New London — Voters defeated the $42.3 million general-government budget Tuesday, sending a message that residents cannot afford a 7.5 percent tax increase.
By more than a 400-vote margin, voters in all three precincts defeated the budget, which would have increased the tax rate to 27.22 mills.
The official tally was 1,436 against the budget and 1,007 in favor. Nearly 19 percent of the city's 13,122 registered voters turned out to vote. Voters also defeated a question asking whether the tax rate should be set at 27.22 mills, by 1,440 votes to 963.
The budget would have required a 1.91-mill increase. The city has not had a tax increase since 2009.
"A 400-vote margin is significant enough to send a message,'' City Councilor Adam Sprecace said following the vote. "People are interested in transparent government and less government."
Mayor Daryl Justin Finizio, who spoke to about 20 volunteers who waited for results outside his office in City Hall, said the message was clear that people cannot afford a tax increase and are angry at how the city's finances have been managed over the years.
"This is not the result you all worked so hard for,'' he said. "But what we did was the hardest thing to do — we asked people to vote to raise their own taxes."
Despite coming up on either side of the question, it appears that Finizio, a Democrat, and Sprecace, the lone Republican on the council, agree on the next step for the city.
Both said the budget put before the voters was a "bare-bones" spending plan, and both said they do not intend to propose any reductions that would cut city services.
Some proponents of the budget had said that if the tax increase were held to 5 percent, rather than 7.5 percent, the senior center would close, recreation and youth services would be slashed and trash pickup would go to once every two weeks.
"I will not cut essential services,'' Finizio said Tuesday, promising no layoffs. "I intend to keep the city solvent and out of bankruptcy."
He said he would be meeting with department heads to discuss cost-savings measures.
Sprecace also said he would not be in favor of cutting services. He said he would look for revenues to offset the spending increases.
The budget the council and the mayor presented, and the tax increase that went along with it, were reasonable, Sprecace said, considering the city has lost millions of dollars in revenues over the past few years.
He said the finance director told the City Council on Monday that he could refinance the city's debt service this year and save about $500,000 in interest payments. And the finance department had set aside about $300,000 to cover the costs of merging the school district's finance office with the city's, but that is not expected to happen this year, he said.
"Provided the finance director is accurate in statements from (Monday), and provided no one has spent the money we earmarked for the business office, we're starting with an $800,000 savings, at minimum,'' Sprecace said.
In 2005, the last time the city's budget was sent to referendum, voters approved the $72.6 million budget, which included general government and education spending, 1,243 to 1,147. Voter turnout then also was about 20 percent.
The $39.8 million education budget for 2012-13 was not part of Tuesday's referendum.
Who has first crack at budget reductions?
While both sides of government may agree on the outcome of the new budget, there is controversy over how they will get there.
The City Council and Finizio have already started a debate over who will have first crack at reducing the budget.
Finizio said the budget process will have to start all over again, with a new proposal from his office, which would be sent to the council for review. Law Director Jeffrey Londregan agreed with Finizio's interpretation of the City Charter.
But Council President Michael Passero said the budget is an ordinance, so it will be returned directly to the council to be amended.
Under both scenarios, the mayor has the power to veto the entire revised budget or line items in it. But the council also can override any veto with a 6-1 vote.
In April, Finizio presented the council with a proposed $87.1 million budget, which was a 6.4 percent increase in spending and a 20 percent increase in taxes. It also included a 3 percent increase in school spending.
The grassroots group "Looking Out for Taxpayers" and members of the Republican Town Committee and other individuals unhappy with the proposed tax increase were instrumental in getting the 644 signatures needed to force the referendum.