by John Osborn ·
Friday, October 11, 2024
MassDevelopment’s chief financial officer Simon Gerlin reported last week that while Devens will continue to operate at a loss in fiscal 2025, the finances of the 33-year old redevelopment project are healthy.
Speaking before members of the Devens Committee at their monthly meeting Wednesday, Oct. 2, Gerlin said that in spite of an expected double digit growth in operating revenue, expenses were forecast to exceed income by $3.1 million. But he said that the operating deficit will be offset by other revenue that will leave the agency with extra cash at the end of the year.
“I would say overall, Devens is financially very healthy. Very, very healthy,” Gerlin said. The Devens Fund, a restricted fund that can be used only for the operation and redevelopment of Devens, has a current balance of $27 million, he reported, a number the Press was unable to confirm in time for this edition of the paper. The taxes, fees, and other income received by MassDevelopment from its operations are added to the fund. Withdrawals pay for operating Devens, including capital purchases that have not been bonded.
If Gerlin’s projections are correct, the agency will add an additional $1.6 million to the Devens Fund at year’s end.
Gerlin’s presentation was his first before the committee, providing a snapshot of the money MassDevelopment expects to spend this fiscal year on the municipal services it provides businesses and residents at Devens and the income that pays for them. Gerlin warned attendees not to construe his report as a profit and loss statement but rather as a report on cash flow, dollars in and dollars out of the Devens Fund.
MassDevelopment expects to receive approximately $19.3 million in taxes, fees, and other income from its operations this fiscal year and to spend $22.4 million. The $3.1 million operating deficit will be offset by a $2.5 million grant from the Department of Defense to help pay for the $20 million rehabilitation of Devens’ public safety building. The agency also expects to receive $2 million in interest on the $27 million held in the Devens Fund.
The largest sources of income are the property taxes paid by Devens residents and businesses. Although neither the budget nor tax rate has been approved for fiscal 2025, Gerlin said MassDevelopment expects to raise an estimated $15.7 million in taxes. This represents growth of approximately 20% over the $13.5 million in tax revenue reported two years ago in the 2023 Devens Annual Report. The majority of that amount—an estimated $14 million—will come from commercial and industrial properties, with the remaining $1.7 million coming from residents. As new commercial developments take shape and the tax incentives granted existing businesses such as Bristol-Myers Squibb continue to decline, this number will continue to grow, Gerlin said. He said he expected the project to be self-sustaining in three years.
The largest expense, according to Gerlin, is the $8 million in administrative costs it takes to operate the Devens project. The salary and fringe benefits of MassDevelopment employees who work at the Andrews Parkway building in Devens, as well as an allocation for Boston employees who contribute time to the project, account for much of this number, he said; though the cost of legal services, information technology, supplies, and insurance is also included. Professional and administrative expenses have risen 32% since fiscal 2023, the highest rate of increase among the several items in the expense budget.
The second largest expense is Devens’ professional fire department, whose budget for the current year is $4.1 million. “It’s not inexpensive having your own fire department, but they do a great job. And the nice thing is, they’re, what, five minutes away from the farthest part of Devens,” said Gerlin.
The Devens budget also includes the annual amount paid to Harvard to educate Devens students. Gerlin said the agency has budgeted $3.1 million, approximately $24,000 per student, for fiscal 2025. This amount also includes money for special education, which varies from year to year, though the amount was not broken out in Gerlin’s summary table. “The kids get to go to a great school system and the town of Harvard is always ranked in the top 10 or top five [schools] in the Commonwealth. But it’s not cheap,” Gerlin said.
Unlike Harvard, the Devens budget does not go before a town meeting for approval. Instead, MassDevelopment’s board of directors reviews and approves the forecast annually and also sets tax rates for the current year. The tax rate in past years has been determined at a December meeting of the board. As of this week, there was no record of the board having reviewed either the budget or tax rate for the current fiscal year. Further analysis of this fiscal year’s finances must await action by the board and publication of the 2024 Devens Annual Report, which will contain actual revenues and expenses for fiscal 2024.