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Municipal Agita, Malloy Wants To Create Fiscal Accountability Board

February 2nd, 2017 · 12 Comments · Analysis and Comment, News and Events

This will give some city leaders stomach cramps. Governor Dan Malloy proposed on Thursday the creation of a Municipal Accountability Review Board so that “the state will be poised to intercede early to put struggling local governments on a path to sustainable fiscal health before they are on the brink of a fiscal crisis.” Translation: lose local control.

Mayor Luke Bronin’s city of Hartford in particular is bleeding badly. Bridgeport resident David Walker, former U.S. Comptroller General, has called for state oversight of Bridgeport finances that has been rejected by city leaders. The governor’s proposal would make it easier for the state to step into local municipal affairs based on a number of factors.

State Rep. Steve Stafstrom who supports the proposal issued this statement:

For far too long Connecticut has let our cities suffocate under the legacy costs they incurred generations ago, which have resulted in burdensome taxes, underfunded schools and reduced services. For months now, I have been advocating that a task force of community, business and labor leaders be put together to help Bridgeport strategize ways to achieve greater fiscal stability and strengthen our economy. The plan put forward by the Governor to create a standardized, state-wide system of fiscal accountability for all municipalities is most welcome. I applaud his initiative to push the State toward re-doubling its efforts to partner with Bridgeport and other cities in helping them to thrive as the livable, walkable and sustainable regional job creators and economic drivers we need them to be.

What follows is a news release from the governor and fact sheet.

Governor Dannel P. Malloy today announced that the state budget proposal he will release next week will include a plan for creating a municipal accountability system designed to provide state intervention and support to local governments confronting fiscal challenges.

To achieve this, the Governor is proposing a tiered system of accountability under which municipalities would be subject to increasing levels of review and intervention based on their fiscal condition and the amount of state aid that they receive. The proposed legislation will create a Municipal Accountability Review Board (MARB) that will be empowered to review municipal finances and place towns and cities into an accountability framework based on factors such as bond rating, fund balance, and state aid as a percent of budget. This tiered framework will determine the scope of the board’s powers and support, including technical assistance for municipalities to put them on a path to fiscal health. The Governor explained that this oversight will bring more accountability to ensure improvement in certain towns and cities with poor fiscal condition.

“Our towns and cities are the foundation of a strong and prosperous state. Healthy, vibrant communities–and thriving urban centers in particular–are essential for our success in this global economy,” Governor Malloy said. “In order to have vibrant downtowns, retain and grow jobs, and attract new businesses, we need to make sure all of our municipalities are on solid fiscal ground or on the path to fiscal health. As part of my upcoming state budget proposal, I will be proposing enhanced municipal accountability for towns and cities in poor fiscal condition.  With this system, the state will be poised to intercede early to put struggling local governments on a path to sustainable fiscal health before they are on the brink of a fiscal crisis.”

The Governor continued, “The vast majority of our cities and towns are financially healthy and will not be impacted. However, we have an obligation to all of our taxpayers to ensure that their tax dollars are being properly spent. With fiscal stable cities and towns, Connecticut will be better positioned to attract young people, families, and entrepreneurs, thereby growing and strengthening our economy.”

Governor Malloy will present his full state budget proposal on February 8 during an address to a joint convention of the Connecticut General Assembly. Earlier this week, he announced that it will include a package of substantial mandate relief for towns and cities that will help make local government leaner and more cost efficient.

Fact sheet:

Reinforcing Fiscal Stability of Certain Municipalities

As part of his Fiscal Year 2018/2019 budget proposal, Governor Malloy is proposing a tiered system of accountability under which municipalities would be subject to increasing levels of state review and intervention based on the state of a municipality. This new system will provide the structure to deliver a graduated response to the severity of need.

The weaker a local government’s finances are, the greater the accountability and state involvement. More importantly, this system allows the state to intervene and support a city or town before its financial situation reaches the brink of a crisis.

Under this system, the vast majority of communities, based on their stable and healthy fiscal conditions, would not experience an increase in state oversight beyond current levels. In fact, Governor Malloy’s budget proposal includes significant mandate relief for these communities, including elimination of the local budget cap, and relief from a number of other mandates covering labor, property tax administration, and education.

