Mayoral candidate Clifton Graves called Monday for City Hall to put the kibosh on Wednesday’s planned $44.5 million bond sale — and on any other planned borrowing efforts to pay for rebuilding schools.
Graves issued the statement days after Moody’s Investor Services downgraded its “outlook” on the city’s financial stability in anticipation of the July 20 sale.
“At this time of fiscal uncertainty, we need to begin to rein in the runaway school construction program we can no longer afford,” Graves stated in a press release. “For a city that is so heavily invested in bonded construction projects, even the smallest rise in interest rates needed to be paid on bond issues will translate into millions of dollars in unintended, unbudgeted fiscal costs.
“Mayor DeStefano and his school board members should ask themselves: ‘Does New Haven really need another new school building at this time of financial crisis?’”
Moody’s didn’t change its actual bond rating for the city. If it had, that would have increased the cost of borrowing for New Haven.
Instead, it looked at a number of trends and concluded that the future looks bleaker for New Haven’s finances. It changed its “outlook” status for the city from “stable” to “negative” — which signals to investors to an actual ratings downgrade could be on the horizon. Read all about that here. Among the trouble signs it cited: a $6 million deficit for the just-concluded fiscal year; a $7 million drop in the city’s “rainy day fund” of financial reserves; underfunded pensions; relatively high debt (6.1 percent); and a $16.5 million deficit in the fund covering workmen’s compensation and self-insurance for lawsuits.
Graves’ campaign platform calls for creation of a “blue-ribbon panel” to study city finances in depth and recommend changes. Former Mayor John Daniels created such a panel after he won the 1989 election. Graves also promised to cut executive salaries by 10 percent if elected and to do the same with the salaries of school administrators earning over $100,000 a year.
Acting city Controller Mike O’Neil stressed that all three major ratings agencies — Moody’s, Standard & Poors, Fitch — are maintaining the city’s bond rating.
“We were affirmed across the board,” he said. “The program [school construction] is functioning at a lower level in terms of borrowing than it was during the heaviest days of borrowing. I see no need at all” to stop the program.
Click here to read the Standard & Poor’s report. Click here to read the Fitch report.
Asked by the Independent for a comment, mayoral spokesman Adam Joseph echoed O’Neil’s points and added that the only two schools currently under construction are Hill Central and East Rock Community Magnet.
“Halting the program would result in huge financial losses and negatively impact the work teachers and students are doing in the classroom,” Joseph said. “School Change and the school construction program have created enormous demand for spots in New Haven public schools. We want to move the district forward, not backward.”