New London attempts to get financial house in order
New London - The City Council on Monday night authorized the bonding of more than $4.4 million to address long-standing problems with the city's finances and to put more cash back into its sickly savings account.
One ordinance sanctioned the bonding of $3.3 million to account for state grant funding the city has never collected, including roughly $1.7 million for various school building projects, about $1 million for the Parade Plaza reconstruction project and about $600,000 for the remediation of Veterans Field.
If or when the city is able to collect the outstanding grant money, it will be placed in an escrow account that will be used solely to pay off the debt.
The second ordinance passed by the council approved the bonding of more than $1 million for vehicle purchases made last year that were originally going to be paid from the general fund.
Both ordinances passed 6-1, with Councilor Martin T. Olsen casting the dissenting vote on each.
"In these instances we're being asked to take on debt to pay for debt, which I think is bad business," Olsen said.
Last month, Finance Director Jeff Smith told a council committee that he and the council will have to act quickly to get the city's financial house in order, or the city could run out of cash in mid-May and risk a state takeover.
"We really need, now, to fix this once and for all," he said last month.
At the heart of the problem is the city's withering fund balance, or savings account, chronic deficits in the city's capital projects fund and $6.9 million in state reimbursements that the city has never collected.
In his State of the City address last week, Mayor Daryl Justin Finizio called the city's fiscal problems "a very real, and a very grave, financial peril" the city will have to extricate itself from if it is to realize the potential of several opportunities, like the planned national Coast Guard museum.
"It's hard for me to say, but I have to say it. It's hard for you to hear, but you have to hear it," Finizio said last week in his State of the City address. "We are out of money, and we are out of time."
Smith's recommended bonding plan, along with the adoption of "a good budget," will ensure that the city "permanently turns the financial corner," Finizio said last week.
The council on Monday also voted to table discussion of two other bonding ordinances that are part of Smith's recommended plan. They would authorize bonding of $1 million to cover overspending on a handful of city projects such as improvements to City Pier, and $1 million for smaller projects that drew from the general operating fund.
The bonding scheme, if adopted in its entirety, would have the near-immediate impact of almost doubling the city's fund balance to about $2.4 million, Smith said.