Report: Tough Decisions, Or An $82M Hole

One vision of 2015: New Haven government is $82 million in the red. A second vision: New Haven has millions to spare, thanks to a modernized fire department, less police overtime, and increased fees for baseball in the park.

Those visions of New Haven’s five-year fiscal future were laid out in a third floor conference room in the Hall of Records on Wednesday night. The city’s Financial Review and Audit Commission (FRAC), a budget advisory body of mayoral appointees, heard a draft of a report by a consulting agency assigned to analyze the city’s financial trajectory for the next five years.

Ken Murray (pictured) of Management Partners consulting firm led the commissioners through a detailed overview of the 70-page five-year financial plan his company has been working on for months. The document was crafted from seven years of financial data from New Haven, as well as comparative data from several towns in Connecticut, Massachusetts, and Rhode Island. Read the draft here.

After all the bean counting and number crunching, Management Partners has determined that, without major changes in how government is run, the city will find itself in a $82.7 million hole in 2015.

There is hope, however, in the form of numerous suggestions and recommendations to both trim expenditures and increase revenues.

The report projects that those changes would avoid the $82 million hole, and put the city on track to have at least 5 percent, or $27 million, of its 2015 budget as ​“unappropriated funds” — aka ​“rainy day funds” — not allocated to any department. That would position the city to have a healthy bond rating, allowing it to borrow money more cheaply.

The predictions are based on a number of assumptions, including the notion that New Haven will raise $8 million this year through vaguely promised ​“Innovation Based Budgeting (IBB).” The report is also based on confident predictions of steady Payment In Lieu Of Taxes from the state, an assumption that drew questions from commissioners Wednesday night.

One commissioner, budget watchdog Jeffrey Kerekes, noted that a huge city expense in years to come was not within the scope of the report: pensions for city employees.

After FRAC peppered consultant Murray (pictured) with questions, the commission made plans to meet again to discuss the report on Sept. 21. After that, it plans to hold a public hearing to present findings to the Board of Aldermen’s Finance Committee. The document presented then will include Management Partners’ final report and FRAC’s analysis and recommendations of how to proceed based on its findings.

That’s all part of FRAC’s mandate as an advisory body. The commission was formed during charter revision in the ​‘90s, when the city’s Board of Finance was dissolved, said city Controller Mark Pietrosimone, in whose offices FRAC meets

FRAC’s role is to review the city budget and make recommendations to the Board of Aldermen and to do an independent audit of the city’s books every four years, he said. In Fiscal Year 09 – 10, money was set aside for FRAC to do a five-year financial plan, to perform a role similar to the Blue Ribbon Budget Panel of that year, Pietrosimone said.

That’s how Murray, the consultant, came to be presenting his report to FRAC Wednesday night. After he and the commissioners helped themselves to Abate’s pizza and Foxon Park Kola, Murray began his presentation — on a positive note.

“The bottom line is you guys have really done a pretty good job financially,” Murray said. The starting point is not bad, assuming the city meets its 2011 budget goals, he said. However, tough decisions have to be made in order to reach the 5 percent unappropriated funds balance by 2015. ​“That’s the magic number when it comes to any type of bond review,” Murray said. It would mean the city has the financial means to support borrowing. The city now has a 3.4 unappropriated funds balance, Murray said.

After some discussion of methodology in creating the report, Murray made his prognosis. If things continue as they have, without changes, the city will have a budget deficit of $82 million by 2015, he said.

“I have seen worse, believe me,” he said. ​“I have seen better, but I’ve also seen worse.”

Does that prediction include IBB and monetization? asked budget activist Kerekes. He was referring in part to a plan revived by City Hall to have the city collect a quick $50 million in cash in return for handing $120 million worth of parking revenues over 25 years to an Ohio company.

IBB predicts $8 million in revenues and $5 million in savings this year, Murray said. The $8 million in revenues is indicated on the report as ​“Monetization/IBB” for the next five years. It’s a placeholder representing the savings IBB promises this year that will be carried over to succeeding years. ​“It’s not to us to say it’s going to happen or not,” Murray said. The city says it will happen, so it’s in the report.

