City Snatches Surplus From Jaws Of Covid

A newly published financial report shows that the city ended last fiscal year with a $1.9 million budget surplus, even as Covid-19 interrupted just about every aspect of city life starting last spring.

Mayor Justin Elicker and city Budget Director and Acting Controller Michael Gormany celebrated that ​“little bit of good news,” as the mayor put it, during a Tuesday afternoon press conference on the second floor of City Hall.

The cause for tempered celebration was the city budget office’s recent wrapping up of its pre-audit financial report for Fiscal Year 2019 – 2020 (FY20), which ended on June 30.

According to the report, which the city budget office sent to the Board of Alders Tuesday and which can be read in full here, the city’s combined fund balance across its general, medical self insurance, workers compensation, and litigation funds was $1,922,769.

When looking at just the general fund budget, which covers day-to-day operating measures like employee salaries, healthcare, debt service, and pensions, the city ended the fiscal year with a $649,529 operating deficit. The is significantly less than the $15.3 million projected general fund deficit eyed at the height of the Covid-19 pandemic in March, or even the $7.8 million deficit projected in June.

Elicker and Gormany, joined by New Haven Public Schools (NHPS) Superintendent Iline Tracey, NHPS Chief Financial Officer Phillip Penn, and Board of Education President Yesenia Rivera, credited that swing to not-as-bad-as-expected shortfalls in building permit and parking meter revenue, stronger than anticipated tax collection revenue, tight expenditure controls at City Hall and NHPS, and public schools shuttered by the pandemic.

“Overall, we are facing still a very, very challenging situation in this city financially,” Elicker said.

The city eliminated over 100 vacant positions from the budget this fiscal year. And the current fiscal year’s budget still includes $2.5 million in ​“revenue initiative” dollars that the city hopes to get from Yale University and Yale New Haven Hospital, but that is not yet a done deal.

Nevertheless, Elicker said, he found the pre-audit report’s less-dire-than-anticipated numbers worth pausing over and representative of the hard work put in by city budget staff this spring and summer.

The $1.9 million overall surplus goes into the city’s overall fund balance, or ​“rainy day fund,” Elicker said. That total rainy day fund now sits at $17.6 million, having benefited not just from this year’s surplus but also from millions of dollars in debt service deferred during the previous mayoral administration’s record $160 million bond refunding in August 2018.

The surplus comes at a time when state and local governments across the country are strapped for cash and cutting budgets amidst the broadscale Covid-induced economic crisis.

Revenues: Not As Bad As Expected

Elicker and Gormany said that one of the bigger drivers of the positive financial landing was a roughly $6.5 million end-of-year shortfall in total revenue collected by the city.

While still under budget, that number was a lot rosier than the $14.9 million shortfall projected in March and the $8.5 million projected in June.

The report shows that overall property tax collections came in $3 million above budget, at $281.5 million total; investment income came in $1.1 million above budget, at $1.8 million total; parking meter receipts came in $1.8 million under budget, at $5.1 million; and building permits came in $2.2 million under budget, at $15.6 million total.

“Our tax office quickly got back up and running” after City Hall’s initial closure in mid-March due to the pandemic, Elicker said. He said the building department never stopped working, and the transportation department stepped up its parking meter and ticket revenue collection after an initial City Hall-ordered pause for much of the spring.

The $6.5 million revenue shortfall, Elicker said, ​“is a much better outcome than we were expecting.”

Expenditures: $5.9M Saved

On the expenditure side, Penn said the public schools budget came in $865 in the black — a significant swing from the potential $8.3 million deficit that the school system was projecting this spring.

“Some of that dramatic improvement was an outcome of the pandemic and schools being closed for much of the fourth quarter of the fiscal year,” Penn said. School closures meant savings in utilities, transportation costs, and overtime costs.

He said the savings also reflected hard work put in by his team in collaboration with NHPS leadership and the Board of Ed to control costs and maximize grants.

“My team and I are much more optimistic about our financial position” this year than at this same time last year, he said.

According to the report, the city spent roughly $5.9 million less than budgeted last fiscal year. In March, the city projected spending around $400,000 more than budget. In June, the city projected spending roughly $800,000 less than budget.

Elicker singled out police department as spending $2.6 million less than budgeted last fiscal year. Its total expenditures came in at $38.8 million. The fire department spent $280,180 more than budgeted, at a total of $34.9 million.

“With department savings, expenditure controls, and really looking at the personnel situation with the city, we were able to realize approximately $5.9 million in overall expenditure savings,” Gormany said. He said those expenditure savings just about balanced out the entirety of the revenue shortfall — thus the $650,000 overall general fund deficit.

