Surplus is only a beginning

By Nancy R. Rossi

Mayor

Last week, the City of West Haven announced a budget surplus and positive fund balance for the first time in many years. Although this is great news, I received many requests for clarification and what the audit meant for the city moving forward. So, I hope this explanation will give people additional information and a better understanding of how important this surplus and positive fund balance are as we continue to aggressively market West Haven to prospective commercial businesses-let’s face it no one will invest in a community that cannot balance their budget and has no plan.

The City of West Haven received its operational results and annual audit for Fiscal Year 2018 (July 1, 2017 – June 30, 2018). The 12-month operational audit showed a surplus (revenues exceeded expenditures) of $3.1 million. This is similar to a profit in the corporate world and is critical to the financial health of any organization. The Allingtown Fire Department and the Sewer fund also saw much needed and significant surpluses and are now in a much better financial position. The Allingtown and Sewer funds reported surpluses of $539,409 and $1,833,451 respectively.

The fund balance (budget reserve or rainy day fund) can be compared to a savings account. The city of West Haven had run operating deficits (expenditures exceeded revenue) for fiscal years 2014, 2015, 2016 and 2017. This drove the cumulative operating deficit to $18 million. This means we had a negative balance in our savings account and quite frankly spent money we did not have.

The prior administration bonded (borrowed) receiving proceeds of $17 million with an amortization schedule (payment plan) of 10 years. This left about a $1million negative fund (savings) balance. So, when the City of West Haven announced a surplus of $3.1 million, the fund balance after taking into account the negative balance carried forward is $2.1 million. West Haven has not had a positive fund balance or rainy day fund in over a decade.

Some people will confuse the two terms deficit and debt. Deficits are the results of budget operations and debt is long-term and similar to a person’s mortgage. Debt is created by bonding (borrowing) for major equipment or projects (buildings) and is usually paid off over a 5-, 10- and 20-year period based on the asset and its useful life. The current long-term debt for West Haven is $116.8 Million. Much of this can be attributed to past school construction projects, police pension bonds (2002) and of course the deficit bonding from 2017.

The good news for West Haven is we now have a positive fund balance (rainy day or savings account) as a result of an operating surplus for fiscal year 2018 and our long term debt payments are projected to significantly decrease in fiscal year 2023 even as we permanently finance (bond) for the new West Haven High School. This is partly because the police pension bonds will be paid off (2022).

A copy of the audit is available on the City of West Haven website.

I hope this information will give you a better understanding and appreciation of the progress the city has made over the past year. We have made momentous improvement but there is still a lot of tough work ahead.