New Haven Independent

Plugs Proposed For Budget Hole

by Melissa Bailey | April 1, 2008 8:11 AM | Permalink | Comments (20)

City Budget Director Lawrence Rusconi offered two options to plug a $9.5 million budget hole: first pray for a municipal sales tax, then ask unions for concessions.

The subject came up at meeting Monday night of the aldermanic Finance Committee, part of a series of workshops on the city’s FY08-09 budget.

The discussion felt like a rerun: Just six months ago, the city was looking at how to plug a budget hole in its FY07-08 budget, due to the same reason — a miscalculation in how much state aid the city would get.

The state budget proposal that passed the Appropriations Committee last week left the city staring at a budget hole of $9.5 million in expected PILOT funds, according to City Hall’s latest calculations. (Mayor John DeStefano, Jr. first pegged the number at $10 million.) The state has yet to pass a final budget, but it’s safe to say the city won’t walk away with any more PILOT funds than what the Democrat-controlled committee has approved. (PILOT stands for state payments in lieu of taxes city can’t collect on tax-exempt property.)

The problem has now passed to aldermen, who are tasked with giving approval to — and taking public heat for — a final city budget. Beaver Hill Alderman Moti Sandman asked what the city budget crew (Controller Mark Pietrosimone and Rusconi, pictured above, left to right) plan to do about the problem.

“How are you going to account for that $10-million-odd shortfall?” Sandman asked.

“Are you going to resubmit a budget with a 2.5 mill increase? Either we need to see what the mayor’s office has in terms of cuts, or” a tax increase that accurately represents what would be needed to balance the mayor’s spending plan.

Rusconi answered that the city is hanging its hopes on a so-called penny tax. A bill at the state Capitol would allow municipalities to levy an extra penny sales tax on goods sold in their town lines. The bill will die unless it is passed through the legislature’s Finance, Revenue and Bonding Committee before a Thursday deadline.

“If that penny tax goes through, we have a very fortuitous situation,” Rusconi told aldermen.

The city estimates the penny tax would turn on a spigot pouring $21 million in revenue over a 12-month period. If enacted in October, it could produce $15 million for the FY08-09 budget. The proposal’s fate is far from certain, however.

If it fails?

“If that doesn’t go through, we have to sit down with the labor unions again,” Rusconi said.

A wage freeze would be one solution put on the table, Rusconi later elaborated.

Deja Vu

The situation sounds a lot like what happened last year: A shortfall between what the city expected and what it got from the state left Rusconi scraping for ways to balance the FY07-08 budget.

Last year, while the state was dragging through a drawn-out budgeting session, the city approved a budget that assumed a $5 million increase in PILOT money.

The city budget appeared to be balanced — until the state aid was announced.

“It all fell apart in the dark of the night,” Rusconi recalled. When the state budget came out, the city stared at a $10.6 million shortfall from what it had expected in state aid. The shortfall sent the city scrambling, mid-year, to fill in the gap.

Everything Must Go!

“That’s when we came up with the asset sales and [creation of a new agency to take over] the transfer station,” Rusconi said. Aldermen approved a mid-year budget amendment that called for selling off $6.5 million in city assets “for economic development” as well as the $6 million transfer station. City officials have come under criticism for relying on one-time revenues to plug budget holes.

Rusconi said despite all the criticism, he’s not opposed to asset sales: It can be good to take city property and make it tax-producing, he said. (The transfer station won’t become tax-producing, just the other assets.)

In other budget years, the city has looked at layoffs or furloughs to balance mid-year budget holes. Rusconi, however, said he sees two options: “We could find city assets to sell or send out a supplemental tax bill. I like the former.”

At a public budget talk last week, the mayor said he’d like to put an end to relying on one-time revenues to balance budgets.

PILOT Woes

By state statute, PILOT for tax-exempt college and hospital land should be funded at 77 percent of assessed value; PILOT for state-owned property should be reimbursed at 45 percent. Both have been historically underfunded.

Looking forward to FY08-09, the mayor assumed the state would bump up college and hospital PILOT to 73 percent; the Appropriations Committee has allotted New Haven only 59 percent. The mayor assumed state-owned property PILOT would be funded to 44 percent; the committee gave it 39 percent.

Given the city’s experience with overestimating state aid, why would the mayor plan for a $10.9 million increase in PILOT money over the governor’s budget? Was that a reasonable expectation?

“The mayor made the decision that he didn’t want the mill rate to increase,” Rusconi replied. “Once we got to the point where we couldn’t cut any more,” he said, the city decided to push at the state level. “We were going to lobby for it and try to make a case for it.”

The city sat down with unions in February and “told them our risk,” mentioning a wage freeze and encouraging them to lobby the state for more resources, Rusconi said. The mayor has made several public calls for citizens to lobby Hartford. A couple have made the trip. The strategy was to make a big push at the Capitol and see if it worked, he said. “Then either we succeed or we fail.”

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Posted by: Ned | April 1, 2008 8:18 AM

"Nothing fails like prayer"

Posted by: on whalley | April 1, 2008 8:27 AM

I was playing SimCity last night and for the fun of it I took my small town and filled it with all sorts of ridiculous things like monuments and parks and universities then I bulldozed the little industrial section I had and rezoned it residential.

