“Piggy Bank” Emptying Out
| Nov 20, 2012 4:35 pm
The city could end the fiscal year as much as $8.5 million in the red—but have only $1.86 million in its “rainy day” fund to cover it.
Those two facts have city lawmakers pressuring the DeStefano administration to come up with a plan now, not next spring at the last minute, to avoid running the government over New Haven’s mini-version of a fiscal cliff.
The latest figures come from city Budget Director Joe Clerkin. His office’s latest monthly financial report, covering the period ending Sept. 30, identifies emerging problems that can add up to another sizable deficit for the fiscal year ending next June 30. They include:
• Yale has postponed plans to build two new residential colleges. The city budget counted on $4 million in building permits from that effort, $4 million that may not now materialize.
• The city budget assumes that Yale-New Haven Hospital will increase its annual voluntary payment to New Haven by $1.6 million because it has taken over the Hospital of St. Raphael. That is not a given.
• The city’s budget assumes that the state will send us $3.9 million in tax relief. The real figure may end up being $500,000 less, based on last year’s experience.
• The city’s budget counted on $2.5 million in labor concessions. But so far the city has come to terms with only one union on a new contract.
“If all those things go wrong,” Clerkin said Monday, the city could face an $8.5 million deficit.
On top of that, police and fire department overtime bills were already $1 million over budget just three months into the fiscal year. At that pace, the overtime overage could hit $2.7 million by fiscal year’s end.
New Haven ran an $8.7 million deficit last fiscal year. But it had $10.6 million in its “unassigned fund balance”—i.e., the rainy day fund—to cover it.
That meant that it started this year with a perilously low $1.859 million in that fund.
And that means the city can’t afford to run another big deficit. It must start now to get overtime under control and find other ways—cuts if necessary, sale of city property if that makes sense—to avoid that deficit.
That message came from aldermen at a recent Finance Committee meeting. They held off approving what would normally be a routine request to borrow some money to cover lawsuit settlements, pending presentation of a broader plan to keep down debt and avoid that projected deficit. Read about that here.
“This is like your [the city’s] personal piggy bank,” East Rock Alderman (and possible mayoral candidate) Justin Elicker remarked at that hearing. “We had $10.6 million in the piggy bank last year. We have $1.8 million this year. If we make the same decisions next year, we’ll be over by $6 million. We have to make hard decisions like cutting programs, laying off people.”
He and fellow Aldermen Jorge Perez and Doug Hausladen emphasized coming up with plans for either cuts or asset sales, or both, right away. Last year the city waited until April to wrestle with the pending deficit. It tried, and failed, to get a sufficient price for selling a parking garage, lacking the time or leverage to find the right buyer.
Aldermanic leaders repeated that message in a private meeting with the DeStefano administration last week. The administration followed up two days later with meetings Friday with the police and fire chiefs to discuss both short- and long-term plans to rein in overtime and figure out staffing needs. Chief Administrative Officer Rob Smuts, who participated in the meetings, said he’s in the process of making “digestible” research he’s done into projecting, for instance, how many people will retire in coming years, for instance, and the benefits of combining the police, fire and public works mechanic shops.
“We cannot finish on a deficit” this year, Perez said Monday. “We don’t have a cushion.”
What would happen if the city runs out of a money by having too big a deficit?
It would probably have to borrow short term to pay its immediate bills while it proceeded with a cost-cutting plan, Clerkin said.
The city obviously doesn’t want to get to that point, because it would, in turn, raise the cost of borrowing money—digging the government into a deeper fiscal hole.
If the city exceeds its rainy day fund, “you can kiss good-bye our current bond rating,” Perez said. “In essence, you’re bankrupt.”
Another long-term challenge for the city: Boosting the rainy day fund itself. Even at $10.6 million last year it was far lower than the level considered sound by credit ratings agencies. They expect cities to maintain rainy day funds covering 5 percent of the operating budget. In New Haven that would mean about $24 million.
Many cities have struggled to maintain their rainy day funds over the course of the recession.
