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The Sky May Not Be Falling
by Paul Bass | Jan 25, 2013 8:08 am
Posted to: City Hall, City Budget
Crippling city budget deficit? What crippling budget deficit?
Such a deficit—as high as $11 million—has been looming over city lawmakers practically since this fiscal year got underway.
After months of hounding City Hall to slice that deficit fast and early, the lawmakers got an almost-rosy report this week: The projected deficit has shrunk to $1.9 million. And counting.
In fact, the city’s counting on some as-yet untabulated savings and new revenues to wipe away that deficit altogether.
Those cautiously optimistic reports emerged at City Hall Wednesday night at the monthly meeting of the Board of Aldermen’s Finance Committee.
Some of the reports were based on speculative or vague documentation. But after the fiscal sky appeared to be falling, the outlook may have shifted to sunnier, or less threatening, weather.
The aldermen swung into action last fall after city officials presented alarming early reports on projected cost overruns, including more than $1 million in projected police overtime; and projected revenue shortfalls. Millions of expected dollars, it appeared, wouldn’t be coming in. Based on the rate the city was overspending and undercollecting, absent any dramatic action, some analysts estimated the deficit hitting $8.5-$11 million by the time the fiscal year ends June 30.
That would create a crisis. New Haven no longer has the money to cover any sizable deficit; it has raided its rainy-day fund, which now stands at only about $1.8 million.
In previous years the city administration waited until the end of the fiscal year to disclose a deficit, presenting aldermen with limited last-minute choices. So, when the bad news started coming in last fall, the Finance Committee held up an otherwise routine administration bonding permission request to demand an action plan and monthly progress updates. Click here, here, and here to read about some of that.
At Wednesday night’s Finance Committee meeting, budget officials returned with the new $1.9 million deficit projection—and lots of multi-million-dollar reasons they perhaps can wipe out the remainder.
The most solid figures came from Chief Administrative Officer Rob Smuts and Clayton Northgraves (pictured), who heads the civilian-run 911 emergency dispatch system for the police and fire departments.
Smuts reported that after the outrage expressed over mounting overtime, the police and fire departments have almost succeeded in returning to their approved budget levels. That happened in part through stricter management, in part (moving forward) through the promotion of 19 new sergeants as well as the hiring of new rookie cops. Finally, the fire department has delayed until next fiscal year seating a new class of recruits. That new class will cut costs long-term, but would have added up-front costs for training in the short term.
Meanwhile, Northgraves reported that his department wiped out a $400,000 projected gap. It did so in part by hiring two new supervisors, which reduced the need for overtime there. In addition, costly new training has been completed, and the city has learned it will receive more state and federal reimbursement than it expected for expenses incurred during Tropical Storm Sandy. Finally a new union contract with AFSCME Council 4 Local 884 contains sick-time and vacation changes that will save $150,000 a year, including $75,000 this fiscal year.
The more speculative—but equally important—part of the hearing concerned new revenues. The city has fallen several million dollar short of its original revenue projections for the fiscal year. In part that has involved less money in building permits; Yale, a major generator of those fees, delayed some major projects. The city had budgeted for $9 million in permit fees; the new estimate is $7.8 million.
Building Official Andy Rizzo (pictured) reported to the aldermen Wednesday night that in recent meetings Yale officials signaled they’re ready to resume building two planned new residential colleges. No guarantees, but it appears they may well start some of the work this fiscal year after all, Rizzo claimed. If so, that could produce several million dollars in more fees.
Meanwhile, though, Rizzo is keeping his fingers crossed that 100 College/Downtown Crossing construction will begin as planned before June 30.
He noted that two years ago the city brought in $11 million in permit fees. Then the recession hit harder, producing just $6 million last fiscal year. “I might as well go in the street and put a gun to people’s heads and say, ‘Take out a permit. The city needs money,’” he quipped in a conversation following his testimony. “It’s a numbers game.” But he predicted the numbers will begin improving.
The city also is counting on selling a surface lot and former narcotics squad headquarters at 10 Wall St. to a developer—another potential sizable deficit-plugger. (No new property appraisal has been done yet.)