Tiers 1-3: Low to Moderate Levels of Accountability and Need

For communities that have some level of fiscal stress, the proposed legislation would place them in one of three tiers differentiated by severity of fiscal distress. The criteria used to determine a given community’s placement into tiers 1-3 include the following:

– fund balance (reserve levels) that are below five percent of a municipality’s annual revenue;
– credit rating; and
– state aid over 30 percent of municipality’s annual revenue.

Tier 1 would require minimal reporting. The higher tiers would cap local grand levy growth at three percent and require increased reporting. Additional accountability in Tiers 2-3 include some level of oversight functions carried out by a newly formed Municipal Accountability Review Board (MARB).

Tier 4: Highest Level of Accountability and Need

Based on the request by the local government or a super-majority of the MARB, a community can be placed in Tier 4. In this tier, the board would have powers modeled on the successful review board in Waterbury. Under Tier 4, the MARB may:

– approve debt restructuring and deficit financing using the State’s Capital Reserve Fund (SCRF) to enhance a municipality’s credit;
– serve as an arbitration panel;
– approve budget assumptions; or
– appoint a fiscal manager to oversee municipal operations.

Composition of the Municipal Accountability Review Board (MARB)
– Secretary of OPM, or designee, and the State Treasurer, or designee, will each serve as co-chairs.
– The Governor will appoint four members: one resident and one affiliated with a business of a Tier 2, 3, or 4 municipality; one with finance expertise; and one current or former municipal chief executive or financial officer. Additional appointees are permitted if more than two municipalities fall into Tier 3 and 4.
– Each municipality referred to the board will appoint three representatives: the local chief elected official; a labor organization representative; and a member recommended by regional COG and appointed by the Governor.

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12 Comments so far ↓

  • John Marshall Lee

    Do we say WOW? Or should we say WOOF? Accountability is a word with which I am reasonably familiar. It was also a word frequently used by Ganim2 during the campaign. (Don’t know how often Malloy may have used it over the years.)

    But monitoring, oversight or providing watchdogs with strong teeth over taxpayer funds is a great idea. Too bad the City of Bridgeport passed on the concept when Charter language was discussed in recent decades. Accountability before bankruptcy … City or State? Seems like a time to do something? After all, accountability does come before bankruptcy in the dictionary, right? Time will tell.

  • Dave Walker

    While I have major problems with some of Governor Malloy’s past actions and inactions, I commend him for recognizing the reality that some local governments have already lost control of their finances and the state has a responsibility to step in when certain criteria are met. My preliminary comments on his proposal follow. Any MARB will only be as good as the scope of its authority and the composition and commitment of its membership. As a result, there should be statutory qualification requirements for appointment with guaranteed minority party representation. A tiered and criteria-based approach to MARBs makes sense although the number of tiers and the criteria need to be carefully considered. Any city or town that has a mil rate of 40 or more has already lost control of its finances and and also faces serious competitiveness challenges. As a result, any such cities or towns should be automatically subject to a MARB. The truth is, such cities typically also rely on the state to provide well over 30% of their resources which makes them double-indemnity candidates. Credit ratings are myopic and inadequate. Ratings agencies will acknowledge their assessments only consider the ability to service debt for 3-5 years and do not consider long-term competitiveness or fiscal sustainability. Furthermore, any city or town that is in the highest-risk tier must have all their current contractual agreements forced onto the table for reconsideration. That is what will happen in a bankruptcy filing and one of the objectives of the MARB process should be to avoid bankruptcy. If a municipality does file bankruptcy, one federal judge will make all the tough decisions. That should only be a last resort.

  • Maria Pereira

    Steve Stafstrom is a jerk.

    Under Malloy, the state has repeatedly faced financial chaos and is facing ANOTHER deficit of over one billion and he wants to provide expertise to cities like Hartford and Bridgeport.

    The governor gets to appoint up to four members with only one required to be a resident. In addition, the OPM and Treasurer or their designee serve.

    I have a question, since the state’s finances are a disaster; when are we going to have State Accountability Review Board with federal employees and members from Massachusetts and NY appointed by Trump with one appointee living in CT?

    How insulting and condescending.

    • Dave Walker

      Maria,
      You are correct, the state has not been leading by example and has its own serious competitiveness and financial challenges. It really needs a state-level Fiscal Accountability Board comprised of qualified state residents with minority party representation. After all, states can’t file for bankruptcy. The PROMESA Board that was established for Puerto Rico serves as an example of what can happen when things spin out of control. At the same time, we have at least four municipalities that are not competitive and need to restructure their finances in order to avoid bankruptcy, including Bridgeport. These municipalities are a good place to start.

