Thomas Breen photo
Acting Controller Mike Gormany and Mayor Elicker: "Remarkable progress" on city's financial front.
Higher than expected property tax collections, building inspection revenue, interest rates, and city employee vacancies helped New Haven’s budget end last fiscal year more than $22 million in the black.
After the city sends roughly $15 million of that surplus towards a record police-misconduct settlement, that means the city can bank another $7 million-plus for a rainy day.
Mayor Justin Elicker and Acting City Controller and City Budget Director Michael Gormany delivered that fiscal news Tuesday afternoon during a press conference on the second floor of City Hall.
Elicker and Gormany said that the city’s finance team and auditors have officially closed the books on the fiscal year that ran from July 1, 2022 to June 30, 2023, also known as Fiscal Year 2022 – 23 (FY23).
That budget projected $633.1 million in general fund revenue and expenditures.
On Tuesday, Elicker and Gormany said that the city ended FY23 with a $22.2 million surplus.
Click here to read the end-of-fiscal-year pre-audit report in full. Tuesday’s announcement follows a $16.9 million surplus and credit bump that the city notched for Fiscal Year 2021 – 22 (FY22).
On the revenue side, some of the key drivers of the FY23 surplus included:
• $7.3 million more than expected in property tax collections. Elicker said that, by city charter, each year’s budget has to anticipate a property tax collection rate that is 1 percent less than the previous year’s. FY23’s actual collections exceeded that projection. He said the city also saw “a lot of residents pay delinquent taxes.”
• $5.8 million more than expected in interest income on, say, money that the city receives from the state in municipal aid that it parks in a bank account before spending on city services. The Federal Reserve raised interest rates from 2.25 percent to 5.25 percent over the course of FY23 as the federal government sought to curb inflation.
• $2.8 million more than expected in building inspection-related revenue.
• $1.8 million more than expected in real estate conveyance tax revenue.
And on the expenditures side, one of the biggest drivers of the surplus included roughly $5 million in salary savings because of the persistently high number of vacancies among full-time city budgeted employee positions.
Elicker said that the city currently has 231 vacancies among 1,407 full-time positions, including at the police and fire departments. “It is no secret that the city,” like cities across the country, has “a lot of vacancies,” Elicker said. “We obviously very, very much want to fill those vacancies, and are working hard to do so.” Nevertheless, the empty positions do translate to salary savings for last fiscal year.
On the flip side, the mayor continued, parking ticket revenue came in roughly $2 million under budget, and debt service payments wound up being $2.3 million higher than projected. Elicker and Gormany said that the FY23 surplus number also takes into account the roughly $6 million that was stolen over the course of several cyberattacks in May and June, more than half of which has been recovered.
All of those expenditure and revenue tallies for the fiscal year that was, he said, add up to a $22.2 million surplus.
But the accounting for New Haven’s FY23 budget doesn’t end there. Because, on Monday, the Board of Alders signed off on the Elicker administration’s proposal to transfer up to $16 million from the city’s FY23 surplus to cover the uninsured portion of the record $45 million police-misconduct-and-paralysis settlement that the city struck in June with Richard “Randy” Cox.
The city’s insurance is covering $30 million of that settlement; the city will be paying the remaining $15 million through surplus funds, plus up to $1 million more to cover an insurance-related deductible and legal fees.
At the end of the day, that leaves the city with roughly $7.2 million in its FY23 surplus.
Elicker said that money will go straight into the city’s fund balance, or rainy day fund, bringing that latter total to around $43.9 million.
“It’s very, very important to have a fund balance that is a good buffer if we face” fiscal challenges ahead, Elicker said. The best practice is to have a fund balance equal to around 16 percent of the general fund, which would translate to around $100 million, he continued. The city is “slowly working towards that number.”
Overall, he said, FY23’s surplus — plus the boost in aid that the city has received from the state and Yale, plus the city’s increased public employee pension fund payments and decreased expected rate of return for those funds, plus the city’s capping of new debt at no more than $30 million a year, plus the steady growing of the fund balance — all add up to “remarkable progress” the city has made on its fiscal front over the years. That’s especially the case when compared to the $66 million deficit the city projected at the start of 2021 thanks to many years of underfunding the city’s pensions. Since then, Elicker added, the city’s taxable grand list has grown from $6.6 billion to around $9 billion, thanks to lots of new construction as well as the latest citywide revaluation.
How would the city have spent the $15 million from the FY23 surplus if it did not have to transfer it to cover the uninsured portion of the Randy Cox settlement? New Haven Register reporter Mark Zaretsky asked during Tuesday’s presser.
“It would go into the rainy day fund,” Elicker replied.
While some people may see that $22.2 million surplus number and ask why that’s not being used to increase funding for the city schools, Elicker said, directing it into the fund balance instead is part of being a “good fiscal steward for the city.”
“Frankly, these kinds of surpluses we are not going to see in the future,” he said. “We have the fortune right now of” $115 million in federal pandemic-relief American Rescue Plan Act (ARPA) funds, which can be used to bolster city services and which will eventually run out. The city hopes to and plans to fill its many vacancies, which would eliminate associated salary savings.
“What’s important for this time period is that we put some of this money aside so that when we do face financial challenges in the future,” he said, “we have some funding so that we don’t have to cut services.”
Click on the video below to watch Tuesday’s press conference in full.
Am I understanding this right, that the $15 million is coming out of the city's general rainy-day fund, rather than from the police budget? That seems off. The police were solely responsible for that huge expense. Why is everyone else being made to shoulder the payment?
Just for perspective here -- the police budget for 2023-2024 is a little over $53 million. I realize $15 million is a pretty big chunk of that, but it's weird that the entire remaining burden is being spread across a fund used by the whole city, from elderly services ($900,000) to fire ($39 million) to transportation/parking ($4 million).
It seems like at the very least, the police budget should have to chip in at least SOMETHING. Or maybe they did, and I missed it?