Medical Fund: $2.2M Surplus

Outside of the general fund, Elicker and Gormany said that the city spent much less on employee healthcare than anticipated.

Much of those savings came during the pandemic. Elicker said the city spent $6.9 million less than anticipated on healthcare costs between March and June. Overall, the medical fund ended the fiscal year with a $2.2 million surplus.

“It’s hard to know entirely why,” Elicker said about reduced employee healthcare expenditures during the pandemic. ​“People were spending a lot more time at home,” he ventured. ​“People were not getting sick as much because they weren’t interacting at people. They weren’t getting injured as much” because they were largely working from home.

The pre-audit report shows that the city spent a total of $111.8 million on medical benefits last fiscal year, down from roughly $118.6 million the year before.

Elicker said that the city also saved $1.5 million last fiscal year thanks to city retirees switching to Medicare Advantage plans.

School Custodian Dispute

Earlier Tuesday afternoon, in anticipation of the budget surplus presser, Service Employees International Union (SEIU) 32BJ sent out an email press release stating that over 160 local part-time school custodians faced imminent layoffs — and that the city and NHPS should direct whatever budget savings they’ve achieved towards keep those New Haven residents employed during the ongoing Covid-19 crisis.

“Our 160 union members don’t understand how the Mayor and city government can make this sudden, drastic cut at a time of such economic hardship,” 32BJ SEIU District Leader Alberto Bernardez is quoted as saying in the press release. ​“New Haven has already received its entire allocation for the coming school year from the state. How can they justify hurting their own city residents and risking school preparedness?”

During the 4 p.m. City Hall presser, Elicker said that he had met with roughly 20 representatives of the janitors union roughly two hours earlier.

The mayor said that he and the local custodians discussed setting up a follow-up meeting for later in the week that would include representatives from the city, NHPS, the union, and the custodians’ employer, Eco-Urban Pioneers. That’s the NHPS school cleaning contractor run by retired city police officer Shafiq Abdussabur.

Elicker noted that schools employ some janitors directly and pay for nightly part-time work through Eco-Urban. The dispute in question involves the latter group of workers.

“My understanding is that there is a discussion between Eco-Urban and the administration of the public schools about the fact that we do not have kids in our schools right now” and the buildings do not need to be cleaned at night as frequently as they otherwise would during a regular school year, Elicker said.

Penn said NHPS has a similar take.

He said last week NHPS forwarded a proposal to Eco-Urban that suggested temporarily halting nightly maintenance work for the part-time custodians for six weeks, and then resuming work — with even more hours and part-time custodians needed — as students prepare to return to school in person later this semester.

“From our point of view, it actually translated into $150,000 more revenue for Eco-Urban,” Penn said, because of the increased work hours on the back end. That work increase, he admitted, would come after a ​“time lag” of six weeks that Eco-Urban custodians would not be needed at city public schools.

“Our next step is we sit down and ask, ​‘What’s your counter proposal?’” Penn said.

“We already have a meeting on the calendar,” Elicker said.

Reached by phone after the meeting, Bernardez said he is still concerned about layoffs.

“These are more than 150 workers from our own community in New Haven who have been working throughout this situation” and deserve to be treated fairly, he said. He confirmed that the mayor promised to ​“bring all the players together” to discuss ongoing negotiations among NHPS, Eco-Urban, and the janitors union.

On Tuesday night, Abdussabur told the Independent by phone that his company is indeed in ongoing negotiations with the public school system about its school cleaning contract.

“Our biggest concern is just making sure that, if workers are laid off, can we continue to maintain a highly trained professional cleaning staff that is ready” to keep schools safe for students when students do return to in-person school, he said.

Abdussabur said he employs primarily working-class African American and Hispanic New Haven residents, exactly the population that has been hit hardest in the city by Covid-19, as well as by a subsequent increase in street violence this summer. He said his workers have kept cleaning the schools throughout the pandemic, and that he used his company’s Paycheck Protection Program (PPP) federal loan to make sure his employees stayed on the payroll. Abdussabur later shared a demographic breakdown of his workforce, showing that 75 percent of his employees are city residents, 65 percent are African American, and 33 percent Hispanic.

If the school system decides it does not need part-time custodians cleaning the buildings for the next six weeks, he said, he doesn’t think he’ll be able to keep his part-time employees employed for that interim — likely resulting in their signing up for unemployment.

“I believe in my workers,” he said. ​“I believe that we all have a moral obligation to do right by these workers and to make sure that their lifestyles during Covid, that we try to keep them uninterrupted and ensure that we maintain a continuity of service and safety for the largest school district in the state.”

Click on the Facebook Live video below to watch the full press conference.