      • Maria Pereira

        Mr. Walker,
        The only people who should govern Bridgeport are the people of Bridgeport.

        Would we allow residents of Canada and Mexico govern and make critical decisions for the U.S.? I would hope not.

        • Pete Spain

          Maria,
          I admire your pluck, but let’s try to find solutions and drop the ad hominems.

          The City of Bridgeport is the financial ward of the State of Connecticut. Without state funding, Bridgeport goes bankrupt. If the City of Bridgeport goes bankrupt, it will be the financial ward of a federal judge who will not care what you or I say about local control, etc. (e.g., the bankruptcy of Detroit).

          I’m all for an elected finance board for our city, but that will take years to come about. In the meantime, might there be other potential solutions to research and consider with the help of recognized experts like David Walker? I humbly submit YES!

          • Maria Pereira

            David Walker is a Bridgeport resident. People who do NOT reside in Bridgeport should not be governing Bridgeport.

            In my view, if you support this you are in essence stating although Bridgeport has over 140,000 residents; we cannot find six residents to serve on an oversight board.

            This is an absolute insult to the People of Bridgeport.

    • Michael Smith

      Ms. Pereira, I think you could have made your point without starting out by calling Rep. Stafstrom a “jerk.” I have met Rep. Stafstrom and find him to be an informed, concerned citizen and a very nice person. I understand you may not agree with his political positions; however calling him a “jerk” is extreme and does not help further the dialog on this issue.

      • Maria Pereira

        Mr. Smith, Steve Stafstrom is incredibly conflicted and his uncle’s pawn.

        He is also a politician whose word means nothing. I had a conversation with him at the Capitol in 2015. I went up there for seven consecutive weeks to lobby against funding two more Charter Schools in Bridgeport. He looked me in the eye and stated he agreed, no new Charter schools should be funded in 2014 and 2015. Budget and Appropriations deleted it out of the budget but Malloy put it back in.

        There was an amendment submitted to remove the funding out of the budget with co-signers from other municipalities. He refused to support it. I approached him about it and he said “it was a good budget” and he was going to vote for it.

        When the state reduced its funding to Bridgeport Public Schools by almost $1 million, which was unprecedented, while we were in the final stages of a 10-year court case arguing that our schools were severely underfunded for DECADES, he had the nerve to say the state wanted to reduce our funding by $2 million, but because the Bridgeport delegation was so “well-respected,” they had gotten the state down to a million.

        I couldn’t help but think how he was absolutely delusional. The state reduced our funding by $1 million while the affluent district of West Hartford, represented by Beth Bye, co-chair of Budget & Appropriations, picked up $1 million in funding.

        After the court ruled urban school districts were being severely underfunded, thereby violating our students’ right to an “adequate” education; the state just reduced our funding by ANOTHER $250,000 half way into the school year.

        Based on all the above, I am going to stand by my comments.

        That is how little Bridgeport and its delegation is respected.

  • Jimfox

    So Malloy wants to throw “Home Rule” out with the bathwater, I love it!
    This is great news, we can’t keep crying poor each budget.
    We the Ganim Hemorrhaging Taxpayers welcome the Malloy (MARB) mandate!

  • Maria Pereira

    We need to take all finance matters away from the City Council and have an elected Finance Board. That is what most municipalities have.

    The City Council should be a legislative body with NO input on finances of any kind.

    No employees should serve on the Finance Board.

  • Bob Walsh

    I have many issues with the funding formula. My initial problem with this legislation is the rule about more than 30% of state finances.
    This includes PILOT money? Underfunded as it may be? PILOT money should be removed from it or at least brought up to speed with reality. Fully fund PILOTs before you included this funding loser.
    Then let’s look at state per-pupil reimbursements. This should not count against the poorest cities in the state. We have been dealt the low road as far as having the neediest population settle into the city. On one hand the state steps in and tries (but not very hard) to live up to its constitutional duties to equally fund education but now we will be subject to state-mandated control. Take that out of the required 30% formula.
    And lastly, if MER funding is included, take all state support away from those cities that do not need it and use it where it is needed most.

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