Police, Fire Alarm

Murray pointed out several areas where New Haven’s spending is higher than that of comparable cities. Education spending, particularly as a result of new school construction, is one area of interest, he said. New Haven has fewer students than Hartford or Bridgeport, but more staff and more schools than either, according to the report. New Haven has 1,000 fewer students than Bridgeport, but has 10 more schools.

“This is a tough nut for you. It’s a very tough nut,” Murray said. At the beginning of New Haven’s school construction boom, ​“did the city every sit down and say how many schools do we need and where do you need them?” Murray suggested hiring an educational consulting firm to look at those questions. Increased number of schools related to an increase in administrative staff, he said.

In terms of general government, Murray pronounced the parks and public works department ​“amazing” for what they are able to get done with the budgets they have. ​“They are performing well above industry standards.”

As for problem departments, ​“it came back largely to your fire and police,” Murray said. The police department should look at where it’s deploying its officers. Crime is not happening equally all over the city, Murray said. The department also needs to manage overtime better. ​“Does the department have an effective process for managing overtime when it is discretionary?” Murray said. ​“You need to be much more judicious about who you call out, when you call them out, and how you use them.”

One part of the solution could be to hire more cops. The police department is paying so much in overtime that it would be cheaper to simply hire more officers, Murray said.

The fire department also has a significant problem with overtime, Murray said. ​“You’ve got a department that has some real significant staffing and response issues.”

The department is larger than necessary, resulting in excessive overtime, since more firefighters respond to calls than are necessary, Murray said.

The department has not changed with the times, Murray said. Fire departments are more and more called on for emergency medical services (EMS) and less and less for fires. New Haven’s department ​“is really stuck in an older response mode.”

The fire department could do more to recover expenses from EMS calls, Murray said. ​“You want to be more aggressive in billing and collecting” from insurance companies, he said.

Unneeded fire department equipment could also be sold to bring in revenue, Murray said. Other city vehicles could also be sold, he said. ​“There’s a surprising market for municipal vehicles.”

Other potential revenue streams Murray mentioned include increased rental housing and commercial building inspection fees, recovery of Medicaid and Medicare funds for health services provided in public schools, and charging the Housing Authority of New Haven $750,000 in Payments In Lieu Of Taxes.

Murray also spoke about raising parks and recreation fees. Other cities recover 25 percent to 40 percent of parks department budgets with fees. New Haven’s rate is less than 5 percent, Murray said.

Raising fees to the industry standard in one year seems unrealistic, said Commissioner Christine Bishop (pictured).

“It’s substantial,” Murray said. ​“It’s been done pretty regularly.”

Don’t people just stop going to the park? Bishop asked.

“They might,” Murray said. The question is whether they have alternatives for swimming and playing ball. ​“I’ve seen cities double their fees year in and year out.”

“Teams come from out of town to play on our fields, because they’re cheaper,” said commission Chair Martin O’Connor.

After the meeting wrapped up, Commissioner Bishop said that while there is ​“still a lot to digest,” all the report’s recommendations look worthy of consideration by the city.

“This is a conversation that the city needs to be having now,” said Chair O’Connor (pictured).

Before the meeting, Kerekes, noted that the report does not consider the city’s pension gap. The report indicates on page 27 that the city has a disproportionately high number of full time equivalent employees, compared with other city’s of it’s size. But the city has not been putting aside enough money for the retirement of those employees, Kerekes said. It’s a big issue that was beyond the scope of the report, he said. ​“That’s the thing that’s going to bankrupt the city.”

After the meeting, Kerekes said avoiding the $82 million hole and coming up with 5 percent unallocated funds by 2015 is a huge task. It amounts to saving about $100 million over the next five years, he said. ​“It’s no small task.”

Success will depend on political will, which the administration might not possess, Kerekes said. Changes to the fire department, for example, are bound to meet with significant resistance, he said.

Kerekes said all the report’s recommendations made sense. He said he saw the report partly as a third-party corroboration of some of the calculations that his New Haven Citizens Action Network budget activist group has done, like the high cost of firefighters and the school board.