Council Diverts Pension Funds, Begrudgingly

In a heated special meeting Thursday evening, the Hamden Legislative Council voted to divert $108,000 from its pension obligation to fund fire fighter salaries — which, depending on whom you ask, was either a routine budgeting adjustment or was a symptom of a trend that has led to past budget shortfalls.

The transfer provides additional funds for the fire department’s sub/straight account that pays firefighters filling in for their colleagues who are absent because of injury or for other reasons.

Before Thursday’s vote, the account had $52,000 left of the $1.7 million originally budgeted, and without action would likely have run out next week.

ThoTthe transfer package originally included transfers to pay for gas, water, and street lighting. The council voted to split the package, creating two separate motions.

The council passed the fire department transfer in a vote of 10 – 3, with votes of no from Majority Leader Cory O’Brien, District 5 Rep. Justin Farmer, and Minority Leader Marjorie Bonadies.

The council voted to table the utilities transfers in another 10 – 3 vote, with no votes from District 9 Rep. Brad Macdowall, O’Brien, and District 1 Rep. Jody Clouse.

Council members said that they were upset about feeling compelled to divert money that was budgeted for the pension fund..

The transfer is only a temporary fix. As Council President Mick McGarry told the crowd at the end of the meeting, a much larger transfer from the pension line will come up at the May 6 council meeting.

The council’s decision will leave the sub/straight line funded until the May 6 meeting. Since the council voted to table the transfers to utility lines, those transfers will have to wait.

Despite shutoff notices because of overdue payments, Mayor Curt Leng said he is not concerned that the council had not passed those transfers. One of the shutoff notices — for the gas bill for a certain building — is for only $1,300; the account still has $15,000. The other is for the water bill at the town’s splash pad. Since the town does not turn on the splash pad until May, Leng said, that shutoff notice was puzzling. He said the deputy finance director is contacting the water company about it.

Routine? Major Problem?

An hour before the meeting, WTNH aired a story about the meeting on its six o’clock news. In it, Leng said that the town’s finances are in fine shape.

“Our fire department budget is sound. Our overall budget’s sound. We do not have a bill problem, an expense problem, and, uh, we’re in pretty good shape,” he said.

Multiple council members brought up the mayor’s TV remarks at the meeting, asking why they had to transfer money if the town is in good shape.

“Why are we being asked to underfund the pension if there is no problem?” O’Brien asked during the meeting.

“He needs to understand it’s not fine,” said District 2 Rep. Harry Gagliardi.

The mayor said that Thursday’s transfer was nothing out of the ordinary. He said it came simply as a result of individual expenses that ran higher than expected, which happens every year.

“There’s never been a year in the town’s history when transfers weren’t done,” Leng told the Independent. He said that every account is variable; some run over, necessitating a transfer into the account. He clarified that just because one account runs over does not meant the whole budget is inaccurate, because the budget is divided into accounts with specific purposes.

A crowd showed up to the meeting. Six people spoke in the public comments section, some questioning the choice of diverting funds from pension payments, some questioning why the town is spending as much as it is when it is in such a tight fiscal position, and all expressing concern for the town’s financial situation.

The main reason for Thursday’s meeting was an overage in the fire department’s sub/straight line. Fire Chief Gary Merwede said that he knew as soon as the budget passed that he was going to have to ask for more money for the account. He had submitted a request for $1.9 million, and the council’s approved budget only gave him $1.7 million for that line.

“I anticipated this transfer on July 1 because I was underfunded $200,000,” Merwede told the council.

Council members were quick to praise Merwede for his budgeting work and for his meticulous projections. Yet the sub/straight line will end up higher than the $1.9 million Merwede had anticipated because of an abnormally large number of long-term injuries. Merwede has estimated that his department will require an additional $480,000 for the sub/straight line to close out the fiscal year. 

Leng said that he was aware before the budget passed that the $1.7 million might not be sufficient, but that ​“if you give every department head every dollar that they ask for, then you’ll have massive tax increases every year.” He added that budgets in the past have often funded that line item lower than department requests and have covered overages later.

At Thursday’s meeting, many council members expressed varying degrees of frustration that the money must now be taken from the pension line.

Shortly after the fiscal year started, said O’Brien, ​“I had a conversation with the mayor where I said, ​‘I am 100 percent opposed to underfunding the pension.’” He said that when he voted for the budget, he voted with the idea that no money would be diverted from pension payments.

“The chronic underfunding of the pension is what has gotten us into this situation,” said At-Large Rep. Marjorie Bonadies. She said that instead, she would like to see the town spend less money.

