Oh those dreaded election-year budgets. Asserting to the City Council Wednesday night these are “staggering numbers to walk into,” Mayor Joe Ganim and his financial team detailed findings of an inherited $20 million budget deficit halfway through the budget year that shows revenues overestimated by $5.6 million and expenditure issues of more than $14 million.
Ganim told City Council members in the mayor’s conference room inside the Morton Government Center that he’ll have an action plan within the next couple of weeks in which “I’ll have to make hard decisions. We have real challenges.” Ganim finance officials initially thought the deficit was no higher than $15 million, but in the past few days they uncovered some deeper spending issues. Ganim briefed the City Council starting at 5 p.m. He allowed the media to join the session at 6.
Ganim worked off a PowerPoint presentation (see a pdf of that presentation here) prepared by Finance Director Ken Flatto, a certified public accountant, and newly named budget director Nestor Nkwo detailing the sobering news Ganim administration officials privately say is a result of a classic election-year budget with no tax increase advanced by former Mayor Bill Finch whom Ganim defeated in a September Democratic primary. The budget year began July 1. The finance director handles the revenue side of the budget while the director of Office of Policy and Management oversees spending. The lead department heads who built the budget under Finch are no longer with the city, but as is often the case of election-year budgets they are told by the mayor and senior staff to produce a no tax increase document and deal with the consequences the next year. None of them are around now to deal with it. Now it’s up to Ganim, Flatto, Nkwo, Chief Administrative Officer John Gomes and others to clean up the mess.
Large expenditure issues highlighted, $2.4 million in retroactive pay raises authorized by Finch not budgeted, public safety overtime millions over budget as well $8.7 million pension payments not made to the state. Finch received about $17,000 from that retro pay increase going back to the summer of 2013 on his last day in office.
The presentation highlighted the following budget variances on the revenue side with causes listed below parenthetically.
Arrears taxes $2.7 million (underbudgeted/unrealistic assumptions)
State aid payment in lieu of taxes program $890,000 (double budgeted/not funded by the State)
State Aid – University/Hospital PILOT cuts $475,000 (mid year recission/State pilot reduction)
Outside police overtime $1 million (net revenue overstated)
Rent from arena, Harbor Yard and Captain’s Cove seaport, all city-owned facilities, $520,000 (failed to pay rent)
Councilor Denese Taylor-Moye, newly named co-chair of the budget committee, said during a question and answer period “To hear this is a mind blower. No one was watching the house?”
Ganim administration officials during the presentation period open to the media addressed the current budget mess rather than blaming anyone directly who had caused it.
On the subject of police overtime Ganim said one of the reasons he brought in former Police Chief Wilbur Chapman as a senior adviser is to do an evaluation of public safety to save money, including overtime “without compromising services.” Chapman has set up shop inside the mayor’s office complex.
At the request of City Council President Tom McCarthy, Ganim agreed to another financial presentation before the council’s budget committee in a public forum in the coming weeks.
Ganim told the councilors that closing a $20 million shortfall with half the budget year remaining will require hard decisions on his part. He added that while the city grapples with the current budget year challenges he will be proposing his own spending plan for the next budget year in the spring that will include implementation of state-mandated revaluation of property. Finch received a two-year reprieve from reval by the state legislature and Governor Dan Malloy to avoid implementing it in an election year.
Flatto said the city has no cash flow issues meeting payroll or paying vendors, but a serious amount of belt tightening is in order to close the budget gap.