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Editor's note: This version has been updated to correct the potential impact on property owners.
New London - The mayor suggested Monday night that the City Council consider sending out one-time supplemental tax bills to raise between $1.6 million and $6.3 million to boost the city's savings account.
Mayor Daryl Justin Finizio told the Finance Committee that the city needs a fund balance replacement plan.
"We'd be out of the state of real financial crisis that we've been in," he said.
The fund balance is the city's savings account. In the early 1990s, the council adopted a policy to keep 8.3 percent of the budget, or about $6 million in a fund balance, or savings account. Municipalities can increase a fund balance in various ways, including saving year-end surpluses and taxing residents.
A healthy fund balance can also help a city get better interest rates when it goes out to borrow money for large projects. Bonding agencies look for trends in a municipality's finances to help determine interest rates.
The city's fund balance is currently at $1.2 million, according the Finance Director Jeffery Smith. But at the close of 2011-12 budget, when the city had to dip into the fund balance to cover a $4.7 million deficit in the budget, it decreased to about $300,000.
Smith said a healthy fund balance also makes it easier to make payroll and pay bills.
"It's very difficult to run an $80 million business without having any money in the bank," Smith told the committee.
The proposed special tax would apply to all property owners. According to Finizio, a one-mill increase would generate about $1.6 million in revenue; a two-mill increase would be about $3.3 million; a three-mill increase would be about $4.7 million; and a four-mill increase would raise nearly $6.3 million.
The proposed tax levy means a resident with $100,000 of assessed value would pay $100 for a one-mill tax and up to $400 for a four-mill tax.
An average single-family home in the city is assessed at $165,900. That property owner could pay $165 to $663 in extra taxes.
The Finance Committee took no action on the mayor's proposal.
"We'll have to have more discussion," said Council President Wade Hyslop, who is chairman of the committee. He suggested the council have a public hearing and ask residents for ideas on how to raise money, other than increasing taxes.
Councilor Michael Passero said although he too wants to rebuild the fund balance, he questioned the wisdom of asking taxpayers for more money. He suggested the administration look at selling unused or under utilized municipal properties to raise money instead.
"I'm concerned. Voters have already rejected the idea of raising more money for the fiscal year," he said. "The taxpayers are saying to us 'we are paying all we can pay."