To balance its budget for the 2018–19 fiscal year, New Haven would have to impose an even higher property tax increase than expected, according to the city’s independent Financial Review & Audit Commission.
Early in March, Harp proposed a preliminary budget for the fiscal year beginning on July 1, calling for an 11 percent property tax hike in addition to municipal employee concessions and a reduction of the Elm City’s rainy-day fund. The proposal provoked concerns among New Haven residents, according to alders who received phone calls about the issue. At the moment, the Board of Alders is combing through the budget to identify any additional sources of funding that would reduce the tax hike. But according to the commission, which is appointed to analyze the city’s finances, the Harp administration would have to raise taxes by twice as much — 22 percent — to cover the expanding costs of the Elm City in the face of declining state aid.
While Harp proposed her tax hike to make up for a $17 million revenue shortage, the commission says the shortage is actually between $44 and $67.2 million.
“Based on our collective experience, these budget imbalances are historically large for New Haven,” the commission’s analysis states.
The commission is an independent and non-partisan organization consisting of New Haven citizens appointed by the city to provide an independent review of its finances. The report does not comment on how money should be allocated across the city.
According to the commission, Harp’s initial budget proposal underestimated how much funding the New Haven Board of Education will need next year. The need for a higher tax also stems from increased pension payments and medical costs, as well as discrepancies in the current debt service plan, according to the report.
The current proposed budget includes a $5 million increase in school board funding — but the current board’s current deficit is greater than that increase. Thus, the finance commission projects that the mayor’s proposal is $2 to 10 million less than what the school board will actually spend.
Asked about the different numbers, mayoral spokesman, Laurence Grotheer noted that it is still “relatively early” in the budget process.
“As the process plays out over the next two months, the figures will line up and the Board of Alders will adopt a suitable budget for the city,” Grotheer said.
Rising medical costs account for the lion’s share of the discrepancy between the mayor’s budget proposal and the commission’s analysis. At a March 27 commission meeting, Jones told the panel that the city is working on a new medical savings initiative but cannot release any details until the next meeting of the Board of Alders’ Finance Committee on April 19, according to the New Haven Independent.
But the fiscal 2018 budget discrepancies are not the commission’s only concern. Its report also shows the current deficit projections for the 2017–18 fiscal year are too conservative. According to the January 2018 monthly budget report summary — submitted to the Board of Alders Finance Committee on March 12 by the Acting Budget Director Michael Gormany and City Controller Daryl Jones — the city currently faces a $14.4 million budget deficit. But by the commission’s calculations, that number is actually somewhere between $34 million and $54.6 million.
Mohit Agrawal GRD ’20, a member of the commission, told the News that though state law requires cities to pass balanced budgets, they can still finish in deficit for a “variety of reasons.” New Haven does not face an “immediate liquidity crisis,” he said, but the budget deficits could harm the city’s credit rating. This in turn, could prompt a negative feedback loop, which could in turn lead to lower growth and higher deficits.
“[The commission] strongly recommends the adoption of a balanced and robust budget so that confidence about New Haven grows rather than shrinks,” Agrawal said.
Grotheer told the News the Harp administration is working on balancing the budget for the fifth year in a row.
The commission usually meets on the first Thursday of the month in City Hall.
Ashna Gupta | email@example.com