New Haven Register (Sunday) (New Haven, CT)
Officials say state takeover not on the table
Finances need work, but town plans to address it in-house
HAMDEN — Amid an audit that shows the town’s fund balance went negative in the last fiscal year, officials say intervention from the state Municipal Accountability Review Board is not on the table.
The recently released audit indicates the town faced a budget deficit of about $5 million for the 2019-20 fiscal year, which pushed the town’s general fund balance in the red by some $2.3 million.
While a negative fund balance is one of the criteria that can trigger state oversight, Scott Jackson, Hamden’s acting finance director, said at this point MARB intervention would not occur unless Mayor Curt Leng and Legislative Council President Michael McGarry asked for it.
Chris McClure, spokesman for the state Office of Policy Management, confirmed Jackson’s assessment.
He also wrote in an email that “the Town of Hamden has been meeting voluntarily with the Municipal Finance Advisory Commission regarding the town's financial condition since September 2020 and has demonstrated commitment in addressing the fiscal challenges of the town, including the negative fund balance.”
Both McGarry and Leng expressed that they would maintain local financial control.
Entering into dealings with the MARB would be “an abdication of responsibility and a bad move for Hamden,” according to the mayor.
McGarry said Hamden’s own elected officials are in the best position to make financial decisions such as tax rate changes.
But officials also know there is hard work ahead.
While a $2.8 million bond premium that came through in August pushed the town’s general fund back in the black, Jackson said, that balance still is very low, at around $600,000.
And as of June 30, Hamden’s government-wide liabilities exceeded its assets by about $1 billion, according to the audit.
“We’re going to pull ourselves out of this hole,” Jackson said.
What MARB means
Other municipalities that have entered into the MARB, such as Hartford and West Haven, have gotten millions of dollars from the state.
But Jackson, who has sat on the MARB, stressed that it is not a magic solution.
“There may be an opportunity for a specific and structured influx of cash, you know, that is dependent on the specific needs of that community,” he said. “There’s no bailout bucket. ... It could be years before there is any financial reward.”
MARB oversight is “not an easy path,” according to Jackson.
“In its worst possible iteration, it could actually do damage to the elements of life in Hamden,” Jackson said.
Brad Macdowall, a member of the Legislative Council, had similar concerns.
He worried MARB intervention could result in forced tax increases unsustainable for some residents.
“There are already people who are unable to afford the tax raises that they’ve already received, and so I’m afraid of what could result in a massive raise in taxes from the MARB,” he said. “I am nervous that that could push a lot of homeowners over the edge … Especially in the middle of a pandemic, right, we’re going to be dealing with the economic fallout of this pandemic for years, and we need to be compassionate about homeowners.”
Jackson also noted even if the MARB were involved, contract negotiations would still be subject to other laws.
“Nobody’s going to come in on a Tuesday and find out that their benefits are different than they were on a Monday,” he said.
Balancing the budget
McGarry said a balanced budget is a vital goal for the next fiscal year.
The town’s budget for the 2019-20 fiscal year was not balanced, the audit shows. Though expenditures were about $2.7 million less than anticipated, revenues came in around $7.7 million short.
Even with the general fund in the black thanks to bond premiums, Jackson said the town will include a line item geared toward further restoration in the upcoming budget season.
In the past, methods like capital sweeps and debt restructuring have been used to balance the town’s budget.
Hamden faced the possibility of a multimilliondollar budget deficit for the 2017-18 fiscal year. To help close that deficit, the town swept around $3.7 million from its capital budget.
“I think the reason why it’s an issue is because at a certain point you run out of capital to sweep,” said Christian McNamara, chairman of Hamden’s Fiscal Stability Committee. “When you rely on things like capital sweeps, when you rely on things like debt restructuring to balance a budget, your expenses are still more than your revenues.”
On top of that, McNamara said, strategies such as debt restructuring mean the town saves money in the short term but has to pay more interest down the line.
Macdowall contended that “dishonest budgets” have been partly to blame for the town’s financial difficulties. He argued that Hamden needs to be more realistic about what revenues it expects to collect, and how much money it expects to spend.
He pointed to line items such as revenue from
Quinnipiac University.
For the 2019-20 fiscal year, the audit shows Hamden budgeted $2.1 million coming from Quinnipiac but received $500,000.
The year before, it received about $600,000, a budget document shows.
Macdowall also expressed doubts about a $6 million COVID relief item included in the current year’s budget. At the time the budget was passed, he said, it was uncertain from where such revenue would come.
That remained the case as of December, according to a report from then-Finance Director Curtis Eatman.
“As of today, COVID-19 reimbursement from the State of Connecticut or the Federal Government has not yet been confirmed from either branch of government,” the report says.
But now, the Senate relief bill means that reimbursement may come through, according to Leng.
“I think we’ve already changed the way we look at revenues,” he said of concerns about budgeting.