The city may benefit; Boston's political heat wave
Boston — It is not good summer for Boston. The city, sweltering through a heat wave and rumbled by fiscal tremors, has been slammed by yet another pair of sobering, though perhaps salutary, jolts.
On July 8, it learned that its bond rating -- which tells investors how much confidence they should place in municipal bonds offered for sale by the city -- was downgraded by Moody's Investors Service to a level below the normal range for sound investment.
On the same day a federal grand jury, handing down its second indictment against a member of the city's much-criticized school committee, accused six-term member John J. McDonough of taking a kickback from ARA Services Inc. in return for voting to give the Philadelphia-based firm a $40 million contract to bus Boston schoolchildren.
Meanwhile, Bostonians are still waiting for what should have been July 1 budgets from their own City Council (locked in contention with Mayor Kevin H. White) and from the state LEgislature (whose two houses continue to bicker while state employees and welfare recipients go without their checks).
And, like other cities facing financial woes -- Cleveland, Detroit, Newark, and nearby Providence -- Boston also faces city administrator David Mundell, could run as high as $53 million. But unlike those cities, Boston is making most of its decisions this summer against a unique backdrop: Proposition 2 1/2, the statewide measure to reduce the Commonwealth's notoriously high property taxes.
The downgrading of Boston's municipal bonds to a "Baa" credit rating follows a four-month period of uncertainty. Last March, Moody's (which, with Standard and Poor's, is one of the most widely respected rating services) suspended the ratings of 44 Massachusetts cities, towns, and authorities. The reason: uncertainties over Proposition 2 1/2, which effectively prevents municipalities from raising property taxes to repay money they have "borrowed" by selling bonds. Now eight of these ratings have been reinstated -- and Boston has slipped from its previous "Baa" rating, which is the lowest class in which such major investors as insurance companies and pension funds can ivnest. Anything below that is considered by the markets to be "speculative."
Confusion persists, however, over the city|s need to borrow. Earlier this month Mayor White, reversing a string of complaints all springing from the threat of impending bankruptcy, said the city had enough cash to continue its rapidly shrinking operations through September and perhaps until November.
But other high-ranking city officials say the city still needs to borrow its way out of debts incurred by the school committee (which overspent its $210 million budget by about $30 million) and by court-ordered repayments to overtaced property owners (estimated to cost $55 million in the next 12 months).
But some observers feel the lowered bond rating, making borrowing increasingly expensive, may have a salutary effect. It may, they think, force the city to live within its means instead of "rolling over" costs into the future and increasing even further thecity's half-billion- dollar indebtedness.
The five-member school committee that runs the nation's oldest public school system, meanwhile, has again been rattled. Last October, former committee member Gerald F. O'Leary resigned after being indicted for accepting $25,000 in the busing kickback scheme after officials of the Philadelphia-based ARA Services cooperated with FBI agents. In January he was jailed for 18 months. Now a second indictment has come down, and a third may be in the offing -- which , if they are followed by resignations, could significantly alter the makeup of the committee.
The indictment comes as the committee debates minority hiring practices and tries to install its choice for superintendent (Dr. Robert Spillane, New York State's deputy commissioner of education) by Aug. 1. At the same time it learned that Dr. Spillane had asked for an increase in salary (to $60,000) before accepting -- a move which may mean that the committee's search for a new superintendent is not over.
Two days before the indictment, it voted to reassign the principals of 27 soon- to-be-closed schools in accordance with seniority rather than affirmative action considerations. The effect, say critics, would be to reduce the number of minority administrators, which (under Boston's court-ordered desegragation plan) must constitute about 20 percent of the total.
These troubles, however, may also be salutary. Public sentiment continues to increase for an overhaul of the entire school system -- a move that, according to numerous recent studies, is long overdue but has been successfully resisted by the system's entrenched bureaucracy.