With uncertain state funding, DeStefano pitches budget options

Faced with funding cuts, Mayor John DeStefano Jr. and the Board of Aldermen are debating a budget for fiscal year 2014.
Faced with funding cuts, Mayor John DeStefano Jr. and the Board of Aldermen are debating a budget for fiscal year 2014. Photo by Isaac Stanley-Becker.

In response to city revenue losses that could total nearly $28 million, Mayor John DeStefano Jr. has adopted a strategy of “hope for the best, plan for the worst.”

DeStefano conveyed that message Wednesday in the three distinct budget proposals for fiscal year 2014 he presented before the Board of Aldermen. Which plan the board passes at the end of May will largely be dictated by forces outside of the city’s control, as each budget plan accounts for the possibility of different degrees of state-mandated funding reductions to municipalities like New Haven. State legislative aides said the state may not hash out a final budget deal until the end of the legislative session on June 5.

In the meantime, Board of Aldermen President Jorge Perez said the board will comb through DeStefano’s proposals. All three expand the city’s general fund budget from $486 million to $503 million, a 3 percent increase from the current fiscal year budget, DeStefano said. All of the proposed budgets include a $3 million increase for the Board of Education, a $2 million increase in public safety funding and a $1 million rise in general government expenditures, highlighting the city’s commitment to school change, public safety and economic development. Funding for all other city services will be kept flat, and no city employees will be laid off.

The variations among the proposals account for the uncertainty surrounding six possible state cuts to city revenue and the consequent increases in property taxes — represented by rising mill rates — to accommodate these reductions. Taken together, DeStefano said the funding reductions represent the “biggest change in state-local tax structure” he has ever seen. They include a $3.5 million cut in public school transportation funding and multimillion-dollar cuts to payment-in-lieu-of-taxes (PILOT) programs for manufacturing and property, some of which may be offset by increased funding from the Education Cost Sharing Grant.

The city might also lose $3.85 million in state-municipal revenue-sharing funds allocated from state sales and real estate taxes to municipalities and $6.9 million in the form of the Pequot-Mohegan Grant, which distributes taxes from casino revenue in the state. A final reduction, which would cost the city $14.2 million in tax revenue by eliminating the motor vehicle tax for the first $20,000 of the assessed value of a vehicle, is also on the table.

DeStefano said after Wednesday’s presentation that the first option, which assumes there will be no change in state aid to the city, is “likely.” Such an outcome, he added, depends on Board of Aldermen lobbying efforts.

“The city can’t go quietly in what is a fundamental change in how we finance local government,” DeStefano said. “We need to think about how the board gets engaged in lobbying.”

Even with no additional cuts, however, the first budget option would involve an increase of 2.09 in the mill rate from the current rate of 38.88, amounting to a $12.33 million increase in city property taxes.

DeStefano’s second option, which he formally submitted to the board, assumes that all of the funding reductions go through, save the elimination of the motor vehicle tax. Under these cuts, state aid to New Haven would diminish a total of $10 million from $208.9 million to $198.9 million, causing the mill rate to go up by 4.43 and a property tax increase of $26.14 million.

The third option DeStefano presented assumes that all state funding reductions go through, including the motor vehicle tax. This final scenario would result in a reduction in city revenue of nearly $28 million and necessitates a 7.35 rise in the mill rate and $43.37 million increase in city property taxes.

City officials were split on the likelihood of the state nixing the motor tax. New Haven Chief of Staff Sean Matteson said the elimination of the tax was “palatable” among legislators who “want to say they’re lowering taxes.” Perez agreed, saying his constituents in Ward 5 favor getting rid of the tax. DeStefano countered that “the general assembly is not in love with the idea.”

Losses under the second and third options are partially offset by an extra $3.8 million increase in funding for the Board of Education under the Education Cost Sharing Grant.

But DeStefano challenged the real impact of this increase, saying more funding in the form of Education Cost Sharing masks larger cuts.

“The governor would say the ECS is increasing and that he’s putting more money into education. But it’s just like him taking money out of our right pocket and putting it into our left and calling it something else,” he said. “The money coming from the PILOT programs has underwritten our economic growth.”

He added that New Haven depends on state grants to make up for financial pressures unique to the Elm City, such as a large homeless population and widespread property tax exemptions.

Ward 13 Alderman Brenda Jones-Barnes said she was worried about increasing mill rates, citing existing dissatisfaction regarding burdensome taxes among her constituents.

“My reaction to the budget details is really just ‘wow,’” she said after DeStefano’s presentation. “We need to think about whether people are going to want to stay in New Haven or whether they’re just going to get up and leave.”

Perez echoed concerns about rising property taxes, saying the board would be “reluctant” to pass a budget that included tax increases. He said that most of his colleagues have not yet had the chance to review details or to consider alternate revenue-saving measures.

Ward 7 Alderman Doug Hausladen ’04 said the board has already met with the New Haven’s state legislative delegation to try to forestall the cuts.

“The aldermen are in lockstep with our state delegation, and we are all unified in speaking out against this,” he said. “The governor can’t balance the state budget on the backs of our cities and towns.”

Adam Joseph, spokesman for the state Senate Democrats, said it’s still too early to determine whether the various funding reductions will go through. He added that state legislators have been meeting with mayors from across the state to discuss concerns about the budget’s effect on their cities.

Malloy’s budget proposal for fiscal year 2014 totals $21.5 billion.

Clarification: March 8

A previous version of this article included multiple references to a state congress, when in fact the references should have been to the state legislature.  

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