City lead­ers: Changes are com­ing

Pledge to rein in costs, make needed pol­icy changes

New Haven Register (Sunday) (New Haven, CT) - - FRONT PAGE - By Mary O’Leary and Clare Dig­nan

NEW HAVEN — This could be a year of in­tense fi­nan­cial re­view.

Af­ter two credit agen­cies down­graded New Haven’s rat­ing, ding­ing it for end­ing the year in a deficit with lit­tle in sav­ings, while car­ry­ing a high-debt load and poorly funded pen­sion li­a­bil­i­ties, the city is pledg­ing to cre­ate a five-year bud­get plan with needed pol­icy changes.

“It is very sober­ing,” al­der­manic Ma­jor­ity Leader Richard Fur­low, D-27, said of the feed­back from S&P Global Rat­ings and Fitch as

New Haven went out to the mar­ket for $58 mil­lion in new cap­i­tal funds and $160 mil­lion in re­fi­nanced debt.

For the first seven years of the re­funded bonds, the city will save $108 mil­lion in debt ser­vice over what it would have paid un­der the cur­rent debt ser­vice sched­ule. In the next nine years how­ever, it will pay $197.6 mil­lion in debt ser­vic­ing just due to the re­fund­ing.

Fur­low and oth­ers said the city needed the flex­i­bil­ity the re­fund­ing of­fers for those seven years to start to get its struc­tural prob­lems un­der con­trol, while sta­bi­liz­ing an en­vi­ron­ment where de­vel­op­ment con­tin­ues to grow.

“What got us to this point and what we have to do as leg­is­la­tors is to make some se­ri­ous changes,” Fur­low said. “We are go­ing to be meet­ing weekly to make sure we get this five-year plan de­vel­oped and not one penny is spent that shouldn’t be. It is cru­cial or we are go­ing to be back in this po­si­tion in five years or three years,” Fur­low said.

The pre­lim­i­nary bond sale doc­u­ment put the city’s ex­ist­ing gen­eral obli­ga­tion debt ser­vice at $755,302,355 by 2038 with $67 mil­lion due this fis­cal year. It peaked at $69.7 mil­lion in debt ser­vice pay­ments in fis­cal fis­cal 2020 and then con­tin­ued to drop to $3.3 mil­lion in 2058 af­ter which it is cleared.

With the re­fund­ing, the pay­ment sched­ule in ef­fect in 2018 equals the old pay­ment sched­ule af­ter which it con­tin­ues to de­cline. From 2027 through 2032 it mostly equals out around $53 mil­lion a year, be­fore spik­ing in 2033 and drop­ping back in 2034.

The re­struc­tur­ing gen­er­ates a bud­getary sav­ings of $31.2 mil­lion which is ex­pected to boost the fund bal­ance to cover unan­tic­i­pated short­falls in state aid and high med­i­cal costs; cover the $11.5 mil­lion deficit in the Gen­eral Fund and put $2.5 mil­lion ex­tra in each of the two

pen­sion funds.

The city said there will be bud­getary sav­ings rang­ing from $18.9 mil­lion to $4.1 mil­lion for fis­cal 2020 through 2025 be­cause of the re­fund­ing.

The ma­jor­ity leader said they are look­ing at changing the tax de­fer­ral pro­gram for fu­ture devel­op­ers; pay­ing the pen­sions in Septem­ber rather than at the end of the year and bring­ing in their own ex­perts as they go through the city’s fi­nances.

Fur­low promised that the alders will also tackle the police and fire de­part­ments’ huge over­time costs.

“We are go­ing to get this over­time un­der con­trol. Ev­ery­one is not go­ing to be happy about it, but these are the mea­sures that we are go­ing to have to do,” he said.

The ma­jor­ity leader said the dif­fer­ence this time that makes him con­fi­dent it will get done is hav­ing a five-year plan­ning doc­u­ment and stick­ing to it to counter the “weak man­age­ment and struc­tural im­bal­ances” cit­ing by the rat­ing agen­cies.

