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City manager proposes $2 million boost to Chelsea Public Schools as revenues fall
Summary
City staff told the council subcommittee the city will use free cash to cover an additional $2 million contribution to Chelsea Public Schools for FY27 while warning the increase may be unsustainable without new growth; local receipts are about $2 million below projections and new-growth revenue is at a 10-year low.
The city manager told the Chelsea City Council subcommittee that the city plans to use reserves to increase its contribution to Chelsea Public Schools by $2 million for the next fiscal year, citing a shortfall in local receipts and a drop in new-growth revenue.
"Our revenues are not doing well. As of January ... we are $2 million behind when it comes to local receipts," the city manager said while walking the council through the municipal budget calendar and capital improvement plan. He described free cash—one-time available reserves—as a tool the city will use to support both capital needs and a temporary supplement to operations.
The proposal would fund the capital improvement plan with $8 million of free cash and supplement the operating budget with an additional $4 million this year, the manager said, leaving the city’s projected net school spending at just under about 107% for FY27. He added that Chelsea currently holds about $33 million in free cash, up from roughly $14 million in FY22.
Why it matters: Council members praised the move to support schools but repeatedly warned the $2 million increase could be a one-time measure unless Chelsea grows its tax base. "We can do it now but other things need to change for us to continue to do net spending," Councilor Sneaggate said, urging development-driven revenue growth as the long-term answer.
Councilors described the trade-offs. Several said that without sustained new growth—Chelsea’s new-growth revenue was the lowest in a decade—the city risks having to make difficult choices in future budgets, including potential layoffs or pauses in hiring for some positions. Councilor Robinson summarized the concern as whether the action is merely "kicking the can down the road." The manager acknowledged those risks and said staff are pursuing growth-oriented zoning and development projects to help increase future revenue.
Officials also clarified reserve accounts. The manager distinguished free cash (often used for the CIP and one-time projects) from the city’s general stabilization fund, which requires a two-thirds council vote to access and holds about $23 million currently. He noted that spending reserves can reduce the city’s ability to earn interest income on those balances, which had generated several million dollars in recent years.
What wasn’t decided: The subcommittee heard the manager’s proposal and discussed implications but did not record a formal, final council vote on the $2 million increase during this session. Multiple councilors asked for future transparency and community engagement on long-term school funding goals and for clear reporting from entities that receive city funds.
Numbers and context cited at the meeting: local receipts about $2 million behind as of January; Chelsea holdings of roughly $33 million in free cash; plan to use $8 million of free cash for the CIP and $4 million to supplement the operating budget this year; projected net school spending just under 107% in FY27; health insurance costs projected to rise about 12%; general stabilization fund balance about $23 million.
Next steps: The subcommittee adjourned and expected the regular council meeting to follow; councilors asked staff to continue analysis, engage the community on long-term funding goals, and return with more details on how one-time reserve use would affect future budgets.
