Though the O’Brien administration is loath to admit it, we suspect it has the same fears that were expressed recently by Democratic challenge candidate Nancy Rossi, regarding the deficit-reduction bond. The City Council is considering a request by Mayor Edward M. O’Brien to approve a bond issue to pay off the city’s almost $17 million operating fund deficit. It is hoped by closing that longstanding gap, the city will be able to improve its financial picture and eventually repair the damage done to its credit rating and ability to pay its bills.
The history of the deficit began following the election of 2005. Then-Mayor John M. Picard had his finance team look at the books and found two things: bonds that were already approved to the tune of more than $225 million, had seen some of that money go toward bill paying; and that in actuality, the city had an operating expenditures gap of more than $10.4 million.
It was Picard’s policy to pay down on the bonds, as a large chunk of the city’s budget was being spent on debt service. He also hoped that economic expansion would eliminate the deficit along with more liquidity as bonds were retired. It worked for a time, and the deficit was whittled down to about $4.5 million. Then arrived the financial problems of 2008 and beyond.
As with the rest of the region, West Haven’s economy and outlook was moribund, with little growth, except a growth in the grand list that could be attributed to inflation. Eventually, even that did not show growth and once or twice decreased, with the final blow coming in the last revaluation, which showed a decreased in property values throughout Connecticut and in much of New England.
Given these circumstances, budgeting had to be a bit more exact than has been seen in this city for quite some time. The fact is, however, in some of the Picard budgets and in the last three O’Brien budgets, the projections for revenues have been overestimated. This has contributed to the expansion of the deficit. Add to that the delay in the long-awaited Haven project. Permit fees and other revenues have not been received because of court proceedings in gaining the final properties.
Regardless of the reasons, audits of the budget have increased the deficit. The intention to bond our ways out of the shortfall might be a good short-term fix, but its benefits might be short lived due to the structural problems within the budget process.
Rossi is right when she calls for some type of assurance that not only is the current budget not in a deficit situation, but that the just-passed plan for Fiscal Year 2018 not has the structural problems of the past and put us in the same situation again. A review by the state’s Municipal Finance Assistance Committee (MFAC) is a good starting point.
Paying off the current deficit by means of a bond issue is bad enough, when it one considers the bond issue for the high school. The city is asking to finance $150 million in debt, putting us back up to more than $200 million in outstanding bonds and the debt service attached. What cannot happen is passing the bond issue only to have the city find itself in another deficit when the audit of the current budget is completed, and added onto a year later because the estimates in the new budget are just as problematic.
All the economic development in the world is useless if we cannot get our fiscal house in order, and have a budget-making apparatus that accurately projects revenues.
Mr. O’Brien and his staff may not like it, but his Democratic challenger has a point, and a review of this year’s possible shortfall, and any other problems in the new budget should be addressed before a deficit-payoff is approved.