Hartford’s rainy day fun fell below zero in fiscal years 2008 and 2009, and has since climbed back up, according to mayoral spokeswoman Maribel La Luz; she said it is currently at $3.1 million out of a budget of around $550 million. Bridgeport currently has set aside $16.5 million in its rainy day fund, around 4 percent of its budget, according to mayoral spokeswoman Elaine Ficarra.
West Haven last officially had a rainy day fund, said current Mayor John Picard—but even then “they were using grant money, which they weren’t supposed to do.”
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posted by: anonymous on November 20, 2012 4:45pm
If the city exceeds its rainy day fund, “you can kiss good-bye our current bond rating,” Perez said. “In essence, you’re bankrupt.”
The fact that the City is essentially bankrupt should come as no surprise to someone who has been a City leader for decades.
Unfortunately, Perez, James, Marchand, Eidelson, and his fellow “BOA Leadership” gave up the chance to ameliorate this situation when they voted down the millions in State & Federal money for bus & transit system improvements, which could have brought billions of dollars worth of development and 1,500+ good union jobs to our City.
They voted this down behind closed doors despite overwhelming public testimony from citizens, and the City, in favor. When people said it was the most shortsighted decision in the history of New Haven, they weren’t joking.
It was also one of many moves, like Charter Revision, showing a complete lack of transparency within the new Board.
posted by: Lisa on November 20, 2012 5:16pm
This disgusts me. The BofA and the Mayor should have cinched up years ago. Instead, spending is out of control as are taxes. Why is it that people have to live within their means, but the city does not? We the people are equally at fault for allowing this to happen, for not getting on our alders harder, and for not standing up to the Mayor. Concessions must be made.
posted by: Theresa on November 20, 2012 6:40pm
So the city wants to hire 70 new cops to stop overtime and save 2.7 million a year.. News Flash!!! 70 new cops will cost the city at least 5 million a year with salary, benefits, equipment and training. How is that saving money??
posted by: Threefifths on November 20, 2012 6:44pm
Why Are you all crying.Did you all not vote them In.
posted by: NewHaven1 on November 20, 2012 6:55pm
I remember hearing these discussions year after year, with the BOA doing the same thing they always do, nothing. This is being set up to begin the “blame game”, the BOA blaming the Mayor, and vice verse. The fact is that both the Mayor and the BOA are to blame. I remember for two years the former Alderman Darnell Goldson not only complaining about the lack of planning, but actually submitting budget amendments to put the city on a path of reducing growth of spending. The first year he received a handful of votes and a several hours debate. The second year no votes and not even a 5 minute debate. I begin to wonder, what’s going on here, why don’t these aldermen see the fiscal cliff they are putting this city on? Why don’t they support the Goldson amendments to reduce the budget? Then I thought, these guys are: 1. afraid to make tough decisions, and 2. jealous as h..e..double hockey sticks of Goldson because of his independence, and the press coverage his independence brought him. I knew his time on the BOA was numbered once I realized this, and also the voice of reason on the BOA would soon be gone.
In the end, these guys will do nothing, and then will rush to borrow money because they are running out of time. Sad game they play.
@anonymous, where do you get those ridiculous street car figures from? “which could have brought billions of dollars worth of development and 1,500+ good union jobs to our City”. That streetcar proposal would have brought us more debt, that’s it. We would have paid millions of dollars to do a study. And even if they did conclude that it was feasible, it would have only served the East Rock and Yale community. Let them pay for it, not us taxpayers in Dixwell, Fair Haven, Newhallville, Westville, and West Rock. The bus system is just fine, and can be improved on at a fraction of the cost.
posted by: anonymous on November 20, 2012 8:13pm
NewHaven, your figures are incorrect. State and Federal officials, including President Obama, were absolutely desperate to invest hundreds of millions of dollars into New Haven’s transportation infrastructure and bus system, even with a city match of $0. This is mainly because they have half a brain and realize that New Haven (and maybe Stamford) is the only area where Connecticut’s economy can grow. But in a slap in the face to our poorest residents and those who can’t drive, the Board wouldn’t let them.
Because of this, the Board has become nationally renowned as a force for regressive policy. I can not think of a single other case in which an elected body that supposedly represents urban residents votes against money for its own bus and transit system.
