The city is, once again, in an operating deficit. That was the conclusion the city’s auditors came to when the much-delayed audit for the fiscal year that ended June 30, 2017 was released last week.
Mayor Nancy Rossi announced that the city finished fiscal year 2017, which ended on June 30, 2017, with a deficit of $1.4 million. The revelation means the city, which bonded $25 million for debt relief and some projects in the waning days of the O’Brien administration is once again writing its books with red ink.
The audit, which was produced by PFK O’Connor Davies, LLP of Wethersfield, was presented to the City Council at its last meeting on July 23. The $1.4 million deficit brings the city’s cumulative unassigned general fund deficit to $18.1 million.
The news was another blow to Rossi, who has had to deal with the aftermath of the decision to pay off the previous $16.1 million deficit, a decision that immediately put us under the scrutiny of the Municipal Accountability Review Board. The board was set up by General Assembly specifically for cities that had to bond to pay off debt.
Rossi said the deficit numbers are far greater than what she was led to believe when she took office.
“When I took office on December 3, 2017, the previous administration notified me that there would be another deficit for year ended June 30, 2017, but they expected it to be approximately $100,000,” she said in a press release sent out Tuesday. “Once the auditors began their work it became clear the deficit would be much larger. Obviously, I am not surprised–but I am disappointed for the city all the same.”
Mayor Edward M. O’Brien and the City Council approved deficit bonding in November 2017, in the amount of $16.1 million which was supposed to wipe out the cumulative deficit as of fiscal year 2016.
“The action of the deficit bonding triggered the oversight of the Municipal Accountability Review Board, (MARB). A municipality can only deficit bond once every 10 years,” she said..
The (MARB) passed a resolution on May 3 of this year, directing the city to eliminate the deficit with part of the restructuring funds. The budget presented to the City Council on March 15 did not have a city tax increase. Once the resolution was passed by the MARB the city was only allowed to use $6 million of the $8 million restructuring funds offered, while the remaining $2 million had to be used to pay off the deficit from 2017 and put aside $250,000 to cover MARB expenses.
“I knew the city had not fixed the budget problem and were running another large shortfall. I spoke at several meetings asking the (O’Brien) administration and City Council not to bond until they could produce a balanced budget,” Rossi said. “City Treasurer Michael Last testified at a budget hearing and sent an email to the Office of Policy and Management (OPM) in September 2017 asking them not to approve deficit bonding until the city could demonstrate that the budget was balanced. The requests fell on deaf ears and now we are saddled with yet another deficit and it’s a shame.”.
The audit did provide good news in that the sewer fund ran a surplus for the same fiscal year to help pay down the deficit carried in that fund.
“We still have a deficit in the sewer fund and I am working with the staff at the Water Pollution Control Authority and we are making decisions that will result in positive operations to eliminate the deficit and produce a cash reserve in the sewer fund,” she said.
Since the directive of the MARB came down in May, the city has had to trim its spending in various – and sometimes drastic – ways. Rossi admits the decisions have been difficult, and not easy to take by the public.
“We are looking at all the governmental funds and making good progress in streamlining operations and providing our services more effectively at a lower cost. Some of the necessary decisions have been difficult and some not very popular, but our financial issues did not happen overnight and they won’t be corrected overnight,” concluded Mayor Rossi.