MARB oversight is latest chapter in money woes
It was not announced, just implied. It was the result of cause and effect, but not really discussed as a possibility when the issue was brought up by city officials. It was one of those things that falls under the category of “concerning,” but honest observers could not be surprised by it.
“IT” was the confirmation, last week, by Mayor Nancy Rossi that the city is now under the supervision of a review board empaneled by the State of Connecticut’s Office of Policy and Management. That decision, made the day after Rossi was sworn into office, means the financial dealings of the city are really not decided by elected officials, but only with the “imprimatur” of unelected overseers.
For the second time in a little more than a quarter-century the City of West Haven finds itself in a financial bind that puts it under state control. One can quibble about the amount of influence/power the board will have, but the material effect is the same: decisions made must have the approbation of others.
The first time the city came under state control was the city nearly bankrupt following the passage by default of a city budget that was woefully underfunded. Then-Mayor H. Richard Borer, Jr. saw the city was more than $17 million in debt and on the verge of defaulting on its payroll. A special act of the General Assembly gave the city the money it needed, but we were under a state review board for at least three years.
In fact, it was three years later the city, after posting three balanced budgets, was given its autonomy again. But the structural problems that were present in the early 1990s remained over the ensuing years and, in many ways, got worse: an eroding tax base with little development or industry continued to erode with development stagnant. The major problem was over-estimating revenues to balance out expected debits. We never attained the rates of revenue upon which the budgets were based.
In 2006, then-Mayor John Picard found the city was more than $10 million in arrears in its operating budget, but determined to bring it down by means other than bonding or tax increases. In fits and starts the deficit was whittled down; however, the financial crisis of 2008-2009, along with a limp recovery saw the deficit go from a low of more than $4 million back up to more than $10 million.
With the election of Edward M. O’Brien in 2012, a new administration came in with the desire to bond the deficit away to aid cash flow and progress in economic development. Unfortunately, the budget-making problems of the past continued. Revenues expectations were never attained and each year of the O’Brien administration saw the city run further than further in the red.
The trigger of this most recent monitoring by the state was O’Brien’s decision to bond for the deficit. Under a new act by the General Assembly, OMB had the option to put the city under review. A letter from Barnes to Mayor Rossi announced the decision.
The state’s own fiscal woes come into play for us and all municipalities as the summer’s budget debacle pulled back expected funds. In West Haven’s case, $8 million in anticipated revenue is not coming. Also, the audit for the past fiscal year promises more red ink. So, instead of entering with a clean slate, the city will be in the red to the tune of an estimated $1 million to $1.5 million.
Rossi, who campaigned as a fiscal hawk, now has to design a budget that takes these realities into consideration, while still providing essential city services. She sees the review board as a positive in that it will be there review and, arguably, give a nod to, decisions she must make. Cynics will say it gives her political cover.
Regardless of the political ramifications, the empaneling of a state review board puts into focus those structural problems in the city’s finances that have never really been addressed. The most pressing and immediate remedy is an accurate assessment of revenues. The taxpayers may see a double-whammy: services cut and taxes increased.
For too long, the city has kicked down the road the problems with the budget, hoping state funding or a big commercial development would provide extra cash. That never panned out.
What’s coming in the next few weeks is going to be painful, but we can’t say in all honesty, we didn’t see it coming.