Hamden Council Plays ​“Hard Ball” To Get Deficit Projection

In a series of unanimous votes Thursday evening, the Hamden Legislative Council tabled three legally required financial transfers in order to send a message loud and clear to the mayor’s administration: Tell us if there is a deficit, what it is, and the plan to fix it.

The council considered three transfers to pay for the town’s bills.

One would have taken $50,000 from the fire department’s regular salaries line and used it to pay for holiday pay.

Another would have taken $62,550 from an ​“emergency and contingency” account and used it to pay for accrued benefits.

A third would take $130,000 allocated for a long-term savings account for other post-employment benefits (OPEB) and used it to pay legal bills.

The town is legally obligated to pay for the expenses in all three transfers, either by union contracts, or by contracts with outside entities.

But on Thursday, the council voted unanimously to table those transfers because, members said, they want a plan from Mayor Curt Leng’s administration that shows where the current fiscal year’s budget stands, how much of a deficit there is, and what the plan is to close out the fiscal year.

Council members have been asking for such a plan for months. On Thursday, they sent that message with a little more force.

Councilwoman Valerie Horsley set the tone of the meeting off the bat by voicing a position that one by one the rest of the council echoed.

“We have continuously asked for a plan, and we still don’t have a plan. We still don’t know how much deficit we are in and I don’t feel comfortable transferring any money in this budget until we have a plan,” she said.

Her comment came after Council President Mick McGarry spent nearly an hour reading close to 90 emails from residents urging the council not to pass any transfers until the administration provides a report on the town’s deficit and how it plans to mitigate it. Many cited the work of Christian McNamara, a private citizen who has spent the last few months digging into the budget and crunching numbers to educate residents about the town’s financial situation.

“We had a FY20 potential deficit [we] have been working to close the gap on and it’s gotten larger,” Leng wrote to the Independent. ​“This is no secret and no surprise to anyone. Now, to strain things far further, the pandemic the State and Nation is facing is affecting the economy in ways which haven’t been seen in 100 years. Every local government is struggling. Our community is not magically unaffected by it.”

He said the town has had a hiring and spending freeze since January. ​“Regarding the financial challenges,” he wrote, ​“we will keep working on every front to close gaps in our revenues, despite the challenges, and do it in a way that does right by our taxpayers.”

Waiting For Go…deficit (Report)

In April, Finance Director Curtis Eatman (pictured) told the Independent that even before the Covid-19 crisis, the town was projecting a shortfall of a few million dollars.

As McNamara showed in a report he compiled about the mayor’s proposed 2020 – 2021 fiscal year budget, department head projections about end of year expenses and revenues as of February appear to show a projected shortfall of $11.8 million. That number, however, was calculated using projections in the proposed budget that the administration provided just to give context. Not every line in the proposed budget shows a projection for the current fiscal year, so those lines are not entirely reliable.

Some council members said they have known since the budget first went into effect that there would be a shortfall somewhere to the tune of $11 million.

Councilwoman Marjorie Bonadies said it was clear from the beginning, based on the expense and revenue projections in the budget (which was the budget Leng originally proposed to the council, since he vetoed the council’s amended budget). Former Majority Leader Cory O’Brien said that at the time, council members knew there would be anywhere from a $9 to $11 million deficit, ​“best case scenario.”

As McGarry put it, ​“I think we knew that there were revenues that would be difficult to achieve in the current fiscal year budget from the beginning.”

Of course, no past estimates anticipated the damage the pandemic may do to the town’s finances, in particular, its revenue stream. New Haven Mayor Justin Elicker recently reported that New Haven is facing a $15 million projected deficit, mostly due to a drop in revenues from the pandemic.

Council members said they had anticipated a deficit in last year’s budget as well. Indeed, revenues ended up coming in about $5.4 million short, but the town still managed to avoid a deficit by finding expense savings. It achieved a large chunk of those savings by funding the town’s pension plan by $6.7 million less than it had budgeted for, which results in higher future pension payments.

This year, calls for a plan for closing out the fiscal year began in the winter. Then Acting Finance Director Myron Hul said he would work on one.

