximately 70 percent of the year's $236 million budget is funded with state aid.
The city is now taking a close look at the value of a property assessment firm it pays $700,000 per year. A new computer software system is helping reduce City Hall paper costs, and "elastic" revenue sources, including advertisements on city-owned vehicles and property and sales of Lawrence-owned surplus property, worth at least $2 million, are all eyed. To date, the city is still owed $13 million in back property tax payments, Sullivan said.
Sullivan said he plans to submit a proposal for the chief administrative officer's position to the council within 30 days. He does not believe the addition of the job requires a charter change. At first blush, City Council President Patrick Blanchette said, he was unsure if a new administrator's position is what the city needs.
"Because one mayor lacks financial discipline doesn't mean that we should change our form of government," said Blanchette, who is considering a run for the mayor's seat in 2009.
He suggested the city now should go forward operating "as if we were under state oversight."
Ultimately, Blanchette suggested that it be residents who decide whether a mayor and a chief administrative officer are needed.
"I think the people should decide if they want the mayor of our city to just be cutting ribbons or kissing babies or they want an elected mayor to the be leader of our city in all aspects of the job," Blanchette said.
Staff reporter Jill Harmacinski can be reached at 978-946-2209 or by e-mail at JHarmacinski@eagletribune.com.
Here are some of the changes recommended in the state's review of Lawrence finances:
r Create a chief administrative officer position: The need for a day-to-day management presence in City Hall is critical. Professional qualifications and relevant work experience can together justify an annual salary between $100,000 to $130,000.
r Monitor financial activity and avoid deficit spending: The city finance director should maintain control of the city's fiscal operations at all times and work closely with the treasurer and comptroller. Budget shortages should be reviewed immediately.
r Improve budget process: A balanced budget should be built and reviewed before it's adopted by July 1.
r Prepare monthly reports to identify budget problems early.
r Update capital planning and forecast future purchases: Plan should be presented to the City Council annually. The finance director should also give the council a forecast for the next three to five years.
r Merge financial departments: Blend the city and school financial offices together to save money. But, only do this after a strong management presence in City Hall has been established and tested.
r Establish biweekly payroll: Paying employees every other week will improve cash flow and reduce workloads in the treasurer's and comptroller's offices. This change requires approval from city unions.
r Look at group insurance plans: Participation in state group insurance programs, which have a 300,000 member pool, allows for more power purchasing health care. Costs for group members jumped 48 percent in five years compared to a 75 percent jump for Lawrence alone in the same time frame.
r Create a financial team: Chaired by the mayor, the group will be on a regular basis throughout the year. Membership should include the finance director, comptroller, treasurer, chief assessor and school business manager.
r Provide training and employee reviews.
r Update and expand the city Web site: A better site will generate public awareness and confidence. This would also reduce the time city employees spend answering questions in person or on the phone.
r Restructure the assessor's office: Communities are moving away from a full-time working assessor's office, to a part-time board and smaller full-time staff that reports to the mayor.
