An analysis of the first quarter of the 2012 fiscal year is predicting a $1.9 million deficit under current patterns, Finance Director Jeff Smith said on Monday.
Smith told the Finance Committee that initial predictions have four departments overspending their budgets by $825,131 while revenue shortfalls amount to an estimated $362,262. In a separate topic, Smith also said a number of capital projects in recent years have exceeded their budgets by a total of $2,221,153.
The figures are based on the $81,087,328 budget set for municipal departments and New London Public Schools for the 2012 fiscal year. A referendum challenge for the municipal portion of the budget has been set for November of 2013, four months after the close of the fiscal year, but Law Director Jeffrey Londregan has given the legal opinion that the city can continue to operate with the October budget.
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Smith said some figures are fixed while others are projections based on the first three months of municipal finances. However, he said the early figures represent a “developing problem” which he wanted councilors to be aware of.
“Doing projections this early in the year is really reading tea leaves, so these numbers will change,” said Smith.
Smith said the estimates show over-expenditures of $651,686 in the New London Fire Department, $122,514 in the New London Police Department, $43,931 in the Department of Public Works, and $7,000 in the City Clerk’s Office.
The majority of the fire department overages are a result of overtime costs, Smith said. He said the department had a staffing level of 18 per shift for part of the summer before the firefighters’ union agreed to lower it to 16 as part of negotiations with the city to avoid layoffs.
Mayor Daryl Finizio said discussions with the union are continuing in an effort to keep the department within its budget.
“We are doing all that we can to correct it, and I think we’ll have a better sense when the second quarter numbers come in if we’re going in the other direction,” he said.
Smith said he expects the City Clerk’s Office overage will not be a major issue. He said the Public Works overage is currently driven by utility costs, and that further changes are likely based on the severity of the winter. Finizio said he is not expecting a deficit in the police department.
“The police department has assured me that the first quarter is over traditionally,” he said.
Councilor Adam Sprecace said he would like projections to be as detailed as possible to best show the public where cost overruns are occurring. He said numbers based on the first quarter may be inflated due to factors such as the firefighter staffing.
“If these numbers do need to be tweaked, and it sounds from this conversation like they do, I think we need to publish those as soon as possible because we’ve taken enough black eyes on finances,” he said.
The largest revenue shortfall is a fixed amount based on state pilot funds for hospitals and colleges. Smith said this is made in a one-time payment and that the amount was $241,103 less than expected.
Other revenue shortfall projections are projections made on first quarter finances and include $50,000 shortages in conveyance taxes and ambulance fees, a $25,504 shortfall in Public Works revenues, and a $25,000 shortfall in parking fees.
“Hopefully these will change and we’ll do better,” said Smith.
Smith also said building fees have a budgeted revenue of $475,000 and have only collected $22,000 in the first quarter. He said New London has historically done well with building fees and that some fees will be dependent on whether the Village on the Thames development at Fort Trumbull begins within the fiscal year.
Finizio said supplemental cuts may be required to keep finances within the budget, as the general fund that can be used to cover overages at the end of the fiscal year is largely depleted.
“This is anticipated,” he said. “We all knew we were on thin ice with the cuts that were made.”
Council President Michael Passero asked whether any proposed cuts will be ready in early January. Finizio said it is likely that these proposals would be made later in the month after the second quarter numbers have been finalized.
“My concern is that the more months we have to spread out the pain, the easier it will be,” said Passero.
Finizio said spending is typically highest during the summer, but that other costs including snow removal and the effect of Hurricane Sandy will appear in the second quarter analysis. He said any cuts will depend on the projected size of a deficit and whether there is flexibility in the budget to cover a budget gap.
In discussing capital projects, Smith said several projects were completed with funds left over for the 2012 fiscal year, totaling $1,269,955. These included $315,915 in a reserve for capital items, $225,400 from City Pier improvements, $175,614 from 2012 bonding, and $151,151 from vehicle leasing.
However, Smith said a number of projects have also resulted in overspending totaling $2,221,153. The largest was $563,919 for the Parade Plaza reconstruction, followed by $434,413 for street improvements and $418,744 for improvements to parks and grounds. Two expenditures were made without appropriations, including $30,664 for pool repairs at New London High School.
Councilor Donald Macrino said he considered the overruns “absolutely incredible mismanagement” over a period of years and asked if there were any safeguards that could be taken to avoid them in the future. Smith said the city needs to recover state funds in some cases but also ensure that departments request City Council approval for any expenditures beyond available funds.
“I think there was an attitude that maybe they knew better than the council,” he said.