Projected City Deficit Drops To $7.8M

The city anticipates ending the last fiscal year with a $7.8 million deficit — a projected budget hole nearly half as large as that predicted last month, thanks in part to pandemic-induced revenue shortfalls coming in better than expected.

That latest projected deficit number is included in the city’s June monthly financial report.

The report was published on Tuesday. It covers all city revenues and expenditures through June 30, the final day of Fiscal Year 2019 – 2020 (FY20).

Those end-of-fiscal-year numbers are not yet final. The city is still in the midst of a ​“financial close-out period” that ends Aug. 31, according to a summary at the top of the report.

The June numbers offer the most up-to-date and comprehensive view yet of how city finances fared during a fiscal year that saw widespread economic shutdowns and the pausing of non-essential city services during the ongoing Covid-19 pandemic, as well as relatively little unrestricted federal aid made available so far for city and state governments to use to cover their losses.

This $7.8 million projected deficit is ​“yet another reminder of the financial crisis our city is in that has been exacerbated by Covid-19,” Mayor Justin Elicker (pictured) told the Independent in a phone interview Thursday afternoon.

“There’s a very strong need for our partners to step up,” he continued, meaning more money to the city from largely tax-exempt institutions like Yale University and Yale New Haven Hospital, as well as increased taxation statewide targeted at racially and economically segregated suburbs.

Elicker said that the city will pull from its $15.7 million fund balance surplus — aka, its rainy day fund — to cover the projected $7.8 million shortfall.

That rainy day fund is so large in part thanks to the previous mayoral administration’s ​“scoop and toss” of existing debt in August 2018, which reduced short-term debt service obligations and increased longer-term costs for the city.

Elicker pointed out that the projected deficit included in the June report is over $5 million less than the $13.3 million deficit eyed in the city’s May financial report. It’s also quite a bit smaller than the $15.3 million deficit predicted back in March towards the beginning of the pandemic.

The mayor credited the rosier financial outlook, relatively speaking, to the city’s recent reopening of the tax office at City Hall as well as to the resumption of parking meter enforcement downtown.

From the May and June reports, the projected deficit for building permits dropped from $3.3 million to $2.3 million, the projeted surplus for property tax collection increased from $1.4 million to $2 million, and the projected deficit for parking meter revenue collection dropped from $1.8 million to $1.6 million.

Elicker also noted that, on the expenditures side, the Board of Education’s projected deficit fell from $2.9 million to $1.4 million, the police department’s projected surplus rose from $1 million to $1.8 million, the contract reserve budget line’s projected surplus increased from $400,000 to nearly $1.3 million, and the fire department’s project shortfall fell from $1.2 million to $1 million.

“The main driver was personnel savings,” Elicker said. He said those savings resulted in part from the dozens of currently vacant positions he and the alders cut in the fiscal year budget that went into effect July 1. Knowing that those cuts were coming, he said, city departments did not hire to fill them last fiscal year.

“The budget office also worked very hard to reduce the non-personnel expenditures,” he said. ​“That led to a savings of around $2 million.”

In June, the state projected that cities and towns across Connecticut have experienced a cumulative revenue shortfall of over $400 million so far during the pandemic, as well as tens of millions of dollars of new expenses.

$555.8M In Expenditures; $548M In Revenue

A summary at the top of June report notes that large-scale economic shutdowns and paused non-essential city services during the Covid-19 pandemic have led to a steep drop in the collection of certain forms of revenue.

Parking meter receipts are expected to come in $1.6 million under budget. Parking tickets are also expected to come in $1.6 million in the red. And building permits are expected to be ​“deficient of budget” by $2.3 million.

“The potential impact of the national, State and City response to COVID-19 to date, and the continued spread of COVID-19 and the national, State and City response thereto, cannot be predicted,” the summary reads, ​“but could have a materially adverse effect on the economies of the State and its municipalities.”

Not every revenue shortfall is directly related to Covid. The city’s $4.9 million ​“Revenue Initiative” line — an ambiguously defined section of the budget that is often used as a placeholder for hoped-for money from the state, Yale University, and Yale New Haven Hospital — is slated to come in at $0 realized for FY20.

Elicker noted that his administration inherited the FY20 budget six months into the year, and that he has been critical of the alders and the previous administration of leaning on that line for revenue that does not always come in.

While the report shows city revenue coming up short by over $8.5 million for the fiscal year, it also shows that overall city general fund expenditures are projected to come in at $800,000 lower than originally budgeted.

The report’s summary identifies that the city’s overall medical expenditures as $6.7 million less than last year. ​“This is primarily related to COVID 19 and the City having to pay less claims in the FY,” the report reads.

It also notes that workers compensation payments are slated to come in $1 million less than the previous fiscal year.

When comparing the May and June monthly financial reports, the city’s projected overall general fund expenditures for the year dropped from $558.5 million to $555.8 million, and the city’s projected revenue for the year increased from $545.2 million to $548 million.