When people started coming in I jacked up the business taxes until they all started leaving and to make up for the lack of funds I upped the sales tax 1%. That didn't work to put money in the bank so I upped the property tax.

By the time I went to bed I had no money and only 6 people lived in my town. I still had the universities and parks though.

Hey, Mr. Mayor, want to borrow my copy of SimCity?

Stop spending!!!!!

It's like this city is being run by all the clowns who went out and got ARM's they couldn't afford to buy property they couldn't afford. You never should have bought what you couldn't afford and New Haven has bought a whole lot of crap it cannot afford. A frantic and stupid attempt to find the funds to pay for your overspending will only dig the whole deeper.

The worst thing is the city's bad spending is like buying an expensive tattoo. It's utterly worthless and there's no way you can return it. Not even for store credit.

Please for the love of god stop spending.

Posted by: Darnell | April 1, 2008 9:00 AM

Does anyone actually believe that an extra sales tax in New aven will generate extra funds? Of couse it will not, those folks who shop at Wal Mart in New Haven will instead go to Wal Mart in West Haven. Only the poor folks, elderly, or others without transportation or means will be slammed by this tax, which will not cover the losses from those fleeing shopping opportunities in New Haven. The way to generate additional sales tax revenues, and jobs, is to LOWER the sales tax in distressed and urban areas, which is common practice throughout the states, bringing MORE shoppers into the city. The only additional revenue to be had from this penny tax is on paper. Six months later the shortfall will appear, and of course the current administration will blame the state and federal govt, anti illegal immigrant organizations, or little green men from outer space.

Posted by: Our Town | April 1, 2008 9:31 AM

Let's see...Mayor gets raise...asks unions to take pay cut.

This man has (insert desired slang word).

How 'bout we cut back on some of the legacy spending on schools...the buildings don't make for better education.

Posted by: Gary Doyens | April 1, 2008 9:48 AM

Hope is not a strategy. Neither is prayer.

Every year I HOPE the city will evaluate every line item of spending, every program and dependency payment it makes. I HOPE they won't launch any new programs, hire new employees that aren't paid for with existing revenue. Every year I PRAY for tax relief; I PRAY that the mayor will have some compassion for working families, for those of us with children. I PRAY he will have the wisdom, courage and leadership commensorate with his executive authority over those he rules.

As I'm praying and hoping, I'm reminded of the Old Testament and the story of Pharaoh who became ever richer at the expense of the Israelites whom he held in virtual capivity. He got smart and only let them go after 10 plagues and the wiping out of his army in the Red Sea. Wonder what it will take for this modern day Pharaoh?

Posted by: Esbe | April 1, 2008 12:01 PM

The 1% sales tax really would raise a lot of money -- shoppers will keep coming to IKEA. But it would be very destructive in the long run. The mayor has an excellent "conceptual" plan for infill development throughout the broadly defined downtown. It calls for lots of new retail. A "city sales tax" is definitely going to work against that.

Posted by: fac Chek | April 1, 2008 12:41 PM

Hint:
How about the most logical option..

Reduce the 20.6 Million budget increase fueled by the second, of five, phase-in of 2006 assessment.

If this is not the first option, it will guarantee increases for the next three years as well.
The next obvious question is where to reduce...

The buck stops with you Mayor!

Posted by: strangerthanfiction | April 1, 2008 2:10 PM

Until the outrageously broken property tax system is fixed, New Haven will be dependent on the goodness of the CT General Assembly as it decides each year how much to underfund the state PILOTS. Why have PILOT levels of funding when the state legislature gives us whatever they want anyways? I don't get it? What a flim-flam on New Haven.

Posted by: cedarhillresident | April 1, 2008 3:28 PM

strangerthanfiction
I agree!
Our city is what keeps all surrounding towns going!! If the cities do not do well those towns will suffer! The state should want to support places like New Haven. Places that have there land consumed by Schools, Hospitals and not for profits that provide jobs for many that live in the surrounding areas. I say we find a new use for Resident ID cards.....If you do not live here you pay a tighty little sum to come and go...A TOLL!

Posted by: Gary Doyens | April 1, 2008 4:33 PM

Folks: It's time for a reality check on PILOT. There is nothing that says PILOT has to be funded at 100%. The first year of PILOT, funding was only 22%. Continued moaning about PILOT are meaningless and change nothing as the mayor knows well. All it provides is a diversion so you don't focus on how much money the mayor spends.

If the mayor really wanted to save money he could do the following:

1. Bring all union contracts in line with each other in terms benefits so that it could be bundled with a state initiative on healthcare. The city of New Haven could join the much larger pool and save $5 - $8 million or more.

2. Immediate hiring freeze.

3. Cut police overtime - leverage cops in the neighborhoods and shifts where there are problems.

4. Purge any city department that has one employee and purge any department who cannot quantify and qualify their existence based on real data.