Members of the public who showed up at the meeting and spoke during the public hearing also said they opposed underfunding the pension.

“I think it’s wrong for this council to take money out of what is supposedly for the pension fund,” said Robert Mordechai.

Council members said they would have liked to see other means of cost savings. At-Large Rep. Lauren Garrett said that at a meeting in October, she had requested the town start a hiring and a spending freeze.

At Thursday’s meeting, Bonadies proposed a motion to transfer funds from capital projects rather than from the pension obligation. That motion died quickly when another council member asked Galarza if that was possible and he responded with one word — no.

The budget contains an emergency and contingency account for situations like the one Thursday evening. Yet in the 2018 – 2019 fiscal year, that account had only $500,000. Leng said that he would have liked to see that account higher — closer to the $1 million or $1.5 million he said is normal.

He said that the town has implemented cost-saving measures, but that those measures were already factored into the budget in the union concessions and attrition savings lines. Since those cost saving efforts had already been budgeted, when accounts still went over, he had to go to larger accounts to pull funds. Those accounts, he said, are the medical line, the debt service, and the pension line. The town is obligated to pay debt service, he said, and the medical line some years has extra, but not always. So, the only choice was the pension.

He added that the town has already paid the amount that the state requires into the pension. As per state statute, in the current fiscal year, Hamden must pay 70 percent of its actuarially required contribution (ARC), the amount that it would have to pay to be on track to fully funding the pension. So far this year, the town has paid almost $16 million into the pension, which is 70 percent of its ARC. He said that amount is the second highest pension payment the town has ever made. He said that he thinks the town will be able to put more into the pension, though he could not say how much.

As Macdowall pointed out, however, the town is required to pay 70 percent of ARC this year. That’s because the state passed a statute that gave Hamden a break last year when it had to divert funds from the pension obligation to close a budget shortfall. According to the old statute, the town was supposed to pay 100 percent of ARC last year.

Council members also said that when they passed a budget that funded the pension at 100 percent of ARC this year, they intended to make good on that commitment.

“It is not conscionable to me to vote for a transfer when we all said: stay within this budget,” said District 5 Rep. Justin Farmer.

Council members have also said that using the pension line in the budget to fund operating expenses simply allows the town to avoid making tough decisions that will help the town in the long run.

“Tough decisions have to be made, and [underfunding the pension] is just avoidance of tough decisions,” said O’Brien. 

Blurred Communications, Unexpected Urgency

O’Brien said that when he found out about the meeting on Tuesday, he was not aware of how urgent the transfers were.

The transfers submitted for Thursday’s meeting were a stopgap solution to get the town to the next council meeting, when a much larger transfer will happen. A much larger transfer had already been submitted to the council, but never ended up on an agenda.

In March, the administration submitted a transfer request to the council for $2.1 million to be diverted from pension payments. As Deputy Finance Director Rick Galarza told the council Thursday evening, that $2.1 million was his best estimate of the total amount the town would need to transfer to various line items to cover expenses that went over budget to finish up the fiscal year.

The $2.1 million transfer package was originally supposed to appear on the April 1 council meeting agenda, but it did not. Leng said that he does not know why it didn’t appear on that agenda.

“The administration didn’t pull the item,” he told the Independent.

O’Brien told the Independent that it did not end up on the council agenda because council members had asked whether it would be the last transfer from the pension line, or whether there would have to be more later. He said that council members had told the administration that they wanted to do the transfer in one swoop and that the numbers therefore needed to be accurate. The reason the item did not appear on the April 1 agenda, he said, was that council members had asked for surety that the $2.1 million was accurate before they voted on it.

District 8 Rep. Jim Pascarella also said that at a meeting six to eight weeks ago, council members sought to ​“make sure the finance department had the right numbers so we could do [the transfer] once.”

Pascarella said that a lack of communication between council leadership, of which he is not a part, and the administration had resulted in the transfer not ending up on the agenda. 

The administration then submitted a series of smaller transfers that would get the town through a shorter period of time until the council could pass the larger transfer. Many council members, including O’Brien, Macdowall, and Farmer, have said the administration did not make them aware that those transfers were as urgent as they were.

“What’s happening is the council was never informed of the urgency of any of these transfers,” said O’Brien.

Pascarella said that, though no council members were aware of the shutoff notices, they were aware that the fire department’s sub/straight account was low and that a transfer was going to have to come out of the pension obligation. At the meeting, he said he regretted that some people on the council felt that they had been ​“left in the dark.”

“I think we’re in a situation where communication between the council and the administration needs to be more formal on both sides of government,” he said.