Mayor Daryl Finizio told the City Council on Tuesday that the anticipated deficit in the 2013 budget is about $1.4 million but that he expects the municipal departments will be able to realize savings to stay within their approved budgets.
Finizio said Finance Director Jeff Smith told him that the estimates for the city’s financial situation after the second quarter of the 2013 fiscal year outline a revenue shortfall of $692,847 as well as expenditures that are $724,776 over budget. The estimates after the first quarter put the deficit at about $1.2 million.
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The budget figures came in on the same day at the citizens’ group Lower Our Taxes filed a lawsuit against the city and several municipal officials challenging the validity of the 2013 budget. Also on Tuesday, city auditor Ron Nossek told the Finance Committee that a preliminary audit of the 2012 fiscal year shows a $3.7 depletion of the general fund.
The latest projection shows a reduction in the first quarter estimate of $825,131 in overspending but an increase in the revenue shortfalls, which were put at $362,262 after the first quarter. Finizio said the revenue shortfalls include $200,000 in building permits, $130,000 in conveyance taxes, $82,150 in distressed municipality funds, and a one-time loss of $241,103 in pilot funds confirmed in the first quarter.
Expenditures that are over budget include unemployment by $160,000 and health insurance for retirees by $100,000. Finizio said the majority of the overspending has been in the New London Fire Department, with the estimate anticipating that the department will exceed its budget by about $428,000 at this point. However, Finizio said this is a significant reduction from the $651,686 estimated overage from the first quarter projection. He said the latest figures are beginning to factor in the reduction in minimum staffing levels from 18 to 16.
“I must say that in the fire department we’ve seen a dramatic improvement,” he said.
Finizio said he has been working with department heads to find additional savings in the current budget. He said Public Works Director Tim Hanser anticipates he can save $350,000 through efforts such as deferred maintenance and restrictions on overtime while Police Chief Margaret Ackley expects that she can save $300,000. Finizio said that a halt on all bonding would save an anticipated $600,000.
Finizio said the city could save $200,000 by cutting subsidies to areas such as the Public Library of New London, but that he would consider this an “absolute last option.” He said other more difficult options for staying within balance would be a supplemental tax bill or a deficit spending resolution, the latter of which he said he would veto unless it passed with the six-sevenths majority necessary for an override.
“If these projections stay on course and everything else goes wrong, I want everyone else to know that I’m prepared to make these cuts that I’ve outlined to make sure that we’ve balanced the budget,” said Finizio.
Councilor John Maynard criticized the possibility of the police department finding further savings by maintaining vacancies, saying he considers the department to be understaffed.
“Our police department hasn’t been able to be proactive,” said Maynard. “They’ve been reactive.”
Finizio said Deputy Chief Peter Reichard has been overseeing an effort to reduce crime by allocating more resources to areas of the city with higher crime rates. He said the goal would be for the 2014 budget to include funding to hire additional officers.
“I think our patrol strength is adequate at this time, but I would agree with you 100 percent that we need to be hiring more officers,” Finizio said.
Ron Nossek, the city’s auditor, told councilors at the Finance Committee that New London’s general fund lost about $3.7 million in the 2012 fiscal year and fell to about $1.2 million.
A preliminary report of an audit of the city’s finances on June 30, the end of the fiscal year, says that the city budgeted $80,849,103 in revenues and collected only $79,322,738 while budgeting $81,650,232 in expenditures and spending $83,242,473. An item for transfers in was budgeted at $1,001,629 while the actual amount was $416,629.
Nossek said the result of the revenue shortfalls and overspending was a depletion of the general fund by $3,716,259. He said this brought the fund from $4,979,248 at the beginning of the 2012 fiscal year to $1,262,989 at the end.
The largest revenue shortage in 2012 was a collection of $1,202,436 under the anticipated level of property taxes. There was also $307,414 less than expected in investment income.
In expenditures, the departments exceeding their allocated budget included the New London Fire Department by $560,295, the New London Police Department by $403,522, the Department of Public Works by $177,969, legal costs by $149,934, and unallocated insurance by $149,446.
Nossek said the general fund is at about 1.5 percent of the city’s operating budget. He said the city has generally followed a policy to have its general fund at 8 percent of the operating budget while rating agencies prefer a ratio of 7 to 15 percent.
Councilor Adam Sprecace said he was dismayed that the audit identified overspending despite efforts in the end of the fiscal year to reduce spending within the departments, but that the audit put the city in a better situation than originally estimated. Smith .
“It appears as though we’re recovering and hopefully we can continue that process,” he said.
“While we’re nowhere near the fund balance that we should have, we’re a wee bit healthier than we thought we would be,” said Council President Michael Passero.
Finizio also said the city is working to replenish the fund, but said the balance should ideally be closer to about $7 million.
“You’re still way too low and we need to operate under the assumption that we have to balance this budget on its own terms,” he said. “We really shouldn’t rely on this very nominal fund balance.”