5. Cut any new program that is not revenue neutral.

6. Elminate cars for mayor, BOE superintendent and other department heads who do not have a demonstrated need for them.

7. Take a very close look at the BOE budget - principal interns, special assignment teachers without specific tasking and job responsibilities should be purged. End all patronage jobs.(City of New Haven spends way in excess of state mandated minimums - bring it in line.) Cut 10% out of the central office.

8. Eliminate double dipping retired employees pretending to be consultants citywide.

You want to get real about cutting the budget? Get out the red pen. Demand change. Blaming the suburbs for overspending, blaming the non-profits which provide a great many jobs for New Haven residents is just pitiful. Blaming the state gets you nowhere.

Quit making excuses and blowing smoke up our collective overtaxed backsides. Chop, Chop.

Posted by: Gary Doyens | April 1, 2008 7:30 PM

From review of the Form 106s which are supposed to provide insight into how the money is spent...consider these:

Eliminate the Peace Commission, Fair Rent Commission for starters.

Absent a grant..end the City ID program

No more travel - there are tens of thousands spent on travel. Cut it.

Drop the Crystal Rock Water at Community Services.

LCI - chop, chop big time. This department was supposed to be self sustaining according to the expansion plans of two years ago. It now exceeds $7 million. That's called mission creep....scale it back to what it is supposed to be doing and do only that part well.

That's for starters only...Form 106 review continues.

Posted by: Darnell | April 1, 2008 7:50 PM

Gary,

I think I agree with 99.8% of what you write. Certainly agree with the above post.

Posted by: Gary Doyens | April 2, 2008 7:00 AM

More Form 106 Continues -

1. Cut Crystal Rock Water in the Elderly Services

2. Consolidate Senior Centers to where they are used the most

3. Reduce transprtation in Elderly Services budget to last year's level - service was expanded this year.

4. Look at the mayor's office budget - there are no positions detailed there..just a lump sum. Details and possible cuts.

5. Many departments have mailing and printing expense with their own letterhead - Is this really necessary? Can there not be one city letterhead that all departments use? It would be good to look over a lot of the printing expenses -is it all necessary? Look at the mailing expense too.

As a general comment in reviewing these forms, most city expenses are just carried forward from last year with some requests going up, a few going down. Alders should require a detailed reason why each of the positions under these departments are justified.

Another place to look for waste, or at least questionable expenditures - "Consultants" -which are not detailed. would look at all those contracts. Patronage?

Posted by: cedarhillresident | April 2, 2008 8:56 AM

Gary I must say.....You have cut the mill rate and have stopped many foreclosures with your ideas.

Town hall our elected Alderman are you reading this! Some of it is totally realistic. It may be the last thing you want to do, but with the economy getting bad and Hartford funding short fall... it is time.

Posted by: cedarhillresident | April 2, 2008 8:58 AM

ps although this bill has made it through.
http://www.cga.ct.gov/2008/TOB/S/2008SB-00701-R00-SB.htm

Posted by: matt short | April 2, 2008 3:32 PM

cedar hill resident, can you give more context to your last posting about the homestead exemption. I am interested. Also, bravo on your "from the blue bin".

Posted by: cedarhillresident | April 2, 2008 6:21 PM

I don't know much about the bill. I have been watching a few that can help the middle class homeowners that can not afford these High taxes ...which will be going up again. This is the link of where it is now.

http://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selBillType=Bill&bill_num=701&which_year=2008&SUBMIT1.x=11&SUBMIT1.y=7&SUBMIT1=Normal

There are few more but they have yet to make it to this step in the game.

***taking a bow on the blue bin***

Posted by: DingDong | April 2, 2008 9:20 PM

CederHillResident,

I am almost always agree with you - but I have trouble seeing your thinking on this homestead exemption. Sure, it will cut taxes on middle class home-owners. In some towns like, Greenwich, this will mean the millionaires will have to shoulder more of the tax burden to make up the shortfall. That's great. But since we don't have many millionaires in New Haven, it will just mean renters end up paying higher rents (because their buildings are not exempt so their landlords will have to shoulder the part of the tax-burden that the homesteaders are exempted from; they'll do this by raising rents). Sounds pretty regressive to me.

Posted by: cedarhillresident | April 3, 2008 9:04 AM

I know dingdong...But remember that in New Haven Foreclosures are up 80% from last year and yes some is from the subprime situation but not all of it.
We must remember something about inner city's... at least through my eyes... the middle class are the protectors of the city. Owner occupied homes... are what keep community beautiful and safer because they (home owners) have an invested interest in them. I rarely see renters and corp landlords at block watch meetings (not to say some don't go). The middle class home owner is a very important tie that holds community's together. Yet very rarely do we see the government protecting them especially in Connecticut.

Posted by: Ned | April 4, 2008 10:55 AM

Cedarhill,
Loved your video!
Look at who is being foreclosed on (just a few examples): Antar, Athan, Perrotti, Gyamfi, Welch, Constitution Holding, et al.
Check the shortlist
Pick some names and check in the Vision Appraisal database.
Fascinating reading... Find the ones in your neighborhood. Such a tangled web. Who will get the bailouts: those in need???

Plugs Proposed For Budget Hole

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