At the last in-person meeting before the pandemic on March 14, the council passed a few large financial transfers. Council members said that for future transfers, however, they would need to see a report on the town’s financial situation and the plan for closing out the fiscal year.

It was the same day the council confirmed Eatman’s appointment as finance director. He had been on the job for less than a month. Eatman said he would get a report to the council soon.

Thursday’s meeting was originally scheduled for Monday, and the report was supposed to come then. But the meeting was rescheduled to Thursday, and there was no report from the administration on how the town would close out the fiscal year. Eatman did report that the town is projecting that it will be $1.7 million short on funding for its payments into the state-run pension plan of which it is a part, the Connecticut Municipal Employees Retirement System (CMERS).

Since Eatman came to Hamden and Deputy Finance Director Rick Galarza returned after a few months away, the town has published monthly reports on its website that show the status of every line in the budget (click here to view the March 2020 report for expenses, and here for revenues). The council had gotten those reports before, but they had stopped for a few months before Eatman and Galarza came.

Those reports, however, do not include projections for the rest of the fiscal year, which are required to calculate a projected deficit. Leng initially pointed to those reports when asked about the council’s request for a plan. Those reports do not provide the information the council is looking for, said McGarry and other council members.

Projecting the town’s year-end position, said Eatman, is like trying to hit a moving target. It requires information from previous years, and anything the administration reports too early may not be accurate.

“The Clarion Call”

Without the overview of the town’s financial situation and the comprehensive plan to end the fiscal year that they had asked for, many council members said they could not pass the transfers.

“I don’t understand how I can approve these transfers because I don’t understand how much money we have,” said Councilwoman Kristin Dolan. Eatman told her that at the next meeting, there would be a conversation about cashflow.

“Well, I guess that’s when we can approve transfers,” she replied. ​“I just don’t understand how we can put the cart before the horse here.”

The council did not reject the transfers. Rather, it tabled them. Still, it is legally required to pay for the expenses they would cover.

“I will not allow the town to be put in jeopardy by not making any transfers,” McGarry told the Independent.

If any transfers must take place before the next council meeting, the council will hold a special meeting.

By tabling the transfers, council members said, they wanted to send a message.

“The only way to get this plan is to play a little hardball with the numbers here,” said Councilman Austin Cesare.

His fellow Republican, Bonadies, echoed him later in the meeting. ​“If the only way to get the information we need is to play hardball, then so be it,” she said. 

The evening differed drastically from a series of meetings that took place last year around this time to pass a few controversial transfers.

Then, the council was split. Some council members, led by Cory O’Brien, took a stand to oppose the transfers because they would involve underfunding the long-term obligations that are responsible for the town’s tough financial position in the first place. Those transfers paid for utility bills and overtime expenses with money that had been budgeted for payment into the town’s pension, which has been chronically underfunded. O’Brien, and others, had criticized the administration for crafting an unrealistic budget that would end in shortfalls and require the town to underfund its pension again. They also frequently called for a comprehensive plan for how the town would dig itself out of the deep financial hole it was (and is) in.

It took three meetings to pass the transfers (read about that here, here, and here), and all three went late into the night, with tempers flaring and council members lobbing accusations at each other.

The situation then was different. The main issue at stake was the fact that transfers would have to come from funds that were supposed to go to the pension.

On Thursday, the town could not turn to the pension, since it budgeted the exact amount it is legally obligated to pay in this year, so no funds are left over to fund other expenses. The town now has fewer places to look for extra cash to pay its bills. Eatman said the places the administration had proposed to transfer money from are really the only options at the moment.

“There are no other places,” he said. ​“The wells really have dried up. We have to start making really tough decisions. We are going to find the money to pay our bills. But there are going to be some tough decisions.”

Despite the now even trickier situation of the town, or perhaps because of it, the council was mostly unified on Thursday. ​“It was a 1960s love fest compared to other meetings,” joked McGarry.

Eatman said he had gotten the message. ​“I heard them, and I know the mayor has heard them, and I know there will be a response,” he said, to ​“the clarion call, which I heard loud and clear.”