Little stimulation for city

City Manager Eileen Cabanel said yesterday that the prospects of municipalities offsetting a shortfall in revenue from the state with funds from the federal stimulus package have dimmed.

When Governor John Lynch presented his budget last month he recommended suspending distribution of proceeds from the rooms and meals tax and revenue sharing with municipalities for the 2009-2010 biennium. He also proposed reducing the state's share of contributions to the New Hampshire Retirement System for municipal employees from 35-percent to 30-percent.

The measures, Lynch said, were necessary in order for the state to balance its budget while fulfill its obligation to fund an adequate education, which will rise by $123-million in the coming biennium. He explained that the funds would return to communities in the form of increased aid to school districts and assured cities and towns that they would receive funds from the American Recovery and Reinvestment Act (ARRA) matching or exceeding what the state would withhold..

Taken together, the measures amounted to $1.4-million — $766,528 in rooms and meals tax, $646,946 in revenue sharing and $49,161 in retirement contributions — in foregone revenue to the city, which would require offsetting budget reductions or property tax increases. Later, Lynch agreed to restore the distribution of rooms and meals tax, returning $766,528 to the city to more than halve the shortfall to $696,107. And again the governor said federal stimulus funds would offset the shortfall.

However, as the state has announced how the ARRA funds will be distributed, the likelihood the city will receive enough to match foregone state aid has diminished. Both the Department of Transportation (DOT) and Department of Environmental Services (DES) have allocated federal funds to qualified projects. Laconia stands to receive only half the construction costs of addressing drainage problems in the neighborhood of Anthony Drive, amounting to $170,000, and $122,910 for the Police Department. Moreover, Cabanel said that since she proposed to fund the project on Anthony Drive with the sale of general obligation bonds, the net effect of the federal funds on the budget will be to spare the city the cost of debt service, estimated at $4,200 in 2009-2010 and $8,400 in 2010-2011. Sewer projects on Pendleton Beach Road and Plantation Road ranked 145th and 159th among 207 wastewater projects, of which DES will fund the first 30. Likewise, among drinking water projects, a new water storage tank and extending city water to Wentworth Cove fell far short of qualifying for federal funding.

The DOT received $129.4-million in ARRA funds, but will distribute only $14.9-million to municipalities. The Winnisquam-Opechee-Winnipsesaukee (W.O.W.) Recreational Trail stands to be a major beneficiary in the Lakes Region. The Laconia Trails with Rails Exploratory Committee is slated to receive $583,000 toward the cost of constructing the first phase of the trail, which runs from the Laconia Public Library to Lakeport Square. However, since the project is financed by federal Transportation Enhancement grants matched by private funds, without an appropriation from the city, the allocation will have no effect on the municipal budget.

The governor has recommended applying ARRA "fiscal stabilization" funds toward meeting its obligation to fund an adequate education in fiscal year 2010-2011. The state expects to receive $89.9-million in federal funds from programs to serve disadvantaged students. The state has not yet announced how this money will be allocated among school districts. However, since the funds will be distributed to school districts and designated for educational purposes, they cannot be applied directly to the city budget.

This week the Concord City Council, which faces a shortfall of $4.8-million in state funding, indicated that it would meet with that city's school board to explore, in the words of Mayor Jim Bouley, "what can we do to work together to ease the burden on the individual homeowner?"

City Councilor Henry Lipman (Ward 3), who chairs the Fiance Committee, saud yesterday that he anticipated the council and Laconia School Board "are going to work collaboratively on the budget as we have for the past four years."