In November 2025 the Massachusetts Department of Revenue certified that Chelsea was sitting on $32,380,414 in free cash. Eighteen months earlier the figure had been $20.2 million. Four years earlier it was $14.9 million. By the time City Manager Fidel Maltez wrote to the council in March 2026 with an updated ledger, the projected closing balance for the year was $5,280,494.60.
That is a drawdown of $27,099,919.40 in a single fiscal year, and the ledger accounting for it reconciles to the cent. Roughly a third of it was never spent at all. Roughly a third bought capital. The last quarter covered deficits and, at the end, the operating budget, where the draw came in nearly $2 million larger than the city had projected in March.
This is what the record shows about where it went, and why.
Where the money came from, in the city manager’s own words
Free cash is the unrestricted fund balance a Massachusetts municipality has left over once the books close, and a city cannot touch it until the state certifies it. Chelsea’s own budget material defines it as “the City’s available reserves that can be appropriated for budget stabilization, one-time expenses, or other financial needs.”
Maltez told the council in January 2026 exactly why the number was so large, and he was blunt that it would not stay that way.
“The City of Chelsea was fortunate to have $32.4 Million in Free Cash for Fiscal Year 2025, as certified by the Massachusetts Department of Revenue in November 2025,” he wrote. “This substantial amount is largely due to a very positive return on our investments and a strong collection of excise taxes, particularly from vehicle registrations. While this is a favorable financial outcome, it is important to recognize that these sources of revenue are not guaranteed to remain at such high levels in the future.”
He then named both risks. The investment income, he wrote, was “primarily due to the high interest rates currently set by the Federal Reserve. As we are all aware, these rates are unlikely to persist for much longer, and we must plan accordingly.” The excise revenue was “dependent on the number of vehicles registered within the City, particularly those related to businesses that rely on the operations of Logan Airport.”
Chelsea’s reserve position, in other words, rested on the federal funds rate and on the rental car, freight and livery fleets registered to addresses in a city that sits across the harbor from an international airport. Neither is something a city manager controls.
The first $10 million was moved, not spent
Maltez’s January letter asked the council to transfer $7,000,000 into the General Stabilization Fund, which the city numbers as Fund 7020, and $3,000,000 into the School Capital Stabilization Fund, Fund 7024. His reasoning followed directly from the warning about interest rates: “These transfers will help replenish these essential stabilization accounts, which have provided the City with the flexibility to weather financial downturns in the past.”
The council adopted the transfers on January 28. On the ledger they read as a $10 million reduction in free cash, and on a chart they look like spending. They are not. The money moved from one city account to another, and it remains the city’s.
The move is also not new. The prior year’s sheet records the same maneuver at nearly the same scale: $7,500,000 into General Stabilization and $2,500,000 into School Capital Stabilization, proposed in February 2025 and adopted that March. Chelsea has now shifted $10 million a year out of free cash and into stabilization in two consecutive years. Any account of the reserves that treats the full $27 million as money consumed overstates it by that amount twice over.
One caution belongs here. Money also travels the other way. The record shows $3,500,000 appropriated out of the School Stabilization Fund to pay for capital projects. The packets do not publish running balances for Funds 7020 and 7024, so the city’s net reserve position across every account is not something the council packet lets a reader calculate.
The second $9.8 million bought capital, in cash
Three items on the March sheet are listed as pending, proposed on February 23:
- $8,197,000 for the fiscal 2027 capital improvement plan loan order
- $854,000 for a school building renovation project carried under the 2025 capital plan
- $745,000 for the Marginal Street capital fund
The first of those is the largest single line in the entire year’s drawdown, larger than either stabilization transfer, and the one that says the most about how Chelsea is managing the windfall. A capital plan is ordinarily financed by borrowing, with the cost spread across the useful life of what is built and paid for through debt service. Paying for it out of free cash avoids interest entirely and leaves no debt behind, and it empties the account that made it possible.