The reason is that the Board answers only to suburban unions and CCNE, not to the interests of people who actually live here. As such, we are constantly losing out in future tax revenue that could easily have plugged this budget deficit, and we lose out on hundreds if not thousands of good union jobs. The behind closed doors decisions being made by the Board right now are just as shortsighted.
posted by: cp06 on November 20, 2012 9:20pm
Did Justin Elicker really say this to Clerkin:
“This is like your personal piggy bank,” East Rock Alderman (and possible mayoral candidate) Justin Elicker told Clerkin at that hearing.
Why would this be Clerkin’s “personal piggy bank” and not the responsibility of ALL the elected officials, including Aldermen, to address?
posted by: Nathan on November 20, 2012 9:49pm
“State and Federal officials, including President Obama, were absolutely desperate to invest hundreds of millions of dollars into New Haven’s transportation infrastructure and bus system, even with a city match of $0.”
You have been spinning position every other time you post a comment on NHI. Why is it that only you seem to have this information? I am only aware that a study was proposed for a system which, if (foolishly) built, would put the city on the hook for operating costs (which are rarely covered by public transit fees).
posted by: new havener on November 20, 2012 11:13pm
sit back, relax, and have a nice warm bowl of *@#%.
fact is, the board of alderman is overwhelmingly controlled by the unions of Yale. union members, somewhat skilled at running a smallwork-group, not managing a city. alderman that are used to taking from the man and giving to the masses. now it goes in reverse. the fun is about to begin.
favorite fraction, my guess is we all won’t admit to voting them all in, because no one wants to admit they bought a ticket to get on a train wreck.
what does this city have left to sell? what new revenue can they generate? the only thing making them money are the updated parking meters and meter-maids. and on top top of that, they are looking to spend more on police, firemen, a new bowen field, and retrofitting old gateway for a new hyde. it never friggin stops.
kudos to NHI for reporting this, and clerkin & o’niell for being honest. I don’t trust either Yale or Malloy to come through, they’ve both got bigger issues. whoever thought bridgeport would be more solvent than new haven?
posted by: Wooster Squared on November 21, 2012 10:21am
This administration and union-backed BOA need to be shown the door. This budget boondoggle is the result of either gross malfeasance or gross ineptitude. Either way, our City deserves better.
posted by: NewHaven1 on November 21, 2012 10:42am
The Great Streetcar Conspiracy
by Randal O’Toole
The real push for streetcars comes from engineering firms that stand to earn millions of dollars planning, designing, and building streetcar lines. These companies and other streetcar advocates make two major arguments in favor of streetcar construction. The first argument is that streetcars promote economic development. This claim is largely based on the experience of Portland, Oregon, where installation of a $103-million, 4-mile streetcar line supposedly resulted in $3.5 billion worth of new construction.
What streetcar advocates rarely if ever mention is that the city also gave developers hundreds of millions of dollars of infrastructure subsidies, tax breaks, and other incentives to build in the streetcar corridor. Almost no new development took place on portions of the streetcar route where developers received no additional subsidies.
The second argument is that streetcars are “quality transit,” superior to buses in terms of capacities, potential to attract riders, operating costs, and environmental quality. In fact, a typical bus has more seats than a streetcar, and a bus route can move up to five times as many people per hour, in greater comfort, than a streetcar line. Numerous private bus operators provide successful upscale bus service in both urban and intercity settings.
Streetcars cost roughly twice as much to operate, per vehicle mile, as buses. They also cost far more to build and maintain. Streetcars are no more energy efficient than buses and, at least in regions that get most electricity from burning fossil fuels, the electricity powering streetcars produces as much or more greenhouse gases and other air emissions as buses.
Based on 19th-century technology, the streetcar has no place in American cities today except when it functions as part of a completely self supporting tourist line. Instead of subsidizing streetcars, cities should concentrate on basic — and modern — services such as fixing streets, coordinating traffic signals, and improving roadway safety.
posted by: anonymous on November 21, 2012 12:17pm
NewHaven1, that analysis is horribly flawed. If you let the Cato Institute drive urban policy, rather than Barack Obama, the United States would not have any cities left.
posted by: streever on November 21, 2012 12:32pm
Are people seriously wasting their time debating street cars and picking Anon’s post apart here?
