Budget Crisis Just Beginning

Taxpayers are hopping mad about a 11 percent hike in the bills they began receiving this week; some have begun organizing community meetings to explore possible actions against it.

But based on a look at the government’s structural financial woes, the city would have had to raise taxes almost twice as much to truly balance the annual budget taking effect July 1 — or figure out how to cut another $30 million.

That picture emerged from a discussion Wednesday between one of the city’s most informed analysts of the long-term budget mess and one of its biggest long-term taxpayers.

The discussion — between Yale economics PhD student Mohit Agrawal, who heads New Haven’s independent Financial Review & Audit Commission (FRAC); and city native Allan Hadelman, who owns 400 units of rental housing in town — took place on WNHH FM’s ​“Dateline New Haven” program.

Hadelman predicted that once landlords pass some of the new 11 percent tax increase onto renters, people will consider moving out of town. He said the city needs dramatic action, including greater help from Yale and the state, to stanch the bleeding.

Agrawal reported that FRAC found that the newly passed budget is already $20-$50 million out of whack. He said taxes would have needed to go up 20 percent for a truly balanced budget; he predicted the city will need to take emergency measures in coming months to make up the difference. A state oversight board, he said, would never have approved the new budget.

Hadelmen said as part of a solution, the city needs to improve its optics by ordering immediate 5 percent cuts to all department budgets. He also criticized the Harp administration’s decision to give raises to 37 executive and confidential employees (some of whom hadn’t received raises in four years) at the same time it raised taxes by double digits. (Click here for a background story and passionate reader discussion on that; here from an update by WTNH including all the specific raises.)

In response, Agrawal said those raises, totaling less than $250,000, do not materially affect the real challenges facing the city budget: $1.5 billion in overall debt, the highest in the state; the benefits cost of union contracts, which can’t be summarily cut; and perilously underfunded pensions.

In the immediate term, FRAC has identified some meaningful potential savings, he said. For instance, he said, New Haven should follow the lead of governments like Nevada’s by switching most pension funds into passive investments, obviating the need for most of the $2 million it pays each year for pension advisors and managers. But he also noted that New Haven’s effective tax rate is in fact lower than that in other Connecticut cities, and it doesn’t have proportionately more school administrators. He noted that city government has slashed some departmental budgets like parks’ and public works’ as much as 50 percent over the past decade.

On the other hand, New Haven has higher per capita debt and far more cops than its counterparts do. The force has 490 budgeted police positions, 430 of which are currently filled, according to Agrawal. Some, like Mayor Toni Harp and top cops, argue that having a bigger force, with more cops on the street, has kept our city safer; others, like retired Assistant Chief John Velleca, argue that a significantly smaller force could do the job as well and free up some money for needed contract increases.

Agrawal added that New Haven has 72 firefighters on per shift compared to 64 in Bridgeport.

Long term, he said, the city will need to wrestle with bigger questions, like whether it can have far fewer cops or new minimums staffing rules for firefighters; whether it can cut the school budget below the state’s minimum funding level as currently understood; whether to submit to state oversight in return for outside action to alter labor contracts; whether it can find ways to bring in enough new state or Yale money to eliminate or dramatically shrink the structural deficit. He said FRAC has begun looking at those questions. He invited members of the public to follow the process and to add their thoughts at this web address.

At the end of the discussion, both speakers agreed that the problems aren’t simple, and that playing the ​“blame game” won’t help solve it.

You can hear the full conversation with Agrawal and Hadelman on WNHH FM’s ​“Dateline New Haven” by clicking on the audio and Facebook Live boxes below.