Maltez’s January letter anticipated exactly this. “With these transfers,” he wrote, “the remaining balance will be more than sufficient for the City to cover both the Free Cash allocations in the FY27 CIP ($8,197,000), and any additional FY26 deficits that may arise before the end of the fiscal year.”
The projections, and what actually happened
The bottom of the March sheet carries six projected draws totalling $6,664,011.85: fire department overtime $400,000, a snow deficit $1,500,000, a 911 deficit $500,000, a FEMA deficit $1,264,011.85, year end supplements $500,000, and a line reading simply “Balance the Budget,” $2,500,000.
Two of those can now be checked against outcomes.
Snow came in under. The council approved $787,296 for the snow removal contract services deficit and $162,358 for salt. Snow overtime ran to $158,343, funded in two pieces: $129,126 from the salary reserve, which that transfer exhausted, and the remaining $29,217 from free cash. Counting that last piece, free cash paid $978,871 of the winter against a $1.5 million estimate.
Fire overtime landed almost exactly on the number. The department finished about $406,000 over against a $400,000 projection, a variance of roughly $6,000 on a line that is notoriously hard to forecast.
The line that moved was the budget.
The $4,495,000, and the 350 students
The March sheet projected $2,500,000 to balance the fiscal 2027 budget. The budget the council actually adopted draws $4,495,000, which is $1,995,000 more.
Order 26F24, introduced by Council President Roberto Jimenez-Rivera, states it in one line: “the City appropriations and assessments in the General Fund are to be financed in part by Certified Free Cash of the City of Chelsea as follows: Free Cash in the amount of $4,495,000.” It was referred to conference and a public hearing on June 8, read a second time on June 22, and ordered on a roll call of 11 to 0, with every member voting yes.
The budget letter says what that money is for, and it is one thing.
“This year our City is increasing our support of Chelsea Public Schools by approximately $4 million,” Maltez wrote. “This is the highest contribution above net school spending from any gateway community. The Massachusetts Department of Elementary and Secondary Education (DESE) reports that Chelsea is 5.6% above mandatory spending. And while the City’s $4 million additional contribution does not address the full funding gap created by the unprecedented loss in student enrollment, it signals our commitment to supporting our school department.” Then, plainly: “The City is able to contribute this additional funding by utilizing in $4,495,000 reserves to support the budget.”
The extra $2 million was not general overspending. It was the city reaching into reserves to keep the school department from absorbing the full consequence of losing students.
The total budget is $272,378,292: $116,129,801 on the city side and $156,248,491 for the schools. The school increase is 3.55 percent, described in the letter as “a minimal increase to address the revenue loss from an enrollment decline of nearly 350 students. This loss is unprecedented and has a significant effect on our entire community.”
What the superintendent told the council
On June 8 Superintendent Almudena Abeyta and Chief of Finance and Operations Billie Jo Turner presented the school budget to the council. The minutes record the pressures they listed, and the enrollment loss is only the first of them.
“Chelsea Public Schools saw an enrollment decline of 350 students, resulting in a reduction in funds received from the State,” the minutes read. “Additional pressures on the budget include the expiration of ESSER funding, rising salary expenditures, increasing charter school tuition obligations, rising health insurance costs, higher transportation expenses, and growing special education costs.”
ESSER was the federal pandemic relief money that carried school districts across the country through the years after 2020, and it has now run out everywhere at once. Student Opportunity Act funding, the state’s main vehicle for increasing aid to districts like Chelsea’s, is itself calculated on enrollment, so a district that loses students loses that too.
Abeyta told the council enrollment is expected to decline further in the 2026-2027 school year, and described it as “a trend seen widely across other Gateway Communities.”
The arithmetic she brought is the sharpest number in the file. “What was originally a $13 million budget shortfall was reduced to $6.6 million due to an increase in the City’s contribution above” the required minimum. The city’s reserves closed roughly half the gap. The schools absorbed the rest.
Nothing in any council packet states why 350 students left. The record establishes the decline, the lost state funding and the consequences in detail, and is silent on the cause.
