Thomas MacMillan File Photo
A groundbreaking at the John C. Daniels School.
Thanks to a last-minute $11.2 million reimbursement from the state for two school construction projects, the city ended last fiscal year in a surplus, Mayor John DeStefano announced Tuesday. Meanwhile, aldermen gave the OK for the city to borrow money to pay off a $5 million settlement in the Ricci firefighters reverse discrimination case.
The city was staring at a $5.5 million deficit at the close of the 2010-11 fiscal year when it got an unexpected check from the state, DeStefano said. The $11.2 million check repays the city for two school construction projects dating back over a decade: John C. Daniels, which opened in 2006 on Congress Avenue; and Conte/West Hills in Wooster Square, which was completed in 2000.
DeStefano said the city will use the money to pay down last year’s deficit — and correct a bookkeeping irregularity that auditors, bond rating agencies and city finance staff have long sought to correct.
The net result is that the fiscal year that ended July 1 carried a $700,000 surplus, DeStefano said. That money will go into the city’s rainy day fund, which will be used for emergency expenses, such as hurricane-related costs that may not get reimbursed by the federal government.
The reimbursement for Daniels and Conte schools had been a big X factor in last year’s budget. The city originally counted on getting $2.6 million for those projects, then revised that estimate to zero when the state changed its reimbursement schedule.
Will Clark, the school district’s chief operating officer, said the two projects date back to a different era of the city’s $1.5 billion school construction project, when the state paid back the city on a different schedule. For projects before 2003, the city had to bond out for the entire cost of the project, and was then repaid over the course of 20 years.
“We knew we were going to get that money back some day” for Daniels and Conte, Clark said, “we just didn’t know when or how much.”
Reached by phone Tuesday, DeStefano said the city will seize the opportunity to correct a long-running accounting irregularity regarding state grants from the Payment In Lieu Of Taxes program, which reimburses cities for non-taxable land. Those checks come in October of every year, DeStefano said.
The irregularity was that every year, the city would apply the check it gets in October to the prior fiscal year’s budget. Every other check gets deposited in the fiscal year in which it is received, DeStefano said. He said thanks to the $11.2 million windfall, the city will now take October’s PILOT check and attribute it to the budget for fiscal year 2011-12, creating a healthier accounting habit that has been recommended by auditors, bond rating agencies and city finance staff.
Thomas MacMillan Photo
Alderwoman Clark.
Downtown Alderwoman Bitsie Clark, vice-chair of the Finance Committee, spilled the beans to the Board of Aldermen at its regular meeting Monday night in City Hall. She announced that the city got a big check from the state for school construction reimbursement, but she didn’t know how much.
The recent windfall has nothing to do with the $18 million in ineligible construction costs included in this year’s capital budget.
City Off The Hook For Clinton Ave. School
In related news, the state legislature may have saved New Haven from millions of dollars in potential school construction costs related to future audits, according to state Sen. Martin Looney. Looney said schools Superintendent Reggie Mayo approached him at the beginning of last legislative session about a potential new bill the city may have faced if the state didn’t change the way it ran school construction audits for the Clinton Avenue School.
As part of the state’s school construction program, the state agrees to pay a large portion of municipal school construction projects based in part on projected student enrollment. If the city doesn’t pull through with that projected enrollment, it may be on the hook for millions of dollars.
Looney said he worked with state Sen. Toni Harp and state Rep. Toni Walker, both of New Haven, to save New Haven from that fate.
The New Haven delegation slipped the following language into a lengthy implementer bill that was part of the state’s budget.
P.A. 11 – 57 Sec. 110 specified that “the town of New Haven shall not be responsible for returning any portion of the grant already paid to the town prior to the effective date of this section based on the enrollment figure of six hundred eighty for the renovation project at Clinton Avenue School (Project Number 093‑0344 RNV) and the Department of Education shall not be responsible for making further grant payments to the town based on said enrollment figure.”
The total cost of the Clinton Avenue School was $37 million, according to state education spokesman Mark Linabury. He said the impact of the bill on that project is not yet known.
Looney and co. also worked on language in a 285-page implementer bill that clarifies the way the state grants waivers to cities for ineligible school construction costs. The bill grants the state’s new school construction czar greater flexibility to “waive any audit deficiencies found during an
audit of a school building project” if the commissioner decides such a waiver is in the best interest of the state. The past education commissioner argued that he didn’t have the power to make such waivers, sending the city to ask the state legislature to write laws to grant waivers on individual projects.
That bill should protect the district from potential negative findings in audits down the road, according to Will Clark.
City To Bond Out For Ricci $$
Also Monday evening, the aldermen passed a measure that gives the city the option of issuing tax-exempt municipal bonds to pay for some or all of the $5 million dollar settlement that in July marked the end of the Ricci v. DeStefano case. That’s the case in which 20 New Haven firefighters argued the city was unfairly favoring African-Americans after it threw out the results of a 2004 promotions exam. The case ended up in the Supreme Court, which ruled for the firefighters, known as the New Haven 20. In July, the city came to a settlement in which it agreed to pay $5 million to the firefighters and their lawyers.
The first portion of that money — $2 million — has already been paid, said Victor Bolden, the city’s corporation counsel, before Monday aldermanic meeting. The remaining $3 million will be paid next August, he said.
The first $2 million came from a line item called the “public liability fund” in this year’s budget. Where the rest comes from will be determined during the budget process for the next fiscal year.
After Tuesday night’s aldermanic vote, the city now has the opportunity to bond for that money, or to recover the $2 million it’s already spent.
“By doing this declaration of intent, it gives us the flexibility to be able to bond for the full amount,” Bolden said.
The final decision to issue bonds would still require aldermanic approval.
“Obviously we have to pay the bill,” said West Rock Alderman Darnell Goldson. “I don’t know if this is the best way to pay for it.”
“Bonding any expense is part of budget deliberations,” said Westville Alderman Greg Dildine. The board will have to look at where it makes sense to find the money to pay the Ricci bill, he said. It might be best to take from the general fund, or it might make more sense to bond for it, he said.
The city’s self-insurance fund — whence the Ricci money might otherwise come — already has a deficit, Perez said after the meeting.
Asked if he thought it would be a good idea to bond for the Ricci payment, he said he’d prefer that to raising taxes, if it came to that.
The city needs to put all options on the table, said Perez.
Procuring architects, engineers, construction managers and program managers based on skill and qualification not campaign contributions would help alleviate this problem in the future.
What about CO-OP, that school went way over budget