New London — Mayor Daryl Justin Finizio issued a farewell to the people of New London on Friday, highlighting his accomplishments but also warning of the potential for an impending multimillion-dollar budget deficit.

The major drivers of the potential deficit, which he refers to as an “uncomfortable truth,” are, according to his letter: an underfunded budget passed by the City Council, the potential for a drop in state revenues and the unauthorized hire of police officers by Police Chief Margaret Ackley.

“I warned the Council not to play politics with the budget, citing the mayoral election year of 2011 as an example of how election year politics influenced the formation of a city budget and pushed the city to the financial edge,” Finizio said in his letter.

Finizio had announced a major budget crisis shortly after his election in 2011.

In an emailed response Friday, Mayor-elect Michael Passero, a member of the outgoing council, gave no indication that he expects to inherit a crisis.

“I have been meeting with the Finance Department on a continuing basis and I feel comfortable that we have a solid understanding of the current status of the budget five months into the fiscal year,” Passero wrote. “While there are some expenditures that will need our attention, we are putting in place financial management practices to monitor and make adjustments if necessary. Present year-end estimates for expenses range from slightly over to slightly under the budget.”

Passero, who will be sworn in Monday evening, said the city will have to keep an eye on state revenue versus the projections made by the current administration.

Passero said “safeguarding” of the city’s finances was a priority during his transition into office.

Former New London Finance Director Donald Gray was hired as a consultant to work with the current finance director, Jeff Smith, shortly after Passero defeated Finizio in a Democratic primary in September.

Gray will take over as the interim finance director once Passero takes office.

Gray first worked for the city as comptroller in 1982 and took over as finance director in 1988.

He retired in 2003 from New London and not wanting a full-time position went on to work on an interim basis for several municipalities in Connecticut and Rhode Island, including East Providence and West Warwick.

“I was basically retired when I got a call from Mike (Passero) asking me to help him with the transition,” Passero said. “I enjoy my work, so it was not a hard decision.”

Gray said his own projections show this year's financial plan to be a tight budget that needs to be monitored.

“It’s a very difficult budget, no doubt about it, but not unlike any other municipality. There aren’t a lot of municipalities around the state that say ‘we’ve got all the money we need,’” Gray said.

This year’s budget process ended with a council override of a mayoral budget veto and a swift warning from Finizio that the council, with Passero leading the budget process, had underfunded the budget by more than $700,000.

Finizio claims the police department is projecting a nearly $1 million deficit. Ackley announced the hiring of four new recruits and two certified officers in September, shortly after Finizio lost the primary to Passero.

Ackley, who was suspended by Finizio for about 10 months during an investigation into alleged wrongdoings, has a pending lawsuit against Finizio and the city for a breach of her contract.

“She is responsible for that budget,” Finizio said. “She will have to explain why, if the department is projecting a deficit, why she hired new people.”

g.smith@theday.com

Twitter: @SmittyDay