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Sprecace hurls criticism from fiscal glasshouse

By JEFFREY SMITH

Publication: The Day

Published April 20. 2014 4:00AM   Updated April 21. 2014 1:13PM

Former New London City Councilor Adam Sprecace's April 8 guest commentary - "Finizio's padded budget would jack up NL taxes" - criticizing Mayor Daryl Justin Finizio's proposed budget exemplifies the faulty reasoning and bad math that got New London into its current financial trouble.

In some regards, whether a city's budget is good or bad is subjective. People can disagree, for example, about how many public works employees to fund. But at the end of the fiscal year, there is one inarguable criteria by which everyone can judge a budget: was it accurate? Or were revenue and expenditure predictions wildly off the mark?

With this in mind, here are the independent audit results from Sprecace's time in office:

• In Fiscal Year 2011, revenue estimates were inflated by nearly $500,000. Interest income - an easy figure to calculate - was budgeted at $160,000 although the city collected only $85,000 the previous year. That same year, expenditures were under budgeted by over $850,000, primarily due to underestimated overtime in the Fire and Public Works departments.

• Fiscal year 2012 was even less accurate, with revenues overestimated by $2.1 million and expenditures underestimated by $1.6 million. Tax revenue was overestimated by $1.2 million. Interest income was inflated to $345,000 against collections of only $38,000.

• As a result, in these two years the city's fund balance dropped 80 percent, or $5 million.

In other words, these budgets weren't just bad; they were reckless. In the Feb. 6, 2012 City Council meeting minutes, Sprecace admits to overestimating the numbers: "The council set a policy that it did not want to have a tax increase for this current fiscal year. To do that, the amount of revenues had to be increased by a certain amount…"

On top of that, at Sprecace's urging, the city put itself at financial risk by underfunding employees' health insurance and upping its Workers Compensation and liability deductibles without setting aside enough money to cover costs. All three of these accounts are now either in deficit or expected to be in deficit by the end of this fiscal year.

Given this track record, New Londoners should read Sprecace's analysis of the mayor's proposed budget with skepticism. When Sprecace calls the proposed budget "padded" and cites a $500,000 increase in overtime for the Fire Department, they should remember that underestimating Fire Department overtime was a key reason the city ran huge deficits during Sprecace's time on the council. When he questions the amount budgeted for 401(a) retirement contributions and medical benefits, they should remember his prior unwillingness to budget adequately for fixed expenses. When he implies that the proposed line item for fund balance replenishment is unnecessary, they should remember how cavalier he was in the past about setting aside sufficient reserves.

New Londoners should also note that the 80 officers and four police dogs included in this budget proposal were mandated by City Council. Sprecace writes that the city shouldn't circumvent ordinances, yet advocates circumventing the ordinances mandating police and K-9 minimum levels.

Lastly, New Londoners should realize that some of what Sprecace calls "cost drivers" are actually cost reducers. Hiring additional building maintenance staff in the Public Works Department is more cost-effective than hiring outside contractors, and would allow us to address maintenance problems before they become costly emergencies. An industrial safety/risk manager would save hundreds of thousands of dollars in liability costs. A grant coordinator would bring in many times his or her own salary in funding for building, equipment and infrastructure improvements.

During this budget season, the current city councilors should do their due diligence. They should require that department heads defend their budget estimates with solid evidence, and they should set budget priorities.

Above all else, however, they must not inflate revenue estimates or under-budget expenses in order to be re-elected. If there is anything to be learned about budgets from Adam Sprecace, it's not to repeat his mistakes.

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