Perez has been on the BofA for, what, 20 years? John has been Mayor for, what, 20 years?
For how many of those 20 years—a generation—have BOTH been campaigning for more transparency? How many of them has Perez been for better fiscal sense?
In those 20 years, how many of them has Perez spent as PRESIDENT of the BofA beyond his current term?
Do not be fooled.
We need new leaders. This city has had enough of the failed policies of John DeStefano and Jorge Perez, and needs to see real change and even upheaval.
Going into receivership would hurt, but it may be the only solution still available to a cash-strapped municipality full of 2-bit politicos who are afraid of making hard decisions, who have been kicking the can down the street for the last decade, all while singing the praises of transparency.
You know where the commitment to transparency got us?
A BofA that makes EVERY major decision in a closed door meeting called the “democratic caucus”—a time where an almost unanimous group of people with no imagination and no commitment to openness pre-determine their votes, allowing vulnerable members of their group the opportunity to cast symbolic no or yes votes, resting assured that the dissenting vote will not derail the goals of the overall group.
A BofA that scapegoats the Mayor for tough decisions.
A Mayor that scapegoats the BofA for tough decisions.
End result? No one makes tough decisions, because they are each so busy trying to cast blame on the other, that the tough decisions don’t get made.
Our city leaders need to find a combination of cost cutting and revenue increases to balance our city budget.
Regardless of your politics or your viewpoint, it is a matter of law that cities do not get to operate on negative balances over the course of years. Because we exist in a lawful society, governed by the law, we do need to find a way to sustain our city in this framework.
That lawmakers are expressing surprise or shock at the current state of affairs is disingenuous and disappointing. No one at City Hall is surprised at the current state of affairs, and their legislative records, statements to press, and correspondence establish that everyone has seen this coming for years.
posted by: Claudia Herrera on November 21, 2012 12:40pm
So much talk about expending, deficit, red numbers and complains for what is done.
WHO’s more interested on CREATING JOB?
I want to know who’s actually looking in to New Haven locals as a really good market for job creations. There are some studies or strategy’s now to use the talents or skills of the local residents?
were and who’s being investing on these areas to expend for economical development?
It bother me a lot to know that all is about who much we expend and noting about creating to produce.
posted by: HhE on November 21, 2012 1:06pm
Currently, the city is trying to sell six lots in the Wooster Square area as building lots for 2 to 4 family units, that ought conform to the historic aesthetic of that area. To me, that sounds like half a million, best case.
Spot on streever, as usual. Albeit, I understand why people would take issue with anonymous’ post. He or she tends to bring out two arguments as fact on a regular basis. One is that borrowing money for a street car study would have produced a street car that would have been a net gain to the city, including numerous union jobs (yet anon complains about union leadership a lot too). The other is that less police equals less crime. I have yet to see a study or other evidence to support ether.
Claudia Herrera, job creation is all well and good, but I doubt that would fix our city’s finical woes. People who are over weight (my self included) rarely exercise their way out of that problem. The only solution is to eat less calories than one burns, and that takes looking at food differently. Likewise, families and governments with financial problems typically have them because they spend money they don’t have. Making more money does not typically solve this problem; just look at Nick Cage and MC Hammer. If we look at why companies and capitalists would not invest in New Haven, we are looking at crime, high taxes, and shaky government.
We need systemic solutions to systemic problems. DeStefino and Perez are the systemic problem.
posted by: Claudia Herrera on November 21, 2012 1:21pm
Streever, We’ve not all been fooled but it’s the reality, you are talking about changes of leaders; Those changes need to be studied way beyond numbers and laws.
In New Haven for the large numbers of multicultural minorities that exist in the city, those leaders need to be strongly prepared to understand the minorities and cultures. Obviously as a sample, Obama’s campaign show the Latino Americans and Black communities support changes when we feel understood.
