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New London - Several former and current city officials are questioning the budget estimates announced by Mayor Daryl Justin Finizio Friday, which he said show the city faces a $12 million shortfall.
"I don't believe the numbers,'' Councilor Adam Sprecace, a member of the council's finance committee, said Saturday.
Council President Michael Passero said it appears the city is facing about a $4 million shortfall in the current budget, but he does not believe there is a "significant budget crisis," as Finizio characterized it. He questioned why the mayor would choose a Friday evening press conference to make such an announcement.
"In an $82 million budget, it can swing one way or the other," Passero said.
"There was no public necessity that required Friday night's dramatic announcement. The bottom line is, we are doing all right."
On Thursday, Finizio called for a special City Council meeting Friday to discuss "potential purchase and sale of real estate,'' but the meeting was canceled Friday after Passero questioned whether the closed-door meeting was legal.
Instead, Finizio announced the $12 million budget gap. City officials said Saturday that the shortfall seems to span the 2010-11 fiscal year, the current fiscal year, and the coming 2012-13 fiscal year.
Finizio said the current budget is projected to be $4.4 million short. To cover that, Finizio said he would tap the city's $6 million "fund balance," a rainy day fund that can be used for emergencies. He also said $1.3 million already had been drawn from the rainy day fund to cover a deficit in the 2010-11 budget.
He said an ordinance mandated that another $6 million would be needed to replenish the fund balance. The accounting for that would happen as part of the 2012-13 budget development process, according to city officials.
Finizio announced a hiring freeze, suggested a supplemental tax bill for this year, and said the sale of city property and the restructuring of debt may be needed to address the shortfall.
"It seems a bit out of proportion,'' said James Lathrop, former finance director for the city who went to work for the Town of Westerly last summer. "They have a cash flow problem."
The shortfalls are in different fiscal years, Lathrop said. What Finizio referred to as a mandate to refill the rainy day fund, Lathrop said, is a policy decision made by the council. Some communities keep a reserve of up to 10 percent of the total budget, he said. New London's reserve was about 8 percent of the budget.
Sprecace, who was poring over some budget documents at home on Saturday, said it appears the $12 million figure is not accurate, and Finizio is talking about different budget cycles.
"In one breath, they're saying there is plenty of money and in the next, we are in dire straits. It's difficult to believe the statements we're getting,'' Sprecace said.
For example, Finizio said the city came up short by $1.3 million in the 2010-11 budget. But this past November, the administration reported that the 2010-11 budget would end with a slight surplus. Sprecace questioned how the numbers could change so dramatically in just two months.
The predicted $4.4 million deficit in the current year's budget also includes recent settlement agreements, retirement packages and transition costs for the new administration - all numbers the council has been asking for but has not yet seen. Sprecace estimates that total to be several hundred thousand dollars.
"There are so many discrepancies in the numbers,'' Sprecace said. "It's far too gray to make any decisions."
Passero and Sprecace both said a far better way to handle the issue would have been to discuss the numbers at a City Council meeting.
"The way a democracy works, he comes into office; he suspects the budget might be in trouble; he gets his finance director to work on it; he tells the council president, who calls a council meeting; and the mayor sends the finance director over and he keeps the finance committee up to speed,'' said Passero. "And it's all done in the open."
But, he added, he has faith in the city's current budget director, Jeff Smith.
"I hope that from this point on, the City Council will have access to the finance director and financial records,'' Passero said. "The City Council will work its tail off to verify there is indeed a hole in the budget, and if there is, we will work very hard to remedy the problem."