New Haven Register (Sunday) (New Haven, CT)
Debt service plan likely means higher taxes
HAMDEN — It meant adding half a mill to the tax rate.
But in a rare vote that united Republicans and progressive Democrats, Hamden’s Legislative Council reluctantly accepted a possible tax rate increase by adding $2 million to its debt service budget.
According to Finance Director Scott Jackson, one mill is equivalent to roughly $3.8 million in revenue.
While the decision may mean higher taxes for residents in the 2022 fiscal year, proponents said it would prevent steeper increases down the line. It also adhered to a plan forged to rebuild the town’s fund balance, following the advice of financial consultant Barry Bernabe.
Under that plan, created last year, Hamden restructured its debt, pushing payments farther into the future but at a lower interest rate. The maneuver artificially lowered the town’s annual debt payment — in the coming fiscal year, Hamden will have to pay roughly $17.5 million, when its payment otherwise would have been closer to $30 million.
Critics have compared the move to “kicking the can down the road.” But if done carefully, Bernabe has said the debt restructure could be transformative.
He has recommended the town over-budget its debt service line, setting aside an amount higher than $17.5 million but lower than $30 million. That creates a built-in surplus that would go toward the town’s struggling fund balance, an increase to which could potentially improve its bond rating.
The plan also dictated that Hamden would ramp up its debt service line, by $2 million each year, gradually working toward $30 million to prevent a major shock when the actual debt payment went back to its natural amount.
Last year, Hamden budgeted $22 million into its debt service line. This year, if it followed the plan, that number would go to $24 million.
But Mayor Curt Balzano Leng, saying he did not want to raise taxes more than necessary and believed Hamden could reach its aspired-to fund balance even with the reduction, put in a negative “deficit mitigation plan” line item that reduced the debt service by $2.3 million, from the $24 million to roughly $22 million.
That left council members with a choice: stick to the plan and add $2.3 million back into the budget but risk higher taxes, or keep it at $22 million.
Ultimately, the council made a decision resembling first option, amending the budget Wednesday to add another $1.99 million into debt service.
Council members Brad Macdowall and Justin Farmer, Democrats widely considered part of the “progressive” wing of the party, made it clear early on in the meeting that they wanted the full $2.3 million back in the budget.
“We cannot continue to kick the can down the road,” Farmer said. “If we want our town to be prosperous, we have to get ahead of things.”
Macdowall said the town already had hit a “critical point” where taxes were too high, but worried things could get much worse if Hamden failed “to meet basic liabilities and obligations.”
“We seem to be sitting on this council with no recognition of the fact that we could just as easily in a few years be talking about whether or not it’s 60 (mills),” he said.
Kristin Dolan, also a Democrat, joined them in favoring reinstating the $2.3 million.
“While I understand we don’t want to increase the mill rate, this isn’t really discretionary, in my opinion,” she said.
Meanwhile, Council member Valerie Horsley said she could not vote for a budget that set a tax rate above 53 mills, and while she supported a smaller increase, she worried raising the debt budget by $2.3 million was pushing it.
She pointed out that since many property values increased under the town’s latest revaluation, even a rate lower than the current year’s 51.98 mills still would mean a tax increase for many residents.
Others also seemed reluctant — until Bernabe weighed in.
“If you push down debt service and use all of that savings to mitigate other increases in the budget, that catches up to you at some point,” he said, adding that any ramp-up below $24 million would have to be dealt with by future generations. “Debt service really should go up $2 million a year for the next couple years.”
At that point, Republicans Betty Wetmore and Marjorie Bonadies, who just the night before had clashed with Macdowall and
Farmer about the police budget, made their stances clear: even if it meant a higher tax rate, debt service had to go up.
“When I voted for this we were gonna follow this plan, at least as closely as possible,” Wetmore said. “We just can’t keep not doing in, like someone said it’s gonna implode.”
Wetmore, Bonadies and fellow Republican Austin Cesare voted with Farmer and Macdowall to add $1.99 million back into debt service. Dolan, Dominique Baez, Athena Gary and Adrian Webber, all Democrats, also favored the motion, which passed.
Opponents included Democrats Michael McGarry, Horsley, Berita Rowe-Lewis, Jody Clouse and Kathleen Schomaker. In a town that suffers divisions among Democratic officials, Democrats such as McGarry, Horsley and RoweLewis are thought to fall into a more “moderate” camp as compared to Macdowall and Farmer.
Some had supported raising the debt service to some degree, but not by $2 million. McGarry and Clouse, for example, approved an earlier motion to increase it by $1.75 million.
The budget is not yet finalized. The council still has one more chance to deliberate after Friday’s public hearing, after which the mayor can veto it, which would necessitate another council vote.
Information about the budget deliberations schedule can be found on Hamden’s website.