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Next Tuesday New London voters will be asked to approve a $42.3 million 2012-2013 city budget that calls for spending about $644,000 less than the city spent in the fiscal year ending June 30. A second question will ask for approval of a 7.5 percent increase in the property tax rate to pay for that budget.
The council flat funded the $39.8 million education budget, which is not subject to the referendum vote.
That the city is proposing to spend less and tax substantially more is an indication of just how out of kilter its finances have become. If voters reject this good-faith effort to get the budget back in balance they invite cuts that will go so deep public safety and vital services will be impaired. Of perhaps greater concern is that if voters force the council and mayor to cut deeper the administration will be operating on such a thin fiscal edge that a large, unexpected expenditure could bring about insolvency.
In the last five years of the city manager form of government taxes were held steady and services largely intact. But like any magic trick it was an illusion. When the 2006-2007 fiscal year ended on June 30, 2007 New London reported a very healthy fund balance - in essence a rainy day fund - of $13.6 million. It has steadily eroded since. When the most recent fiscal year ended it was all but gone, about $312,000 remaining.
That, in large measure, is how the city kept taxes steady without slashing spending. As President Bill Clinton noted in his recent address to the Democratic National Convention - it's arithmetic.
Mayor Daryl Justin Finizio, working with Finance Director Jeffrey Smith, identified early in his administration this troubling and unsustainable trend. Tough negotiations between the mayor and City Council have produced a lean budget and a minimal tax increase.
In fact most of the proposed tax increase, 91 percent of it, is driven by the need to generate revenues sufficient to actually support city services. Look at the numbers from the fiscal year that recently ended and you see the problem. In an $81.9 million budget, revenues fell $3.9 million short of estimates. Tax revenues came up $1.2 million short, income raised by charges for city services $1.1 million short, and state and federal revenues were off by nearly $700,000.
It is not hard to conclude the revenue estimates were never realistic to begin with.
To address this the mayor proposed and the council adopted a spending plan that lowers non-property tax revenue estimates by nearly $2.7 million, to a realistic level. The spending plan also uses a more practical property-tax collection rate, based on a 10-year average.
What this all means is that the property tax rate has to go up, even as the city projects spending to go down over what the city spent last fiscal year. Through contract concessions, reforms to reduce overtime, an executive order to eliminate pay for comp time, and staff reductions equal to 27 full-time equivalents, Mayor Finizio is cutting spending in many departments.
The mayor's office, police, recreation and the council all see substantial spending reductions. And while the fire service sees an increase of 5.3 percent over what was budgeted last year, that line item too was way out whack. The fire department overspent its budget by 13.4 percent due to mandatory overtime that the prior budget failed to account for. In actuality, the fire service spending is also going down over what was actually spent last year.
One more note. When compared to the budget approved for 2011-2012, the proposed expenditures go up $277,276, about 0.66 percent. But that year-to-year increase is deceptive, because the 2011-2012 budget was arguably never realistic to begin with and was overspent by $1.7 million.
The bottom line is that a budget is now before the voters that contains realistic revenue estimates and genuine efforts to curb spending. Voters should approve both the budget and 27.22-mill tax rate.