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New London - The taxpayer watchdog group Looking Out for Taxpayers has submitted enough signatures to the city clerk's office to force a referendum of the City Council's authorization in April to bond $1.1 million to bolster the city's feeble fund balance.
The city clerk's office verified 301 signatures on the referendum petition, just three more than the 298 needed to force the council to reconsider its action.
"My hope is that they don't waste the taxpayers' money by going to referendum and just cancel the ordinance," said Bill Cornish, a member of LOT who helped organize the signature gathering effort. "They should just cancel the entire ordinance. They have to go back to the drawing board and they have to find ways to economize."
On April 30, the City Council voted to approve the bonding of $1.1 million to add to the city's fund balance, the account that can act almost as overdraft protection for the city's general fund.
Among those who signed the petition was Councilor Martin T. Olsen, who opposed the bonding plan when it was before the City Council.
By bonding the $1.1 million, city officials said, the city would be able to replace money it took from its fund balance going back about a decade, when capital projects such as roadway improvements ran over budget.
The council, at its next meeting, must reconsider the bonding ordinance and may vote to uphold, repeal or amend it. If the council reaffirms its decision, the bonding ordinance would be submitted to residents at the next municipal election - or sooner if at least five councilors agree on a date.
In April, the City Council passed a four-step fund balance replacement plan that involved bonding a total of $5.5 million, and adopted resolutions that require it to budget at least $250,000 in each upcoming fiscal year for fund balance replacement and to put proceeds from the sale of city-owned real estate into the fund balance.
Jeff Smith, the city finance director, said the plan passed by the council was a substantial part of why Fitch Ratings and Standard & Poor's both recently re-affirmed the city's A+ rating. He said the city's bond rating could be downgraded if the council or voters were to repeal the ordinance.
"The rating agencies have been very clear about this," he said Monday. "We were able to show them that the city was taking steps to address the issues with our fund balance, but if that changes it could jeopardize our current rating."
If the city's rating were to be downgraded it would cost more for the city to borrow money.
Fitch noted its favorable view of the city's fund balance replacement plan in its rating summary, but also warned that "any reversal in this plan could result in negative rating pressure."