New London — Mayor Daryl Justin Finizio said Thursday the city's budget for the current fiscal year cannot be challenged by a second referendum.

Finizio cited a legal opinion he received Wednesday from City Law Director Jeffrey Londregan, which said the budget cannot be taken to another referendum because the city already has spent more than 25 percent of its budgetary allocation for the current fiscal year.

In the opinion, Londregan said a provision in the city charter states voters may not challenge the budget once the city exceeds this 25 percent cap. He cited precedents from 2003 and 2007, in which the cap quashed attempts by voters to take the budget to referendum by petition.

"We're running into real structural problems to effectively run city government," Finizio said. "This is skating on the thinnest of thin ice."

The City Council on Tuesday in a 5-2 vote passed a $41.3 million general government budget, and the mayor signed it Thursday. The budget calls for a 5.1 percent tax increase. The council also approved a 1.31-mill tax rate increase, bringing the tax rate to 26.6 mills.

A petition forced a September referendum on the first budget, a $42.3 million spending plan requiring a 7.5 percent tax increase. Voters voted down that budget, 1,436 to 1,007, leaving the council to trim further.

Both Finizio and the law director's opinion said Finance Director Jeff Smith confirmed the city has exceeded the 25 percent cap at this point, nearly 4½ months into the 2012-13 fiscal year.

City Council President Michael Passero said Thursday that he discussed Londregan's opinion with Finizio last week. Passero, a city firefighter and a lawyer, said the opinion is a compelling interpretation of the charter, although he plans to spend the weekend deciding whether he agrees with it.

Passero said a second referendum could create serious problems for the city. He said the earliest a second referendum could take place would be in December. Ballot boxes must remain sealed for one month after the Nov. 6 election.

"That puts us nearly halfway through the fiscal year without a budget. I'm not sure, practically, how that can work," Passero said. "The question in this case is how many times can you do (a referendum)? Are you just endangering the whole governmental process at some point?"

Finizio has instructed City Clerk Nathan Caron not to issue any petition forms for the purpose of collecting signatures to seek another referendum, nor to accept any petitions for that purpose. Passero said he expects this to be an unpopular decision with some in the city.

Evelyn Louziotis, a member of the Looking Out for Taxpayers group, expressed her displeasure with the mayor when she was informed Thursday of the law director's opinion. The LOT group helped circulate the petition that forced the first referendum.

Louziotis declined further comment and would not discuss how the group would proceed. Jim Louziotis, her brother and also a LOT member, said the group planned to meet on Saturday to discuss its course of action.

City Councilor Adam Sprecace said the law director's interpretation of the charter may be viewed as a "pre-emptive strike against would-be petitioners." He said another successful petition would not necessarily result in a second referendum. The council could consider the petition and vote to lower the budget without moving for a second referendum.

While Sprecace believes the council reached an appropriate budget, he said he doesn't feel it is necessary to keep people from challenging the budget with another petition.

"I think this announcement short-circuits that process," he said.

Finizio said Thursday that the depleted fund balance is another reason the city should move forward with the budget the council passed Tuesday. The fund balance, essentially a rainy day fund, contained just more than $300,000 about a month ago. At one point, it was about $6 million.

The mayor also reiterated that he does not see a petition or a referendum "as an inherent, indelible right." He said he felt a responsibility as the city's chief executive to move forward.

"People did get to vote on this budget, and a significant cut was made in the budget," Finizio said. "I feel now it's at a point legally where I don't know how we would do anything differently."

jeff.johnson@theday.com