The city’s own 4.8 percent, and the three bills behind it
City expenditures rose 4.80 percent, which the budget letter notes is “the lowest annual increase since FY22.” Maltez then argues that almost all of it was compelled.
“In fact, if we remove these costs, our budget would be increasing by only 0.92%,” he wrote. “In other words, the majority of this year’s increase, or 3.88%, are non-negotiable items.”
Three assessments carry that 3.88 percent, and the letter gives the before and after for each.
Health insurance. Up $1,053,545 this year. The comparison Maltez chose is severe: “in FY22, our health insurance costs went up by $25,000.” The increase arrived “even after we made difficult health plan decisions and utilized savings in our Healthcare Trust Fund.”
Regional schools. Chelsea paid $1.4 million in fiscal 2024. This year the line is $3,190,000. The driver is named: the assessment “now includes the full debt payment for the new Northeast Regional Vocational High School,” a total debt service payment of $1,565,163. Chelsea students attend the regional vocational school in Wakefield, and the city’s share of the new building arrives as a fixed annual obligation regardless of how many students it sends.
Charter schools. Up $2.6 million, against an increase of $560,000 in fiscal 2024. Charter tuition follows the student out of the district, which means the same enrollment shifts that cut state aid to Chelsea Public Schools also raise what the city must pay out.
Those three lines total well over $6 million of new cost in one year, none of it discretionary, all of it landing on a city whose main non-property revenue sources are interest income and vehicle excise.
“This perfect storm is affecting most cities and towns in Massachusetts,” Maltez wrote. “We have to be fiscally responsible at this moment, while keeping the tremendous momentum we have built. I firmly believe that this budget achieves that balance. We must also continue leading the effort for new growth, which is going to be our way out of this storm.”
The FEMA line is a pandemic food bill, still unresolved
One projected draw deserves separating from the rest. The $1,264,011.85 marked “FEMA Deficit” is not a storm. It is a reimbursement claim for food distribution during the COVID-19 pandemic, work Chelsea did at a scale that drew national attention at the time.
In January 2026 Maltez notified the council that the city had “submitted the second appeal to FEMA requesting reimbursement for food distribution efforts during the COVID-19 pandemic,” and that the city was “working very closely with our State Partners at the Massachusetts Emergency Management Agency (MEMA). The State continues to advocate for Chelsea and for this reimbursement.”
No FEMA decision appears in any council packet through September 2026. If the appeal succeeds, $1.26 million returns to the city. If it fails, the write-off already booked on the March sheet stands.
What the city’s own forecast says happens next
The five-year forecast the administration gave the council in February shows the general fund balanced in the current year and the next, and then it stops balancing.
The projected surplus is zero, zero, and then a deficit of $7,242,436, followed by $12,424,287, then $15,351,437, then $18,636,555.
The mechanism is visible in the forecast’s own rows. Interfund transfers, the line that carries reserve draws into the operating budget, sit at $5,331,681 in fiscal 2027 and fall to $2,643,632 the following year. Miscellaneous revenue drops from $4,650,000 to $3,650,000 and then to $1,400,000. Education spending rises from $157.4 million to $163.7 million over the same step. The budget balances this year substantially because money is being moved into it, and the gap opens in the first year that money is not there.
Against that, the projected free cash cushion is $5,280,494.60.
What is not knowable from the packets
The certified closing figure for fiscal 2026 has not been published; the $5,280,494.60 is the city’s own projection from March, not a Department of Revenue certification. The running balances of the General Stabilization and School Capital Stabilization funds are not in the packets, so the $10 million a year going in cannot be netted against what comes out. No FEMA decision has been reported. And the cause of the enrollment decline that drove the $4,495,000 draw is stated nowhere in the record, only its size and its consequences.
Documents that would close any of those gaps, including the FY2026 free cash certification, the stabilization fund balances, or correspondence on the FEMA appeal, can be sent to [email protected].