And I have to say we ARE NOT fooled for social medias that runs for few leaders around our city. WE THE COMMUNITY knows who works with us and who doesn’t, and not only in one or two events a year but YEAR ROUND in issues that matter to us. Over all, one thing I’m strongly supporting you about transparency on all levels.
posted by: Claudia Herrera on November 21, 2012 2:08pm
That’s very truth about over spending equals financial problems, but also is knowing that if you eat poorly is because of your own choices or better say it in many occasions for the only choices you have or can afford.
Right now it’s too late to see job creations as a sloven problem to the deficit agreed with you on this one too, but my point is who is really looking into New Haven locals as a strong potential business owners for creating revenues that eventually will be reflection in our city and Hartford? Supporting and investing into communities and locals to open small businesses is a strong reality. City and residents we are all affected for this economic problems. We all know that
I’m not agreed with you about job creating will help. The real issue is to discus how to put people to work and not focusing in the existing jobs since they are so poorly compensated, part-time jobs with no benefits create only people depending on New Haven services (more expending).
Like I just commented before to streever. Systematic solutions , leadership and changes are way more that how know to do math and laws. All are elements that need to be work out with human beings that exist already in New Haven and more to come.
posted by: ElmJackCity on November 21, 2012 3:02pm
The biggest problem with out city is a lack of recurring revenue streams. Selling assets like a parking garage does the city no justice to that end. The parking authority pays into the city’s coffers without presenting itself as a tax revenue burden.
posted by: ElmJackCity on November 21, 2012 3:42pm
Maybe Hillhouse H.S. Assistant Principals should be set to raise funds for the remaining portion of the bill to build a new Bowen Field?
Instead of taking away decent paying jobs to hard working Americans, why not take away the enormous salaries of a few?
Every year this topic continues to come around, and yet we see no deliverance being wrought on the top-heavy administration of the city of New Haven.
Asset sales are short-term remedies that do not address long-term, systemic problems. The city sold Broadway lot to Yale for $1.00, and the Chapel Square mall (underneath the Omni Hotel) to ProPark. Has the city’s budget deficit improved?
Since Traffic and Parking was used as an example, we will go there. Part-time positions have been increased greatly, thus reducing the employer’s burden to provide benefits. These parking enforcement officers cannot afford health insurance. Yet the city hopes to hire a new Deputy Director for Traffic and Parking at $100k? Does that formula sound like something good for families? Is the notion to create a poor class of people that live in subsistence to social programs?
Oh, and what happened to the development of a conference center at the old Coliseum space, currently in use as a parking lot? Or, what happened to the addition of parking facility at Union Station?
When we look at the problem of being in the red it never seems that there is a master plan for the city that serves as a baseline. All we ever get is rhetoric, tree planting, electioneering hub-bub and schools, schools, schools.
After you sell off the parking facilities in New Haven, will you then sell off the schools?
Is Karl Rove the mayor and the BOA?
posted by: parejkoj on November 21, 2012 4:15pm
Has anyone made a summary of the city’s revenue and expenditures? I know I can download a slew of PDFs from the city’s budget and finances page, but that’s more detail than I want. Some kind of grand overview, like the pie-charts you always see for the federal budget[2,3], but with a bit depth. If this already exists, could someone please point me to it?
It’s hard to comment on the city’s finances without having some data in hand. Has the Indepdendent done an analysis like this? If not, I think that would make for a great series of articles! It would also help show whether the current problems are due more to the ongoing recession—which decreases taxes and increases transfer payments—poor long term planning, etc.
posted by: ElmJackCity on November 21, 2012 4:50pm
@parejkoj: Education is the elephant in the room, followed closely by debt.
posted by: abg22 on November 21, 2012 5:11pm
I think Vin Petrini said yesterday at the Downtown Wooster Square Community Management Team that due to the merger Yale-New Haven would be increasing its voluntary “tax” payment by about $1 million.
posted by: Anders on November 21, 2012 5:58pm
I find it interesting that Perez, Hausladen and Elicker all voted for $50 million in bonding for three new schools earlier in the year, but are now panicking over the budget. I also find it interesting that this story does not include the $1,000,000 for litigation settlement and the $2,500,000 for reduced property tax mentioned in earlier stories. Add these in and it’s a $12 million hole. DeStefano never increases taxes in an election year. So what’s it going to be. 200 layoffs now or a mil rate of 80 in 2014. The only certainty is the $150,000 a year mechanics and the $100,000 a year cops will still be around.
