City of New Haven
The city plans to dip into its $15.7 million rainy day fund to cover the cost of this fiscal year’s pandemic-exacerbated deficit, which is currently projected to be over $13 million.
That latest deficit projection is included in the city’s May 2020 monthly financial report, which was published on Sunday.
The report indicates that the city will likely end the current fiscal year $13,322,520 in the red.
Today is the last day of Fiscal Year 2019 – 20 (FY20). The newly published financial report covers city finances through the end of May.
Mayor Justin Elicker told the Independent Tuesday that the city plans to pull from its roughly $15.7 million rainy day fund to make up for the shortfall.
“We will be dipping into the fund balance this year and will be working to rebuild that fund balance down the road,” he said. The mayor also said that the actual end-of-fiscal-year deficit could be less than $13.3 million, considering that the Board of Education’s projected deficit has come in lower than previously expected.
The city has been eyeing a steep projected deficit since March, when the Covid-19 pandemic and concomitant economic shutdown caused revenues from building permits, parking meters, parking tickets, and property tax collection to plummet.
In that month’s report, the city projected it would end the fiscal year with a $15.3 million deficit, up from a $6.6 million end-of-fiscal-year crunch projected by the city in February, before the public health crisis hit.
Thomas Breen photo
Mayor Elicker introduces his FY21 proposed budget in March.
Elicker said Tuesday that the city has limited options when trying to make up for the pandemic-induced lost revenue. New Haven’s not alone on that front. State and local governments across the country are staring down significant deficits caused by pandemic-induced lost revenue that the federal government, so far, has been reluctant to help make up.
The $3.5 million boost in Community Development Block Grant (CDBG), Emergency Solutions Grant (ESG), and Housing Opportunities for Persons with AIDS (HOPWA) funds that the city has received from the federal CARES Act can only be used for specific Covid-19 related costs — including homelessness prevention and testing site construction.
And the $8.5 million that the Board of Education has received from the CARES Act can only be spent on certain focus areas, like technology for distance learning, supplemental programs to decrease learning gaps between students, and mental health support.
Elicker said the city plans to issue Tax Anticipation Notes (TANs) this summer to help cover the cost of late property tax collection thanks to the state-mandated, city-adopted property tax deferral program that extends through October for eligible applicants. That low-interest borrowing is only meant to help with expected cash flow concerns at the start of the fiscal year, he said, and will not be used to plug FY20’s projected deficit.
“The point of having a buffer from year to year” is to dip into it during tough financial times, Elicker said about the reason for tapping the $15.7 million rainy day fund.
That positive fund balance itself is relatively new — and a direct result in part from the previous mayoral administration’s “scoop and toss” of existing debt, which reduced short-term debt service obligations and increased longer-term costs for the city.
The city ended Fiscal Year 2017 – 2018 (FY18) with a negative $11 million fund balance. The following fiscal year, after the city’s $160 million debt restructuring in August 2018, the city ended with a positive $15.7 million fund balance.
The drivers of the May 2020 report’s projected deficit are almost entirely on the revenue side: $3.3 million less than budgeted for building permits, $1.99 million less than budgeted for parking meters, $1.7 million less than budgeted for parking tags, $1.8 million less than budgeted in rents and fines, and $4.7 million less than budgeted in so-called “Other Revenues.”
The largest chunk of missing revenue in that latter bucket is the $4.9 million “Revenue Initiative” line, which the city currently projects collecting $0 on this fiscal year.
The “Revenue Initiative” line is a catch-all that past mayoral administrations have used to account for hoped-for additional revenue brought in from a variety of sources, including Yale University and Yale New Haven Hospital.
Elicker looked to reduce that line to $0 in next fiscal year’s budget, and referred to it as a “budget gimmick.” The Board of Alders subsequently overrode the mayor’s recommendation and added $2.5 million to the Revenue Initiative line Fiscal Year 2020 – 21 (FY21), with the explicit hope that Yale will make up the difference through an increased voluntary contribution.
I didn't get past the first sentence before finding the need to comment.
"The city plans to dip into its rainy $15.7 million day fund"
It's NOT a "$15.7 million rainy day fund". A rainy day fund is created during good times when revenues exceed expenses and the municipality uses the surplus to squirrel away money for when hard times come - as they eventually always do.
The $15.7 million is what's left over from when Harp and the BOA's refinanced approximately $160 million in bonds and in the process added something like $80 million in interest to future New Haven taxpayers.
So, it's not a rainy day fund, it's a credit card loan.
Dennis Serfilippi