On top of that, the city was closing a contract deal with the police union that should produce major health and pension savings in years to come, and some modest savings in this fiscal year.
That led the Finance Committee’s toughest questioner, board President and Hill Alderman Jorge Perez (pictured), to predict aloud that come next summer the “doom and gloom” scenarios may suddenly disappear from discussion—and “a surplus [will materialize] two weeks before the election.”
David Cameron wasn’t buying it. The Yale professor heads the Fiscal Review and Audit Commission, which produces independent reviews of city monthly financial reports. Wednesday night Cameron presented his commission’s review of the most recent city report, covering December.
He pulled back from his previous prediction of an $11 million looming deficit. But he predicted it could still hit between $2 and $7 million. He questioned, for instance, whether the city will realize $2.5 million in planned labor-contract savings; six contracts remains open, not counting police. Given state health spending cutbacks, he also questioned city officials’ predictions that they can squeeze more voluntary money out of Yale-New Haven Hospital in light of its acquisition of the Hospital of St. Raphael. He cast doubt on the expected $2.1 million in permit fees from 100 College and the hoped-for $700,000 in permit fees for the next phase of construction of new homes and offices at Science Park.
“It is reasonable to anticipate” that the deficit will no longer hit $11 million, Cameron concluded. “But it is also reasonable to anticipate that some of those revenues and savings will not be realized in full and that the deficit will be larger—perhaps substantially larger—than the deficit proposed” by new official estimates. In short, we’re not out of the woods, and the city needs to work harder on a more realistic action plan, he argued.
Tags: Fiannce Committee, city budget, deficit, Jorge Perez, Rob Smuts, Clayton Norgraves, Andy Rizzo, David Cameron
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Extreme caution advised. I would bet on the Audit Review Committee and David Cameron’s numbers because there is too much history, too convenient timing involved. Moreover, a preliminary review of the police contract makes it hard to believe there are significant savings this fy or future ones for that matter.
So basically, without the actions of the Board of Aldermen, the city would be in the hole?
Please please please remember this when election time comes. Don’t let City Hall claim responsibility for any surplus.
I’ll take listening to David Cameron over “its not so bad as we thought, so no worries.” It is like watching someone who owes five large to the sharks, that finds an old twenty in his coat pocket, and figures its all good.
What about our tremendous long term bond debt? What about when Yale finishes its historic re-construction jag? What about the still excessive property tax rates that are stifling growth and investment? Solving a one year $11M problem is just the tip of the iceberg.
HhE has it right. David Cameron has been right far to many times for me to not hear what he has to say!
This is like bullwinkle pulling a rabbit out of that hat!
And like robn said, this is just one year. we need long term plans. Not election year miracles
When one owes $60 million, one does not have a surplus until one has paid off that $60 million.
David Cameron’s stake is that of a resident of New Haven. The BoA’s stake includes spending on their pet projects, and telling all the voters how great they are. That, and the history lesson, kind of tells me where to put my trust.
As an aside, I find David to be very personable and sensible.
posted by: Christopher Schaefer on January 25, 2013 9:40pm
“David Cameron wasn’t buying it. The Yale professor heads the Fiscal Review and Audit Commission, which produces independent reviews of city monthly financial reports.” And what is that Commission, you wonder? From the city’s CHARTER, ARTICLE XI. - BUDGETARY PROCEDURES; REPORTING; FINANCIAL REVIEW AND AUDIT COMMISSION: Sec. 63. “There shall be in the city a nine-member financial [not fiscal] review and audit commission… not fewer than seven members shall have training and experience in financial matters as evidenced by being a certified public accountant, having earned a bachelor’s degree in business or public administration, having not less than five years service as the financial officer of a business, having not less than five years service as a public administrator, or having a similar degree or experience.” So I trust they know of what they speak. http://library.municode.com/index.aspx?clientID=14668&stateID=7&statename=Connecticut
posted by: streever on January 26, 2013 1:15pm
I’m glad the Mayor’s staff is being less obstructionist this year compared to previous years in reporting the actual finances of the city.
I’m going to keep my faith in Cameron’s take on things, however. Well said, Hhe.