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 Financial 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.