Another issue I’ve heard way to much about is the only way to save the city is by building a new trolley line. There was a bus that looked like a trolley car that circled downtown that was always empty. It finished ten years ago when some genius at city hall realized it was a waste of money.
posted by: cedarhillresident! on November 21, 2012 9:28pm
Every year the mayor does his pie charts. This was last years
http://www.cityofnewhaven.com/uploads/FY 2013 Mayors Budget for Website.pdf
Only difference this year is we have less money and more debt. But this at least give you a basic break down. But I look at the city budget like an English muffin ...tons of nooks and cranny were stuff is hidden.
posted by: Threefifths on November 21, 2012 9:34pm
To the union haters.Which union was elected to the BOA.Last I looked all democrats got elected to the BOA.Second Blame the career politicians that you kept voting in office.Push for Term Limits and Proportional Representation anfd you will not have this problem.
posted by: jeffreykerekes on November 22, 2012 9:19am
The first link of yours has a good deal of official information on the City’s finances. Not all of it is quick and easy to understand. The City’s budget has pie charts but they do not tell the entire financial picture. The best place to start, although a little dense in places, is the Bond Offering Statements - these are the official documents that must share the City’s financial picture with the bond market before we can sell bonds. There is a great deal of information in there. With patience (and a spreadsheet), you can get a better picture of where we are. Here is a link to the bonds sold over a year ago. There must be a newer offering statement but it’s not on the page you linked to. You might need to search financial sites for it if you want the latest or ask the City’s Controller’s Office. Here is the link to last years: http://www.cityofnewhaven.com/Finance/pdfs/2011B.pdf This year’s bonding efforts was for about $70MM (I forgot the exact number).
Another resource, is to look through http://www.nhcan.org that attempted to summarize this information in an easier to digest form. Near the top, are link to two reports looking at a gap analysis - the growing gap between revenue and expenses. These projections are frightening.
The biggest issue is keeping up with not only the growing costs each year, but adequately funding our liabilities (promises to employees for pension and healthcare in retirement).
I hope that helps you learn more.
posted by: Stephen Harris on November 23, 2012 1:08am
No one who works in urban planning pays any attention to Randal O’Toole. He’s an apologist for sprawl.
In urban areas the goal is to move as many people as possible using the least amount of space. Cars are nice, I own one but they are not an efficient way to move people in an urban environment. Streetcars are a good low tech solution to urban mobility.
posted by: Stephen Harris on November 23, 2012 1:25am
I think we, as a city and nation, are at a crossroads. Our economy is predicated on endless and inexpensive energy, is driven by an out-of-control finance system, and slavishly adheres to globalization.
None of that is sustainable. Fossil fuel is finite, finance needs to go back to capital formation, not speculation, and globalization is time-limited.
We need a new economic model that isn’t based on the fallacy of endless growth. I think a national industrial policy based around regional and local production is needed to bring jobs home.
This is a huge undertaking but I don’t think there’s any choice. Events always drive change. We should take the blinders off have some foresight and do our best to get ahead of the curve.
posted by: Noteworthy on November 23, 2012 11:39am
The BOA - prior years and the recently union re-configured version along with the mayor including those individuals quoted in this article have all been told and heard public testimony for years about the dangers of a rising tide of debt, unpaid obligations to pension/health funds and a bloated operational budget stuffed full with 5,000 employees manning programs and initiatives of questionable value and unaccountable results.
The mayor has used one-off revenue events and an annual beg-a-thon to get Yale and YNH to prepay permit fees, buy slivers of land, parking lots to balance the budget. One year, DeStefano took a surprise check from the state, months after the end of the fiscal year and backdated the event in order to claim the revenue for a past fiscal year.
All the advice and warnings were ignored, denigrated and diminished by limited testimony, cooked votes and deaf ears of politicians who were more concerned with sucking up vs. manning up. The result is this budget and a city who is essentially bankrupt.