DURING A televised debate last week, mayoral challenger Michael Flaherty chided incumbent Thomas Menino for holding up the city’s AA+ bond rating “like a Stanley Cup trophy.’’ The Boston Bruins haven’t taken home hockey’s biggest prize at any point in Menino’s 16 years in office. But if there were a trophy for excellence in financial management, Menino would have won it.
His administration has been notably cautious in managing taxpayers’ money. Rating agencies examine management practices, debt burden, reserves, and liquidity before determining a city’s creditworthiness. It’s not the only indicator of fiscal health, but since 2001 the high rating helped the city refinance $600 million in outstanding debt, saving taxpayers about $34 million. The rating also means lower interest costs when the city borrows to pay for capital projects, such as road repairs, buildings, and equipment.
Whoever wins on Nov. 3 also needs to manage the city’s $2.4 billion operating budget amid economic uncertainty. Boston has lost about $90 million in state aid over the last year, and state revenue forecasts suggest more lean times for cities and towns. Boston will need to manage its resources conservatively to maintain its schools, roads, public safety, and other services. Menino has done that during similarly tough economic times in the early 1990s and again in 2002. But Flaherty, who has served on the City Council since 2000, remains untested.
Menino’s strength lies in his financial team. Lisa Signori, his director of administration and finance, is lucky that Menino’s penchant for meddling doesn’t, as a rule, extend into her office. The stable and long-serving staffs in the budget, assessing, and auditing departments are wise to the ways that cities go financially astray, including political pressures to spend during election years. It’s a testament to the administration’s restraint that the estimated $18 million expected this year from new local option taxes on meals and hotels has been held back in anticipation of additional local aid cuts.
Sam Tyler, the president of the nonprofit Boston Municipal Research Bureau, has been tracking Menino’s spending habits since the day the mayor took office. He says Menino should do more to reduce the costs of retiree health insurance, especially in the case of 1,700 retirees who haven’t enrolled in Medicare. Tyler also faults Menino for awarding hefty contracts to city workers during his early years in office with little giveback from the unions. More recently, though, Menino has required city workers to assume higher shares of health care costs. And Boston is on target to fully fund its $2.1 billion pension liability by 2023, seven years ahead of statutory requirement.
If anything, Tyler faults the city for playing it too safe with its capital budget. Last year, debt service payments fell to just 5 percent of operating expenditures, well below the city’s conservative guideline of 7 percent. The city, says Tyler, should be spending more on infrastructure to encourage greater real estate development. Menino likes to bemoan real estate cycles. But city policies contribute to some lost opportunities in underdeveloped areas, such as the South Boston waterfront.
Flaherty does speak consistently about making the city more attractive for commercial growth, including wooing CEOs and bringing corporate headquarters to Boston. And he is a booster of performance reviews and modern data systems that help city government measure its own effectiveness. Even so, he has yet to make a convincing case that he could field a stronger financial management team than the one now in residence at City Hall. When the city pledges its full faith and credit, it’s not just talking smack.
