New London - City Councilor Adam Sprecace, who serves on the Finance Committee, is predicting the city could be facing a $1.1 million projected deficit in the current year - nowhere near the projected $4.4 million deficit the mayor announced last month.

Sprecace has also called for a forensic audit of all city finances "to accurately identify the financial state of the city."

"I think the deficit projections are far less than what was reported,'' Sprecace said during a Finance Committee meeting Tuesday afternoon. His numbers, if they turn out to be accurate, would significantly change the estimated $12 million shortfall over three budget cycles that Mayor Daryl Justin Finizio announced Jan. 27.

"This would have the effect of reducing the alleged three-year, $12 million deficit to a three-year, $5.5 million deficit, with many questions still outstanding,'' Sprecace said.

The committee, which is in the midst of a review of all city finances, took no action on Sprecace's report, called "Observations Regarding Reported City of New London FY2012 Budget Deficit," or on his call for an audit.

Finizio, who also was given a copy of Sprecace's report after the meeting, said the figures may fluctuate - he's instituted a freeze on spending and hiring and is working on plans to consolidate debt and sell off surplus property - but the city will face a significant deficit. He relied on figures from the professionals who work in the city's finance department, he added.

"I trust what they tell me,'' Finizio said. "And until they tell me otherwise, I will rely on my financial team."

Finance Director Jeffrey Smith told the Finance Committee Tuesday that he met with Sprecace on Friday, along with Public Works Director Tim Hanser, to review budget figures.

"We did have a very productive meeting,'' Smith said. "We found a bunch of things in the budget that were positive and will help us bring the budget deficit down.''

Hanser said the Public Works Department could be looking at a $600,000 deficit in the current year's budget. Although he's working on the trimming costs and finding revenue, he said there will be a deficit in his budget.

"I don't think it's feasible to get to zero,'' Hanser said, adding that even if he lays off 13 people in the department, he would only save overall about $200,000 because the department would have to incur other costs, such as overtime, to get the job done. "And we would have to make severe modifications to (the) department.''

According to Sprecace's review of the budget, which he said took more than 100 hours over the course of three weeks, the projected budget deficit for 2011-12 is $1,133,842. Part of that - about $886,000 - covers the costs associated with expenditures the new administration made during the transition from city manager to mayor form of government, he said.

He also pointed out that the $81.9 million budget approved by the City Council included several adjustments that were made without council approval, such as a reduction of expected debt service from $5.5 million to $5.1 million.

About $3.2 million, Sprecace said, is the overestimated amount of the reported deficit prediction and is comprised of items such as vacant positions, overestimated expenditures, department-level expenditure adjustments, inaccurate revenue expectations, unaccounted revenue streams, and excluded revenues already received.

He said the fiscal year could end with an even lower deficit, about $400,000, "if identified savings opportunities are employed.''

But Sprecace also acknowledged that he did not have complete information.

"Some estimates made during this evaluation required financial information that was either unavailable or not provided,'' he wrote in the report. "To compensate, conservative practices were used in several areas of the evaluation (eg. excluding associated FICA reductions when incorporating overtime cuts.)"

The Finance Committee will continue its review of the budget at 4 p.m. on March 5.

k.edgecomb@theday.com