“To be hon­est with you I was flab­ber­gasted that we still don’t have a plan in place,” Fur­low said.

Fur­low, al­der­manic Pres­i­dent Ty­isha Walker-Myers, D-23 and Alder Aaron Green­berg, D-8 were unan­i­mous in their vote for the bonds, as they joined Mayor Toni Harp and Con­troller Daryl Jones in ap­prov­ing the sale as the five mem­bers of the Bond Sale Com­mit­tee.

Fur­low said they did not want, as an al­ter­na­tive, to send out sup­ple­men­tal tax bills to cover the fis­cal 2018 deficit.

But per­haps their big­gest fear was be­ing forced into the Mu­nic­i­pal Ac­count­abil­ity Re­view Board, where the state takes over your fi­nan­cial de­ci­sions.

“As long as we can make sound fis­cal fi­nan­cial de­ci­sion, then we are not go­ing to do it. We are go­ing to help this ad­min­is­tra­tion the best we can,” he said.

He said it also did not make sense to is­sue tax an­tic­i­pa­tion notes as the pay­back would be too soon.

As a res­i­dent with fam­ily

go­ing back al­most 100 years in New Haven, Fur­low said, “I owe it to the city to do the right thing.”

Harp is on board with the al­der­manic lead­er­ship’s agenda.

Some alders, who weren’t in­volved in the de­ci­sion how­ever, said the bond sale wasn’t the best move for the city.

Alder Dar­ryl Brac­k­een, Jr., D-26, said in an email, “If we don’t deal with our fis­cal sit­u­a­tion now, we will con­tinue to hurt fu­ture gen­er­a­tions.”

He said the city needs a more ag­gres­sive de­vel­op­ment plan in ad­di­tion to find­ing other sources of rev­enue. Brac­k­een said the ad­min­is­tra­tion should look at re­gion­al­iza­tion and con­tinue to fight for more PI­LOT (pay­ments in lieu of taxes. Brac­k­een said he would have pre­ferred to have had more leg­isla­tive in­put, although the board ul­ti­mately de­cides where the $31.2 mil­lion will go.

Alder Abby Roth, D-7, said the ad­min­is­tra­tion’s so­lu­tion to fi­nan­cial prob­lems is to re­fi­nance debt.

“This is not a so­lu­tion — it is cre­at­ing tem­po­rary cash sav­ings, while in­creas­ing what we will owe in the fu­ture: Fitch pre­dicts the city’s cur­rent re­fund­ing will cost the city tax­pay­ers $10 mil­lion in the long run,” she said.

“We must stop ir­re­spon­si­bly in­creas­ing our fu­ture debt and start ad­dress­ing the un­der­ly­ing struc­tural prob­lems by se­ri­ously en­gag­ing all stake­hold­ers so that we can make hard but nec­es­sary de­ci­sions about how to re­duce huge cost driv­ers such as pen­sion, health care, and police and fire over­time,” Roth said. She said the police and fire con­tracts are a good op­por­tu­nity to do that.

She also wants to en­gage the MARB for ad­vice.

Alder Steven Win­ter, D-21, said the city should have looked at other op­tions be­fore re­fi­nanc­ing.

He said it is ir­re­spon­si­ble to add to the city’s debt if the city hasn’t ex­plored all other op­tions, like is­su­ing tax an­tic­i­pa­tion notes con­nected to the next in­stall­ment of prop­erty tax pay­ments,” Win­ter said in an email be­fore the vote.

Win­ter said he’s not sur­prised by the city’s re­cent credit down­grade be­cause it hasn’t taken steps to “sub­stan­tively ad­dress its struc­tural bud­get deficits. Fur­ther down­grades are likely un­less sig­nif­i­cant steps are taken to bring spend­ing and rev­enue into align­ment.”

The alder sup­ports the sug­ges­tion of the Fi­nan­cial Re­view and Au­dit Com­mit­tee to get an in­de­pen­dent cost study of police and fire staffing lev­els and move more pen­sion funds to low­cost, pas­sive in­vest­ments.

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