Budget Passes With $53M State, Yale Bump

Alders overwhelmingly adopted a $606.3 million operating budget for the new fiscal year that keeps taxes flat and the libraries open, jacks up the city’s pension contributions — and assumes the state and Yale will fork over an extra $53 million.

The legislators took that vote Wednesday night during a special full Board of Alders meeting held online via Zoom and YouTube Live.

The alders voted 27 – 2 in favor of a general fund operating budget that weighs in at $606,344,052 for Fiscal Year 2021 – 2022 (FY22). The two alders to vote in opposition were Downtown’s Abby Roth and East Rock’s Anna Festa.

Both opposed the amended general fund budget on the grounds that assuming a $4 million annual increase from Yale, which rarely heeds the alders’ budget-related calls for more money for the city, is too risky of a fiscal move to make. (The Elicker administration has had a team negotiating increased voluntary payments with Yale.)

The alders also voted 27 – 2 in support of an unchanged version of the mayor’s two-year, $60 million capital fund budget. Roth and Festa were again the alders voting no after a failed attempt to require a public process for debt restructuring that has long-term costs for the city — aka, ​“scoop and toss.”

The approved budget now advances to the mayor’s office for a final signature before going into effect on July 1.

Education Cut; $500K For Alder Priorities

The budget OK’d by city legislators Wednesday night is nearly identical to the the amended version endorsed by the Finance Committee two weeks ago. That version in turn was nearly identical to the ​“forward together” budget put forth by Mayor Justin Elicker on March 1.

It keeps the city’s mill rate flat at 43.88. It ditches all of the mayor’s sort-of half-proposed ​“crisis” service cuts — including the closures of Westville’s Mitchell Library, the East Shore Senior Center, and the Whitney Avenue fire station.

The final budget preserves the only major fiscal change imposed by the Finance Committee earlier this month.

That is, it reduces the mayor’s year-over-year proposed increase to the city’s Board of Education by $1.5 million. It puts $1 million of those savings into the catch-all ​“expenditure reserve” account to cover unexpected pandemic-related costs. It moves the remaining $500,000 into five new broad-based funds that correspond with the alders’ five top legislative priorities.

That means $100,000 for a job training outreach fund, $100,000 for a community policing forum fund, $100,000 for affordable housing studies, $100,000 for a health engagement fund, and $100,000 for an environmental education fund.

The only other changes imposed by the full Board of Alders on the final budget Wednesday night came from a two-pronged amendment introduced by Finance Committee Vice-Chair and Westville Alder Adam Marchand.

That amendment specifies that the Office of Legislative Services (Board of Alders staff) is the only department allowed to determine how to spend the $500,000 spread across the five new legislative-priority funds.

Marchand’s amendment also cut four newly added leadership positions in the fire department — three captains and a lieutenant. It moved the nearly $398,000 in personnel-related savings into the ​“expenditure reserve” line, bringing that latter account up to $2,397,874 for the fiscal year to come.

Beaver Hills Alder Chair Brian Wingate applauded the board’s support for the ​“bold amendments” that set aside money to pursue the alders’ recently adopted legislative agenda.

He said the $100,000 for a community policing forum fund is particularly urgent need, given the recent citywide spike in violence.

“As the vice-chair of the Public Safety Committee, I see crime rising,” he said. ​“Every day, we’re losing our loved ones to senseless gun violence. At this particular time, taking a bold move to strategize, put pen to paper, figure out how to calm the storm” is what the city needs to do.

Newhallville Alder Delphine Clyburn also urged her colleagues to vote in support of the amended budget. ​“I support this amendment. It speaks loud,” she said. Thanks to the alders’ legislative agenda, ​“our neighborhoods of need will thrive, not just survive.”

Pension Funds Hiked 26%

The final budget approved Wednesday night also leaves untouched two of the Elicker Administration’s most aggressive fiscal pushes in the ​“forward together” budget: a substantial hike for the pension funds, and an even larger assumed increase in aid coming from the state and Yale.

The pension fund bump is $17.5 million in total, or 26 percent. That brings the city’s annual contribution to its two public employee pension funds up from $67.2 million to $84.7 million.

That increase is driven largely by the city’s and the two public pension fund boards’ decisions to follow the advice of city-hired actuaries and reduce each fund’s estimated rate of return on its investments from 7.75 percent to 7.25 percent.

“While the city’s advisers recommended 7 percent,” Prospect Hill/Newhallville/Dixwell Alder Steve Winter said Wednesday night, ​“this is a significant step in the right direction toward increasing our pension funding.”

With the lowered rate of return estimate, the combined unfunded liability number for the city’s two pension funds is now up to $954 million. The alders recently reconvened a Pension Task Force to explore different ways to close that gap in a sustainable way.

Will Yale Deliver The $?

The final budget also includes Elicker’s projected $53 million revenue increase from the state and Yale.

During Wednesday night’s deliberations, many alders were optimistic that the state will increase its annual municipal aid to New Haven by $49 million, which is the fiscal bump provided by the proposed budget voted out of the state legislature’s Appropriations Committee.

