How Danbury expects to spend its $5.3M surplus

DANBURY — About $5.3 million in city and school surplus funds — plus other monies — are expected to go toward education, capital projects and other initiatives.

City Council has approved a plan to allocate this money left over from the prior fiscal year, although the annual financial audit will not be completed for several weeks. Pending the audit, the surplus will go into the unappropriated fund balance and then be doled out.

“We’re making the best use of the available fund balance,” Finance Director David St. Hilaire said to the council at a recent meeting. “We’re managing it properly and putting it in places where we know we’re going to need it.”

City revenues exceeded expenditures by $2.4 million, largely due to $1.8 million from a premium on the sale of bond anticipation notes, he said in a letter to the mayor and council. The school board’s revenues surpassed expenditures by $2.9 million.

Danbury plans to put that $2.9 million in a contingency fund that may be used for unplanned school costs.

Danbury may get back another $2.9 million in education funds that the school board spent that were eligible for federal coronavirus relief grants. The city has asked the state if Danbury may recover those funds, which would go into the reserve, too, St. Hilaire said.

This will be critical because the district expects to face funding gaps once federal COVID-19 relief funds are exhausted, plus will face additional operating expenses as Danbury moves to open the career academy, he said.

“Having this money right here, especially if the extra $2.9 (million) comes in, is going to go along ways for that transition,” St. Hilaire said.

That extra $2.9 million includes $1.5 million from 2020-21 and $700,000 from $2019-20, both related to the school lunch program. Another $700,000 is from 202021 and is related to remote learning.

Where the money will go

The bulk of the surplus and other money in the fund balance — $3.33 million — will go toward capital projects — something some council members questioned because the city expects to receive federal infrastructure money from a package Congress approved in November.

But St. Hilaire said not all projects may be eligible for these grants.

Of the $3.33 million, the city plans to put $3 million toward to-be-determined capital projects in future budgets. Another $260,000 will go toward the state mandated property revaluation this fiscal year, with $69,000 for projects at Danbury Municipal Airport.

The next biggest chunk — $650,000 — will go toward salaries and retroactive pay. The council has already approved raises and retroactive pay for the firefighters and municipal employees unions.

Danbury plans to commit $240,000 toward a reserve to support city-funded grant agencies through United Way of Western Connecticut. The city typically includes money for these agencies in its operating budget, but didn’t in 2020-21 due to COVID-19 financial challenges. The money was restored in this year’s budget.

“It really is to ensure we don't have another gap year for grants,” St. Hilaire said.

Another $350,000 will go toward debt service costs. The city recently refinanced its debt to issue 10-year bonds, rather than 20-year bonds, which saved money over the long term, but increased payments for a single fiscal year, St. Hilaire said in his letter.

The city will put $200,000 toward litigation costs. Separately, the council agreed to put $350,000 from the contingency fund into litigation for this fiscal year.

Robert Yamin, corporation counsel and chief legal officer, said he expects to deplete the litigation budget “well ahead” of the end of this fiscal year because the city is facing an “inordinate number of historically large, pending tax appeals.”

The council has previously appropriated additional money for litigation in these cases. For example, the council approved $250,000 in 2020 for the city to fight tax appeals, including those connected to the Danbury Fair mall.

St. Hilaire said he anticipates the city would save an excess of $13 million with these suits.

“I won’t get into the specific cases, but this is a pretty good year for tax abates, and it far exceeds that,” he said.

With these approvals, the litigation reserve will reach $650,000, he said.

The city plans to allocate $200,000 to human resources, the legislative assistant’s office and mayor’s office for transition planning and office reorganization to better meet the city’s needs since COVID-19. This could include signs and security, St. Hilaire said.

The city will add about $53,600 to what it contributes to the Candlewood Lake Authority, meeting the budget increase the authority had requested. Danbury’s approved budget didn’t initially meet this request, but the city is required to because at least three of the five lake towns agreed to the increase.