SPRINGFIELD – Mayor Domenic Sarno and his financial team announced a “innovative” initiative that will provide more than $2 million in tax relief for the fiscal year 2024 (FY24) budget during a Jan. 12 press conference. Sarno expressed that Springfield is the first city in the state to embrace this new approach, which could become an annual measure for generating additional city funds.

“This is not a one-time measure … If interest rates continue to remain high, this could start a trend,” said Sarno.

The idea was originally conceived by Ward 2 City Councilor Michael Fenton. Sarno said Fenton reached out to his office in October 2022 with the idea to invest stabilization funds in federal Treasury notes with high yield interest rates. Sarno and his financial team ultimately decided to invest nearly $45 million from the city’s stabilization account – a total that will net the $2 million total from an interest rate of 4.676 percent.

During the press conference, Sarno cited the significant rise in inflation as an opportunity to explore this concept.

“With inflation, interest rates have gone up … it’s the highest inflation since 1982,” said Sarno.

Sarno discussed his administration’s continued focus on prudent financial management. After transferring $45 million from its stabilization account, Springfield still possesses around $5 million in stabilization funds and $60 million in its free cash account.

“One of the reasons we were able to do this is because of our prudent fiscal policy – a strong fiscal stead that we are in. These are our policies that have continued since being [elected as] mayor,” said Sarno.

The mayor stressed the importance of dedicating the funds completely to tax relief as property values continue to skyrocket. Previously, Springfield set aside $10 million towards tax relief for FY23 and $5 million for FY22.

“It’s a beneficial tax relief initiative for our residents and business community,” said Sarno.

Sarno referenced a chart that broke down how the investment will generate a net return for the city from inflation rates alone. He stressed that the Treasury notes will ultimately not cost the city any of its funds.

“We’re not using any of our money. This money comes off the interest of the money that we are putting in [Treasury notes]. So, we keep all our money, we make over $2 million and it’s dedicated directly for the FY24 budget,” said Sarno.

Chief Administrative and Financial Officer TJ Plante said his team conducted significant research on the idea before enacting the investment. Once the city hired Treasurer/Collector Stephen Lonergan in December 2022, he, Plante and City Comptroller Patrick Burns collaborated on accelerating the process for acquiring Treasury notes.

“Out of the gate, we wanted to invest in Treasury notes and to be ready to move on them quickly while the interest rates are high,” said Plante.

Plante said the city is also exploring this approach to address other financial needs, like the city’s unfunded pension liability and other post-employment benefits (OPEB).

“We’re also looking to do this with other funds, such as pension and OPEB, as a way to generate additional revenue for these liabilities,” said Plante.

Ward 1 City Councilor Maria Perez spoke positively on the tax relief measure. She also praised the positive impact that can occur from cohesive collaboration between the mayor and the City Council.

“This is the type of discussion we should be having as a team,” said Perez.
Fenton was unable to attend the press conference, but submitted a statement championing the measure.

“This is a shrewd, inventive and unprecedented way to provide tax relief without spending a nickel of city reserves. I suspect this announcement will attract attention from across Massachusetts, the region, and the country. Over the last decade Springfield has emerged from bankruptcy to leading the region in fiscal prudence. Today, we reap the literal profits from over a decade of sound financial management,” said Fenton.

Sarno concluded the press conference by reemphasizing the city’s execution of sound financial management.

“It’s a balancing act. We want to continue to provide full services to our residents and business community,” said Sarno.