New London — Mayor Daryl Justin Finizio on Wednesday vetoed the budget approved last week by the City Council, saying the proposed $86 million plan "creates an automatic deficit," would deplete the city's fund balance, imperil the bond rating and jeopardize city cash flows, or require drastic cuts to staff and services.

"Either result would be disastrous to the city," Finizio said in a statement.

The mayor said he is ready to work with the council to "pass a responsible budget that satisfies our mandates, avoids layoffs and preserves our city's financial stability."

Finizio's action on Wednesday is contrary to the requests of downtown property owners, who urged him on Tuesday to swiftly sign the budget approved by the council.

On May 27, the council unanimously approved a fiscal 2016 budget that would increase city spending by 1.3 percent and increase the tax rate by about 3.9 percent. It would include $43.9 million in general government expenditures — about $95,600 less than the current budget — and $42.4 million for the Board of Education, about $1.2 million more than the current budget.

Before the council's vote, Finizio told the council that his administration estimates that the budget underfunds mandated costs by $657,903 and overestimates revenues by $68,489, for a total "built-in" deficit of $726,392.

Councilor Michael Passero, who apparently led the push to approve the budget, said he hopes all seven councilors maintain their positions and override the veto. According to the city charter, a veto override requires six of seven council votes.

The council has 15 days to vote whether to override the veto, but Passero said he hopes the vote takes place as soon as possible. Passero is challenging Finizio in the upcoming mayoral election. Council President Wade Hyslop could not be reached to comment on Wednesday afternoon.

"I believe we've passed a responsible budget, with a sufficient amount of money to operate this government for the next fiscal year," Passero said.

Passero said he believes the approved budget includes a "very comfortable surplus" and that it will not require dipping into the fund balance or threaten the city's bond rating. He added that if certain line items in the budget are underfunded, the council would be open to fund transfer requests from the mayor's office.

Finizio was not available to comment Wednesday, but his office directed questions to Director of Finance Jeff Smith. Smith reiterated concerns he expressed in a memo to Finizio on Wednesday that the council's budget is about $1 million short of the amount needed to cover city expenses, and about $725,000 are "expenditures that must be met."

He listed three main areas that would be harmed by the budget: the city's liquidity, bond rating and impact on the 2017 budget.

He added that the city is about to start a school building project that will require about $35 million in bonding. A lower bond rating would force the city to pay a higher interest rate on the funds, costing $367,500 to $1.1 million over the course of the bond, he said.

"I have no problem cutting the budget, but if you're going to cut it, do it honestly," Smith said.

Finizio's office also provided copies of an email message from Mark Chapman, director of Independent Bond & Investment Consultants of Madison, agreeing with Smith's assessment of the negative impacts to the city of dipping into the fund balance and a drop in the bond rating.

Also included was a March letter from the state comptroller's office informing school Superintendent Manuel Rivera that the school system was behind on its health insurance premium payments.

j.benson@theday.com

Twitter: @BensonJudy