The issue: City finances

They disagree on numbers -- how much the city holds in reserve -- and on style -- how to deal with union leaders who pressure the city for raises.

When it comes to balancing Boston's $2 billion budget, the mayoral candidates suggest two very different approaches.

Mayor Thomas M. Menino wants to hold the line on spending, while pressuring the Legislature and universities for more money. Councilor at Large Maura A. Hennigan wants to dip into reserves and foster better relations with labor unions.

The pressures on Boston's budget are growing, especially from payroll and healthcare costs. During the past decade, Menino granted more generous raises to police officers, firefighters, and teachers than private-sector employers gave to their workers, squeezing other departments and programs.

He also increased spending on public schools, parks, and other initiatives. But that largesse is in jeopardy. Health insurance accounts for 7.4 percent of the budget, compared with 4.4 percent in fiscal 1995. Since fiscal 1997, the city's health insurance costs have increased by $81.7 million, or 117 percent.

Hennigan, warning of a public safety crisis in Boston, proposed dipping into the city's surplus to hire more police, contending that the city has $184 million on hand. She proposed selling some city-owned land to raise money and placing part of the Boston Redevelopment Authority under city control, to make it more accountable. She called for an outside audit.

Menino pledged to lobby for more state aid and to fight for a bill that would allow the city to tax some telecommunications facilities that are currently exempt, a step he said would raise $35 million annually. He pointed to the city's strong bond rating as evidence of his prudent fiscal management, but warned that without help from the state and federal governments, he will not be able to enact bold new spending initiatives. He said the city has only $56 million in reserve, a cushion it needs to keep.

Both candidates discussed fiscal affairs with Globe correspondent Michael Levenson. What follows are excerpts.

Mayor Menino

Q: OK. Overall, do you think it will be a time of city budget expansion over the next number of years?

A: Yeah, if we get some relief from state and federal government, sure. No question about it. I mean, I talk about Boston having 6 percent of the population, [we generate] 20 percent of the gross state revenues. Just simply -- for every $5 we send out there, we get a dollar back. There's something that's wrong with this.

Q: Are you optimistic that you will really get more state assistance, and hasn't that been an argument you've been making for some time?

A: That's right. I continue to fight for that belief for our city. I don't give up. One thing people say, you're persistent. When I put the bee in my bonnet, I try to go after it and get it done.

Q: And is $56 million in reserve, is that a reasonable cushion for the city?

A: Sure, that's reasonable. I think it is. The Department of Revenue thinks so, too.

Q: So then is it reasonable to maybe spend a little more of that?

A: What do you do next year? See, you're shortsighted. I'm thinking long term. I'm thinking about next year or the year after. That's how you get in trouble. Oh, we could use it this year -- you know, because we got an election. What do I do next year?

Q: On the payments in lieu of taxes, how do you convince a university to pay more?

A: It's negotiations. They want services from the city, they have to pay for those services. And that's how we've done it in the past. They're a nonprofit. They have certain exemptions. But they also -- they understand they have an obligation to the City of Boston.

Q: Right. What possible reason would they have to pay more, though, other than just --?

A: Because they all want to make changes in their campus. We want the -- and it's also their social responsibility.

Q: Sure. Well, what leverage do you have as mayor to convince them you've got to pay more, other than just making the case?

A: Well, making the case -- they're in our city. They use city services. They want to change their master plan as they grow. All those things. That's part of the negotiations.

Q: So you can hold some of that against them?

A: Yeah, hold their feet to the fire.

Q: Say, we'll cut off your water or something?

A: No. They want the services, the services they need. Work with them. Like Northeastern -- Harvard, now. All the land they bought in Allston. How do you deal with that? That's one of the requirements we have as they go forward in their development plans. What are they going to give -- do for the City of Boston? Harvard right now owns more property in Boston than in Cambridge. So one of the things I insist on is that Harvard change their name --from Harvard, Cambridge, Massachusetts, to Harvard, Boston, Massachusetts

Q: There are watchdog types who consistently say the city has been giving away too much in terms of pay raises to its workers, outpacing the private sector. How can the city outpace the private sector and do that responsibly?

A: We're not outpacing the private sector; we're trying to keep up with the private sector, trying to maintain the workforce we have. When you look at what we give, it meets the financial situation we're in. After we gave them their [last raises], the three rating agencies went over our books, and said, well, we're in good financial shape. We could afford that. We have to be careful, of course, and we are careful.

Q: The next time, with new contracts coming up, do you feel like you have to rein that in a bit in order to preserve the city's --

A: Well, see what we do is, we do an analysis of the resources on hand and how that fits into the credit ratings. We didn't give any pay raises out that we really can't afford. I mean, the only one I questioned is the police pay raise, and that was a decision not made by Tom Menino. That was a decision that was made by an arbitrator, who came up and said, they want 18 [percent raise], I wanted 9. He said, OK, we'll [split] the difference. My god, I want a job like that.

