LOT Sues New London Over Budget, Referendum

A city tax group has filed a lawsuit against the city of New London and several municipal officials, saying it does not have the authority to spend money or collect taxes for the current fiscal year.

Lower Our Taxes—which has also been referred to as Looking Out for Taxpayers—filed the suit with the City Clerk’s Office today. LOT, described in the suit as a group advocating “responsible government and sound fiscal management for the city of New London”  is named as a plaintiff, courtesy of resident Dennis Downing. Residents Avner Gregory, Dwight Gross, Barbara Hample, Andrew Lockwood Sr., and Susan Plunkett are also named as plaintiffs. Each of the named plaintiffs was a petitioner in the effort to challenge the City Council’s , an increase of 5.1 percent over the 2012 rate.

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In addition to the city, the suit names Mayor Daryl Finizio, City Clerk Nathan Caron, Finance Director Jeff Smith, and all seven members of the council as defendants.

The council passed the revised budget on Oct. 9 following a Sept. 18 referendum vote that defeated a $42.3 million budget and 7.5 percent tax increase. Following the vote, Law Director Jeffrey Londregan opined that further referendums on the budget were impossible under the City Charter and a past legal precedent because the city had made expenditures equivalent to 25 percent of the prior year’s budget.

On Nov. 5, the council disagreed with Londregan’s opinion and accepted the second petition. However, the council could not raise the majorities necessary to reduce the budget and tax rate, send it to a special referendum vote, or approve the Oct. 9 budget as an emergency measure. As a result, the referendum was scheduled for this November’s regular election, which takes place about four months after the conclusion of the 2013 fiscal year.

Londregan said the city would be able to operate based on the Oct. 9 budget, and revised tax bills reflecting the increase to the mill rate were sent out in December. The bills inform residents that payment is due before the end of the month to avoid interest penalties.

However, the LOT suit charges that as a result of the city’s actions New London “does not have an effective or operative appropriation ordinance and does not have an effective or operative ordinance laying a tax rate and authorizing city officials to collect taxes.” The group says the city should not be able to make appropriations or incur liabilities until the voters decide on the 2013 budget at referendum.

The suit says the city has acted “improperly, illegally, and without legal authorization” to expend funds and incur liabilities. It says the council has incurred $9 million in bond debt and made numerous appropriations for items in the 2013 budget as well as items where Finizio "failed or refused to submit a recommendation in writing to the City Council."

The suit charges that the scheduling of the referendum for after the close of the fiscal year will render the budget challenge meaningless and accuses the city of “[intending] to deprive the plaintiffs of their right to present a referendum petition to the defendants and have a meaningful vote on the issues presented by the referendum petition.” The suit accuses the city of depriving residents of due process under the state and federal constitutions as well as the City Charter.

Jeff Smith is charged in an individual capacity, with the plaintiffs saying the finance director “knew or should have known that he issued, directed, and/or authorized payment for items on behalf of the city of New London which were improper and/or illegal and for which no valid or legal appropriation had been made, or for payment of which there was not sufficient balance in the proper fund, or which should not have otherwise been approved.”

The suit demands:

• “Fair, just and reasonable money damages”
• Attorneys’ fees
• A declaratory judgment that the budget and tax rate do not become operative until voted on by electorate
• A declaratory judgment that the City Charter mandates that before the annual appropriation ordinances become effective, the council may only make appropriations upon recommendation of mayor for current municipal expenses - chargeable for the year when effective - to an amount not to exceed 25 percent of amount appropriated for a similar item in the prior year, and that no other liabilities should be incurred except in accordance with provisions of the annual appropriation ordinances
• A “temporary and permanent mandatory injunction” enjoining defendants from any further expenditures or liabilities except those provided for by this section of the charter
• A court order that Smith must prevent city or employees from incurring any further liabilities or authorizing any other payments except as provided for by this charter section and/or until an annual appropriation ordinance becomes effective
• An injunction enjoining defendants from further tax collection until a vote on the 2013 budget and tax rate or further action of council
• Any further relief deemed appropriate by court

Attorney M. John Strafaci is representing the plaintiffs. The suit says it is seeking monetary damages in excess of $15,000.

Councilor Adam Sprecace said he was not surprised that a lawsuit had been filed regarding the referendum, but did not expect a demand for monetary damages. Sprecace previously said that he did not consider New London to have a budget after the Nov. 5 votes.

“I always thought we were in uncharted waters and I still feel that way,” he said.

Sprecace said he expects that the suit will likely be slow in making its way through the courts and that it is unlikely a decision will be made before the end of the fiscal year. However, he said the court will be able to provide a resolution on controversial issues such as whether budget petitions may be heard past a certain point in the current fiscal year.

“The most important thing in my mind is that this will help bring some closure to the issue,” he said.

Council President Michael Passero said he would also look forward to a judicial resolution of the issue. Passero said he considered that the council followed the charter to its “logical or illogical end” in the Nov. 5 vote.

“I don’t see any express charter violation there,” he said. “It will be interesting to see what a judge says.”

Mayor Daryl Finizio said the city has been operating on Londregan’s opinion on the current fiscal year and tax rate.

“In regard to how the city is issuing tax bills and following the adopted budget, the city is following the advice of the law director,” he said. “To the merits of the lawsuit that has been filed, the city does not comment on pending litigation per standard practice and procedure.”

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