Alder after alder on Wednesday singled out New Haven State Sen. and President Pro Tem Martin Looney for praise in helping usher through the legislature a reform to how municipal aid payments are calculated to prioritize cash-strapped cities like New Haven.

“I thank the state delegation, and in particular Sen. Looney, for hopefully bringing crucial revenue to our city this year,” said Ward 1 Alder Eli Sabin.

The state legislature is slated to vote on a final biennium budget before the state legislative session ends on June 9.

Following up on Alder Festa’s critique during the last Finance Committee meeting, both she and Alder Roth explained their no votes Wednesday night by citing their skepticism that Yale will fill the $4 million gap left between a $49 million increase from the state and a $53 million assumed increase overall.

“Four million dollars is a drop in the bucket for them,” Roth said about Yale, and the university should pay up. But recent history is not encouraging, she said.

Two years ago the alders added $4.9 million to the budget with the hopes that Yale would fill that gap, she recalled. How much of that did the university wind up paying? ​“Nothing.”

In the current fiscal year, the alders budgeted $2.5 million in a ​“Revenue Initiative” line with the assumption that Yale again would pony up. ​“With one month left, we have not received any of this.”

“I appreciate that this board wants to use this budget to send a message to Yale,” she said. ​“As the past shows, Yale’s not going to make the decision whether or not give $4 million based on a line item in our budget.”

Festa agreed. ​“We will have a financial gap that will need to be filled if some of these assumptions fail,” she said. ​“This board will have to find the funding to make up for that gap.”

She also singled out for criticism how few updates the public has received about ongoing negotiations between the university and a committee appointed by the mayor.

“We have not received any reports, any updates from that committee,” she said. ​“Where is the transparency in that process?”

East Rock Alder Charles Decker spoke out in favor of the increased revenue assumption from Yale, which currently makes a $13 million annual voluntary payment to the city.

Decker called the $53 million state and Yale aid assumption ​“a real gut check moment.” He said the university should heed not just the alders, but also the many residents who came out to public hearings on the budget to call on Yale to pay its fair share. Nearly 60 percent of the city’s real estate value is tax-exempt, with a large chunk of that tax-exempt property belonging to Yale and Yale New Haven Hospital.

“We expect Yale to invest in us and in our communities,” he said. ​“We expect Yale to respect New Haven.”

Click here to read a response from Yale’s spokesperson to local labor and elected official calls for the university to increase its voluntary payment to the city.

In an email press release sent out after the alders’ vote on the budget, the mayor applauded the decision to leave in the state and Yale revenue assumptions. ​“The budget puts us on a more sustainable financial trajectory all without increasing the mill rate,” Elicker is quoted as saying. ​“Now, it’s up to Yale University to invest more in our city and the state legislature and Governor Lamont to make the long overdue reforms to PILOT in order to make this budget a reality.”

“Scoop & Toss”? No Worries

The only other item debated Wednesday came during the vote on the city’s two-year, $60 million capital budget.

Roth introduced an amendment seeking to strike a handful of words that show up in Section VI of Appropriating Ordinance #3 on PDF Page 408 of this year’s budget book.

Those words — ​“or to restructure debt service payments” — may sound arcane, Roth said, but they allow for a rare, incredibly consequential bit of budget maneuvering to take place largely outside of public view.

Those words allow a committee consisting of mayor, the city controller, the Board of Alders president, the Board of Alders majority leader, and the Board of Alders third officer to vote on a bond issuance that restructures city debt by reducing short-term borrowing costs, allowing proceeds to be used to cover general operations, and increasing the city’s long-term fiscal obligations.

Before 2014, such an action would have to go through the full Board of Alders, including a public hearing by the Finance Committee, before being approved, she said. After 2014, the addition of those words to the budget allows for such a ​“scoop and toss” action to be taken solely by the smaller committee. ​“Scoop and toss” refers to the practice of restructuring or assuming new debt to pay for current operating expenses (rather than, say, capital projects) and fill short-term budget gaps, pushing greater debt into the future and endangering long-term finances. Analysts said the practice helped bring the city of Hartford to the brink of bankruptcy.

That is exactly what happened in 2018 when the city refunded roughly $160 million in existing debt, which resulted in a net present-value cost to the city of around $10 million.

Roth argued that removing these words would ​“improve financial transparency” by allowing all alders to vote on such a decision.

Board of Alders Majority Leader and Amity/Westville Alder Richard Furlow urged his colleagues not to support Roth’s amendment.

“Every responsible organization has a leadership structure that has the capacity to respond quickly to important issues,” he said. If the public is concerned about debt restructurings, he said, they can contact aldermanic leadership, the mayor’s office, or the alder that represents their ward.

“I’m asking colleagues to stand with a sound and sensible, ​‘No,’” Furlow said. He called on fellow alders to ​“have confidence in the leadership that you elected.”

The amendment failed 24 – 5, with Alders Roth, Festa, Eli Sabin, Steve Winter, and Darryl Brackeen voting in support. The alders then voted 27 – 2 in support of the unamended capital budget.