2014-06-12 / Front Page

Report Outlines Finances

By Tom Walsh

On the eve of the City Council’s first public review of its recent report, Finance Review Committee Chairman Ron Becker warned that councilors would find “no lowhanging fruit” to help them balance Newport’s budget for the current fiscal year.

“There is a lot of good material in there,” Becker said of his panel’s 51-page report. “I can’t say that one thing tops another.” However, he added, following through on most of the report’s recommendations will require time, and in some cases money.

Much of the report considers the Newport School Department, and in that section of the report recommendations are mostly directed to the school committee and superintendent rather than the City Council.

“The Newport School Department faces new pressures to con- trol its costs and find sources of revenue – about 27 percent of the city’s annual general fund expenditures are allocated to Newport’s public schools,” the report found.

School-related recommendations include:

Establish a shared grant coordinator/ writer function for the city and school department. It was felt that his will diminish the risk of missing grant opportunities, enhance the likelihood of success with a more experienced person coordinating and managing the process, reduce the amount of time current employees are taken away from their primary duties to work on grants, and better justify the cost of a shared position.

Improve quality of financial reporting. The committee report recommended that one overall finance director have management responsibility over school and city finances. “It cannot be overemphasized that in order for this combination to work, it is critical that the city manager and school superintendent have equal authority over the finance director and staff,” the report states. The report said there would be no immediate need for additional staff for a merged department.

Streamline the budget process. “The School Department has not coordinated its budget process in an efficient manner with the city,” the committee found. Its report recommends that the City Council and city manager “coordinate efforts” with the School Department in preparing a two-year budget for fiscal 2016 and 2017. The result, it said, would be to better align the School Department with the city budget process. The report also recommends including a one percent reserve account in the School Department budget to “cushion the impact of fluctuations in estimated line items over the course of the fiscal year.” Finally, the report recommends “improved communication channels between the City Council/city administration and the School Committee/school superintendent.”

The Finance Review Committee also tackled the vexing issue of the city’s tax-exempt properties and recommended that the city lease roads or road portions to Salve Regina University “to improve their campus while generating new revenues to the city of Newport.” It also recommended:

. Creating a “committee of stakeholders” to develop a payment formula for tax-exempts to voluntarily contribute to the city for “services they use and derive benefit from.”

. Working with Middletown and Portsmouth to “create, adopt and garner support” to create a special military payment in lieu of taxes (PILOT) for Navy and Coast Guard land. The report maintained that “the state realizes significant financial benefit from military operations via income taxes and sales taxes collected. However, while the hosting towns/cities see a significant cultural and social benefit, financially they suffer significant property tax loss.”

. Selling or leasing tax-exempt lands that are city, state or federally owned but not developed for public benefit or commercial use for development of a broader economic base beyond season tourism and military.”

The panel, in its report, lamented that much of the revenue involved with tourism “does not directly benefit the municipal budget or its revenue stream, despite the related costs it incurs. Newport’s businesses and their owners do benefit significantly from tourism; however, income and tax revenue mostly bypasses the city and is captured by the state. To the extent that the businesses are successful, the city does not share in that success, but receives only the businesses’ property tax revenue.”

According to the report, Newport generates $640 million a year in tourism dollars but only receives about $15 million of that. And, the report added, “For every 10 tax dollars generated from tourism in Newport, seven dollars stay in the state budget.”

With this in mind, the panel recommended “that the city determine the costs associated with various tourism revenues, establish whether the revenues are covering the costs and seek revenue adjustments where needed.”

Failing that, the panel urged the City Council to ask the state to review its allocation formula “with the objective of Newport receiving a larger share of the revenue.”

The report was to be first considered publicly by the City Council at a workshop on June 12.

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