City Projects $14.4M Deficit For Current Year

Thomas Breen photoThe city is still wrestling with a projected $14.4 million deficit for the fiscal year that ends June 30, according to a recent financial update from the city’s budget director. The projected deficit is evenly split between the city budget and the Board of Education budget.

On Monday night Acting Budget Director Michael Gormany and City Controller Daryl Jones revealed that figure when they presented their latest monthly financial summary report to the Board of Alders Finance Committee during a meeting in the aldermanic chambers on the second floor of City Hall.

The report covered the current finances for the city and the Board of Education as well as financial projections through the end of the fiscal year in June.

Click here to read the full report.

Gormany told the alders that the city’s overall projected deficit by the end of the year shrank from $16.3 million in December 2017 to $14.4 million in January 2018.

He credited the change to better-than-expected increases in real estate conveyance tax collections, a year-over-year increase in building permit revenues, and a decline in police overtime in comparison to what the city had projected.

According to Gormany’s summary, the city is projected to collect $1.4 million over budget in tax revenue by the end of the fiscal year. The summary also states that building permit revenues are expected to be $1.2 million, or 32 percent, higher than last year.

Police overtime came in at under $100,000 per week for the first three weeks of March. Even though the overtime budget is still projected to be $2.5 million above what was initially budgeted, Gormany said, the recent decreases allow the city to revise down the latest projections for end-of-year overtime costs by $1 million in comparison to what the city projected back in December.

Gormany said that the Board of Ed’s projected deficit decreased by $2 million, from around $9 million to $7 million, from December to January.

“We did realize some more vacancy saving for open positions as we do not fill them this fiscal year,” he told the alders. “We’re only filling the critical need positions to reserve the saving from the vacant salaries for the fiscal year.”

Gormany and Jones also drew the alders’ attention to two substantive cuts in municipal aid from the state.

Gormany said that the city’s general fund had to cover $400,000 that the state usually sends to pay for the Youth Services department’s Youth At Work program.

The city went ahead with the popular summer employment program for local teens last summer even though the state had not yet passed a budget. When the state finally did pass a budget in October, the document did not include funding for Youth At Work, which the state has funded for over a decade. The city had to backfill the costs of last year’s program with money from the general fund.

Youth Services Director Jason Bartlett told the Independent that the program, which employs around 600 local teens over the course of the summer, is critical in connecting cash-strapped nonprofits with local teens who can help the organizations run summer camps while also getting their first taste of paid work outside of school.

Bartlett and mayoral spokesperson Laurence Grotheer said that they hope the state legislature puts funding for Youth At Work back into the next state budget, but that Mayor Harp’s administration is committed to continuing with the program in either case.

Controller Daryl Jones also said that two weeks ago the state cut $750,000 in municipal aid that New Haven expected to receive this year as its share of funds from an East Windsor casino project that has been indefinitely delayed.

Gormany’s report reduces the projected state Education Cost Sharing funding for the current year down down by $250,000. The report states that the state budget passed in October returned the administration of the Renters’ Rebate Program to the state Office of Policy and Management (OPM), but requires municipalities to cover the cost of 50 percent of the cost of the claims in their towns, up to a cap of $250,000 per town.

Plan Promised

“It looks to me like the $14.4 million question is: What’s the path towards ending the fiscal year balanced?” asked Westville Alder Adam Marchand.

Gormany and Jones promised to present a more detailed plan to the alders at an upcoming Finance Committee meeting on how the city plans on reducing the projected $14.4 million hole.

“We have the expenditure controls for all the departments,” Gormany said, referring to strict rules in place about not filling vacant positions unless those positions are absolutely critical to the functioning of city government. “But we’d be happy to submit a plan on how we’re going to close that deficit before the end of the fiscal year.”

“From a budgetary standpoint,” Jones said, “the most important thing that we try to achieve is the balancing of the general fund.” He said that rating agencies tend to penalize cities for not balancing their budgets, and that an unbalanced budget could make borrowing money more expensive going forward.

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posted by: FacChec on March 16, 2018  12:27pm

BS.. while the Governor did make recessions during the budget year, the city’s original estimate of aid from the state was under reported by $12M, so then, if you start expending from a false revenue total, of course you will end up with a deficit that the city can conformable blame on the state, as you see happening in these two budget articles by the NHI.

posted by: Noteworthy on March 16, 2018  12:44pm

The demand from alders should be that the budget/controller balance the budge without getting building permits on projects launching next year, paid in this fiscal year. And a promise from this hinky finance duo to stop using next years PILOT payment from Yale, paid in the Fall of 2018 to be posted to FY 17 books.

Oops - the budget deficit just went higher.

posted by: 1644 on March 17, 2018  6:49am

Noteworthy:  The ultimate blame responsibility for the budget lies with the Alders.  It is they who adopt the budget based on proposals from the BoE, Mayor and professional staff.  They were free last year to reject the Mayor’s fanciful belief that state aid would increase, as well as the long-standing practice of booking Yale’s “voluntary” payment a year early.  New Haven could also revert to DeSteffano’s practice of flogging city property to Yale in order to close year end deficits.  Perhaps Yale would be interested in High Street between Chapel and Crown?  Or some of the Route 34 lands?

posted by: Noteworthy on March 17, 2018  11:23am

Incorrect Notes:

@1644 - you’re just wrong. This is mid-March - this financial report for January was just given to the alders. The fiscal year ends June 30 - and the city will drag out closing its books for months while it gathers cash, waits on Yale to pay its PILOT and then it will declare a balanced budget. The budgeting process, with all the apparatus and expertise of “career professionals” is controlled, monitored and drafted by city department heads, the finance department and the mayor’s office. In fact, all of these activities are associated with the city’s chief executive suite. The BOE budget and management of the schools rests with the NHPS board - and on which the mayor sits. The cop shop is overspending its overtime budget despite having almost 500 cops in its budget. This is just poor management.

The faulty projections from the state are not the fault of the BOA, who are lay people none of which have much if any business or financial expertise, who for $2K a year - basically donate their time. Their fault is not demanding answers and taking a tougher stand - but the fault for managing the financial affairs of the city on a daily basis is the mayor and her top lieutenants.

posted by: 1644 on March 17, 2018  4:28pm

Noteworthy:  I, too, am a lay person.  I knew that the New Haven budget had vastly unrealistic revenue projections when it was adopted.  I suspect you did, too.  So, if you and I could know that the budget was out of balance when adopted, why couldn’t the Alders?  And yes, they are not paid much, but the situation is the same with most other Connecticut town Board of Finance members, town council members, RTM members, etc., in towns that adopted realistic, or, as with Avon and Branford and others, worst case scenario, budgets.  In fact, in may of those towns, Board of Finance, RTM members etc, receive no compensation at all.
    BTW, I am not sure what you mean by “faulty projections from the state”.  At the time that town budgets were being adopted, there was no state budget, so there was no reliable information from the state.  It was, however, abundantly clear that the Governor’s proposal was dead.  Like the Governor, the Mayor only proposes a budget.  The authority for the ultimate budget adoption lies with the Alders.  They can alter her budget any way they want, except for the minimum educational funding requirement and contractual obligations.

posted by: robn on March 19, 2018  7:12am

I hope this current projection doesn’t include the ridiculous tax hike that’s been proposed because it’s a non starter. NHI?

[Paul: The projection is for the current year, before next year’s proposed tax hike.]