Q: You see any other ways to help relieve the tax burden?

A: A meals tax. But the Legislature says you can't get it done. The Legislature is stonewalling it. They won't step up to the plate and help their own cities and towns. . . . I mean, I'm not talking about, like, when you go to -- to McDonald's or Wendy's, or something. But, you know, with certain benchmarks, say, over $50 a meal, at 1 percent. We're the probably lowest meals tax of the large 11 cities.

Q: So no big areas of spending you think need to be cut in the city?

A: You could farm some of it out, or maybe do -- we're doing something -- we can do better -- our rubbish collection in our parks. Why do we have the Parks Department doing rubbish collection instead of Public Works? You know, things like that.

Councilor Hennigan

Q: Do you think the city's been too generous with raises to police officers, firefighters, teachers?

A: What I think is that [at the time of] the Democratic National Convention, those contracts had been expired for a couple of years. The mayor knew he was going to be asking for Boston to host that convention. So before you go down that road, what you do is you look at all your contracts, so that you don't end up [in a contentious situation.]

Q: Under a Hennigan administration, would you try to stand up to these unions more?

A: Well, I have been a member of the union, so I come with a very different set of credentials than Tom Menino came with. As a woman, I am a collaborator. Women tend to be more collaborative. It isn't so much ego, well, ''Hey, I'm going to be the boss, and I'm just going to walk away from the table." What you do is -- the way you get a better relationship and a better result with labor unions is you first of all stand and walk in their shoes and understand, which I have done. I have --

Q: But ultimately you have to balance this budget, right?

A: Ultimately you have to balance it, but if they don't look at you from an adversarial position. Ray Flynn was very successful of having a great relationship. I can never remember during Ray Flynn's tenure that he had labor unions out there doing what Tom Menino had. So, first of all, you give them a confidence by opening up your books and showing them what is there. This has not been done in 12 years. Let me give you another example. What Tom Menino said throughout our labor negotiations, when he was fighting with the unions and the City Council kept asking, ''Why can't you negotiate in good faith? Why can't you work out a contract that is fair and equitable, which is not always about more money?" And what he said is, ''We don't have any money."

Q: Right. Do you think that --

A: Let me just make this point, because it's an important point.

Q: Sure --

A: Yet when he negotiated his contracts and he submitted them to the City Council and we asked, ''Where is the additional money going to come from to pay for this?" do you know what they told us? ''We don't need any more money. We had already set it aside in reserves." So what that creates is a level of distrust with your city unions, because you told them you didn't have the money, you told them you couldn't afford it, yet there it was set aside in all these reserve funds. So that is why when I say you open up the books, you show them what is there, so they know what you know.

Q: So are there some specific things you could do to actually give people some property tax relief?

A: Absolutely. First of all, the Boston Redevelopment Authority has been taking a number of city parcels by eminent domain [and leasing or selling them] and using that to fund their budget, with no oversight of city government. They have a $45 million budget. Let me give you an example, how the BRA is taking money from what should be the City of Boston's budget. The BRA, when they negotiated to lease Yawkey Way, which is a public street that was owned by the taxpayers, the city flipped it over to the BRA. That money for those leases is not going to the city taxpayers. It is going to the BRA. So we can take an assessment of properties owned by the BRA. If we are able to cut their budget and make them more of an efficient department, we will be able to either sell or lease some of their properties, which can go into our City of Boston revenue stream, which can defer some of our costs. We also have many city-owned assets, which we can sell off.

Q: The city has a $2 billion budget, huge healthcare, salary costs. There were salary increases that were, for the city workers, higher than people were making in the private sector. Do you see a need to raise revenues in your administration?

A: What I would do is I would reserve saying we are going to raise revenues, raise taxes, until we open our books and we get a sense of where we are. And what I do now . . .

Q: I mean, we do know sort of where we are now. We just don't have a . . .

A: Well, no, we really don't, to be honest with you. The citizens really don't and the media really doesn't, because the administration has a huge surplus. . . .

Q: So what is your view, then, about increasing revenue, trying to find new ways to raise . . .

A: Well, I've already talked about, we have to more fairly assess our commercial property owners. We need to look at our BRA assets. We need to be looking at present city assets, whether or not we lease them or we sell some of them. All of these things, plus efficiencies within city government, can save money. By not back-filling a number of positions as people retire or back-filling them at the lower level, versus what this administration does -- they bring in a political person and pay them that salary.

Q: Are there any areas of spending you'd like to see cut?

A: Yes. The law department.

For complete coverage of the upcoming city election, go to Boston Elections.