Thomas Breen photo
The full Board of Alders on Monday night.
Just two weeks after the city was downgraded by two different credit rating agencies in part for using restructured debt to fund normal operating expenses, alders voted to use $10 million in restructured debt to fund shortfalls in the past fiscal year’s normal operating expenses.
At a meeting Monday night in the Aldermanic Chambers on the second floor of City Hall, alders unanimously voted to transfer the $10 million from last fiscal year’s debt services budget towards closing deficits in the police, public safety communications, parks, workers’ compensation, and youth services finances for the fiscal year that ended June 30.
The ordinance amendment to Appropriating Ordinance #1 for Fiscal Year 2017-2018 (FY18) was submitted by Acting Budget Director Michael Gormany back in May in anticipation of $10 million worth of deficits in the five different areas of the city budget.
The city actually ended the fiscal year with an $11.5 million general fund deficit.
However, this $10 million transfer will not reduce that $11.5 million overall deficit, city spokesperson Laurence Grotheer told the Independent.
That’s because the $10 million being transferred had already been accounted for as debt service “savings” in the city’s June 2018 monthly financial report. Those “savings” are now being applied to various department accounts that ended last year in the red.
“It was a money transfer for FY18,” Grotheer said, “but it was to resolve individual department accounts as part of the process to come up with a final [general fund deficit] number for the year end.”
The transfer allocated $2.9 million to the police overtime budget, $2.8 million to the fire overtime budget, $2.9 million to the fire salary budget, $450,000 to the other contractual services line of the youth services budget, $250,000 to the public safety overtime budget, and $700,000 to the workers’ compensation line item in the employee benefits budget.
The proposed amendment notes that $10 million could be taken out of the debt service line item because “Debt Service is projected to be under budget for FY2017-18 due to the August 2017 refunding/restructuring.”
That August 2017 refunding freed up roughly $31.8 million in the FY18 city budget by scooping up some of the year’s existing required debt payments and tossing them a decade into the future.
The city wound up paying only $28.1 million towards its debt service last year, which is around $38 million less than the $66.4 million budgeted for debt service before August’s refunding.
Last fiscal year’s “scoop and toss” of $31.8 million, as well as this current fiscal year’s refunding of $160 million in existing debt, helped earn the city downgrades from the credit rating agencies Standard & Poor’s (S&P) and Moody’s, both of which criticized the city’s financial management for covering general operating expenses with debt.
Downtown Alder Abby Roth: Keep the city “fiscally responsible.”
Although she ultimately voted for the transfer along with the rest of her colleagues, Downtown Alder Abby Roth said the alders should not encourage the city to keep up this practice of paying for general operating expenses with debt.
“The administration has a practice of counting money received from refunding and restructuring debt as revenue in the operating budget,” she said. “FRAC [the independent Fiscal Review and Audit Commission] has warned that debt should not be used for operating expenses and that the budget should be balanced without such gimmicks. This is because refunding and restructuring debt increases the city’s debt burden in the long run on top of imposing significant transactional costs on the city.”
She praised the alders on the bond commission for pressuring the city to commit to putting together five-year financial plans going forward. But, she said, that promise doesn’t excuse existing bad behavior.
“As this request shows,” she said, “the administration has not followed through on its one-year budget plan and so going forward we as a Board of Alders must use our power to control transfers to ensure that they act fiscally responsible.”
Click on the links below to read other stories about the city’s structural deficit and ideas for closing it.
• Record Bond Sale OK’d; Discipline Vowed
• Like Hartford, New Haven “Scoops & Tosses”
• Fixing the Budget: Fire Choices
• S&P Downgrades City Credit Rating
• City Will Refinance Debt To Avoid Takeover
• S&P Downgrades City Credit Rating
• Mayor Open To Idea Of Fewer Top Cops
• City Ends Policy As It Begins To Pay Off
• Hey, Buddy, Can You Spare $30 Million?
And the Band Played On Notes: