City counting on land sale to pay '08 costs

Haverhill's bond rating is up, homeowners are enjoying the lowest property tax increase in years, downtown development is booming -- yet Mayor James J. Fiorentini says the city will have to rely on one-time revenues to make ends meet in the upcoming fiscal year.

As he crafts a spending plan for fiscal 2008, which begins July 1, Fiorentini said he hopes to balance the books by tapping proceeds from the sale of a city-owned riverfront parcel.

The mayor said he believes the sale of a 4.8-acre property on Railroad Avenue to a developer who plans to transform the site of William Ornstein's former wooden heel manufacturing business into a residential community will net the city $2.8 million. Fiorentini hopes to complete the sale by early May, at about the same time he expects to present his fiscal 2008 budget proposal to the City Council.

"If this project goes through, we'll get by," the mayor said, noting that the deal is expected to save the city from having to make painful cuts, much in the same way the state's gift of $2.6 million to chip away at debt associated with the former city-owned Hale Hospital saved Haverhill from financial chaos this fiscal year.

The extra state money, which was secured through the efforts of state Representative Brian S. Dempsey, a Haverhill Democrat, is finally on its way to the city, according to the city auditor, Chuck Benevento, who noted that Governor Deval Patrick restored the funding in January after it had been cut by then-governor Mitt Romney.

The mayor's approach to paying for public services by relying on one-time revenues worries some city leaders.

"I really feel we have to move stronger in a more fiscally responsible direction," said the City Council's president, Michael J. Hart. "I feel like I'm living in Las Vegas and we've got everything riding on black right now. We need to come up with long-term solutions to our financial troubles. We cannot continue to rely on one-time revenues or soon we will be facing a day of reckoning."

Fiorentini says the Hale debt leaves him few options. The city pays roughly $6.5 million a year toward the hospital debt, and that figure is expected to swell to $8.5 million by 2011, Fiorentini said.

Haverhill sold the hospital in 2001 but must spend millions each year to cover the cost of pensions and healthcare benefits for those who worked for the hospital, the mortgage debt on the property, and the deficit finance loan. The city expects to be saddled with those payments for 15 more years.

"The Hale debt and rising costs -- salaries, benefits, and other fixed expenses, such as fuel -- will prevent me from adding patrol officers to our Police Department, but public safety is my number one priority," Fiorentini said. "Drafting the budget is always difficult. The city's revenues go up just 2.5 percent, but it's impossible to hold spending increases at that level, primarily because of rising healthcare costs."

Fiorentini said that while it's too soon to discuss firm figures -- municipal department heads began presenting the mayor with their wish lists for fiscal 2008 just last week -- he expects city spending to increase about 4 percent, or approximately $5.4 million, to a total of nearly $142 million, up from $136.5 million this fiscal year.

The mayor said he would embrace a multipronged approach to come up with the cash needed to meet Haverhill's financial obligations. He said he plans to reorganize City Hall to improve government efficiency and boost local revenues by imposing parking fees in the downtown area and streamlining the permitting process, a move he said could lure new businesses to Haverhill.

City officials estimate that permitting fees alone for projects already in the pipeline -- including planned mixed-used projects that would create new residential units and retail spaces in the downtown area and commercial development at Northgate Plaza off Route 97 -- will result in a windfall of about $1.6 million in fiscal 2008.

Haverhill also is expecting an additional one-time boon of $600,000 from state coffers for embracing a smart-growth overlay zoning district in the downtown area. The new zoning initiative, approved just a few weeks ago under a two-year-old state law known as 40R, allows builders to convert former factory buildings in the city center into mixed-use developments.

But even with such funds on the horizon, some local leaders are concerned about the city's financial future, noting that state aid for education does not take into account the Hale debt.

"There are a lot of things we would like to do and should be doing, such as staff development and curriculum improvements, but we can't because of funding shortfalls," said the School Committee president, Robert P. Gilman. "It's like a pie. If one piece gets bigger, another has to shrink because the pie isn't expanding."

Under Patrick's proposed state spending plan for fiscal 2008, Haverhill would see a 1.3 percent increase in state aid for education, a boost of $33.48 million -- the smallest increase allocated to any Merrimack Valley community.

Statewide, the governor's budget proposal would increase state education aid, known as Chapter 70 funding, by an average of 5.7 percent per district.

At the behest of the School Committee, Fiorentini is requesting a meeting with the city's Beacon Hill delegation in hopes of securing more state aid. The House and Senate are drafting their own versions of the state budget. Those plans will have to be reconciled with the governor's before state leaders adopt a final budget.

Brenda J. Buote can be reached at bbuote@globe.com.