City of Amesbury Provides a Financial Update, including 2021 Free Cash Certification

2021 free cash certification

In early October 2021, the City of Amesbury received news of our free cash certification and a reaffirmation of our bond rating.

The City’s free cash was certified on October 12th in the amount of $1,978,854. This was a result of surplus revenue collections in the amount of $828,847 which included $620,000 in Cannabis Excise. Our increase in free cash also came from $981,419 in appropriation turn backs including $104k in employee benefits from the premium free month offered by MIIA, $157k from the Police Department, $227k from DPW, $225k in Debt Service as well as other various departmental turn backs.

Chief Financial Officer Angel Wills and her team were happy to receive the news, saying "I am thrilled with our free cash certification. This is a very positive achievement and aligns with our goals of rebuilding reserves and securing the City's financial framework which results in strength, resiliency and efficiency. I want to thank my finance team and the administration for their support in making these notable accomplishments possible.”

Free cash is a revenue source that results from our community’s remaining, unrestricted operating funds of the previous fiscal year. It’s used to support current-year operations or to pay for one-time expenditures such as capital projects. Amesbury strives to have reserves in the amount of 10% of our annual budget. With this certification Amesbury’s free cash now stands at 2.94%, which is one component of our total reserves.

The Massachusetts Division of Local Services and the Technical Assistance Bureau (TAB) provides guidance to municipalities regarding free cash, saying "Under sound financial policies, a community strives to generate free cash in an amount equal to three to five percent of its annual budget. This goal helps deter free cash from being depleted in any particular year, which enables the following year's calculation to begin with a positive balance. To do this, the community would orchestrate conservative revenue projections and departmental appropriations to produce excess income and departmental turn backs."

“Having low reserve funds is like living paycheck to paycheck; it makes it less likely that you can withstand an emergency,” says Mayor Kassandra Gove. “As a City, if we don’t have reserves to help us fund unexpected issues, that burden falls to the taxpayers. We have focused heavily on increasing our reserves in order to ensure that we are not straining our residents and business owners any more than is necessary.”

free cash 2021

Earlier this month the City also received reaffirmation of the “AA” bond rating released by S&P Global. The “AA” rating is the second highest bond rating, and S&P endorsed this distinction by saying, “The rating reflects our opinion of the city's consistent economic growth over the past several years and stabilizing operating performance for fiscal years 2021 and 2022, with forecasts of revenues from new cannabis businesses and recent residential developments enhancing revenues.  We view positively management's focus on maintaining a strong fund balance, as well as its forward-looking view on the city's economic development goals."

In addition, S&P outlined a pathway for the City to achieve "AAA" rating which would result in additional cost savings to the City. This upward plan is contingent upon funding the City's long term liabilities such as OPEB and pension liability, as well as a continued dedication to rebuild reserves in accordance with our financial policies. S&P cautioned that not following this trajectory could result in a decreased bond rating for the City.

Finally, the City issued a $5,925,000 20-year general obligation bond to fund fiscal 2022 capital projects as well as to pay off an outstanding short term note for road improvements issued in 2018. As a result of the positive financial standing, the City received (4) competitive bids. The winning bid was awarded to BOK Financial Securities with a true interest cost of 1.58%.

In the FY 2022 budget, Mayor Gove is funding almost $10,000,000 in capital improvements. This includes everything from roadways and sidewalks to information technology infrastructure and a website re-design. You can see the full 5-year capital plan including FY22 capital by department in the FY22 budget book.

capital requests by category