WEST HAVEN, Conn. -- With the annual audit of fiscal 2015-16 now delivered to the city -- and showing the city's cumulative deficit rising by $500,000 to $16.8 million -- the long-discussed deficit financing plan to bond the deficit and pay it off over time is ready to go forward.
But the total price with costs factored in has risen to $17.35 million.
Mayor Ed O'Brien's administration is asking the City Council to amend the original 2016 ordinance authorizing the procedure to reflect the higher number. Residents got their first chance to sound off on the idea Monday night.
The council took no action other than to allow public comment, give the proposed new ordinance a first reading and set a public hearing for June 26 at 6:50 p.m.
But there was plenty of talk on all sides, beginning in the public comment session at the start of the meeting.
Nancy Rossi, former council Finance Committee chairwoman and current Democratic challenge candidate for mayor, told the council that she's not against the deficit bondings, but "I'm against the deficits that have occurred since."
She also called it "unprecedented" that the auditor now has delivered the audit report but, to the best of her knowledge, there was no plan to present it publicly.
City taxpayers paid for the auditors and they deserve to be able to hear what the auditor has to say, she said. "The auditor does need to come."
When council Finance Committee Chairwoman Tracy Morrissey, D-8, brought the matter up in committee, Councilman Ron Quagliani, D-at-large, wanted to know what the $17.35 million represented.
Director of Finance Kevin McNabola told him that it represented the deficit in the General Fund's unassigned fund balance, plus the equivalent of closing costs on the borrowing.
"The reason for why this took so long was because the City Council opted to include the last fiscal year," and to get those figures, "the audit had to be completed," McNabola said.
Quagliani then wanted to know how the city is trending for the current fiscal year.
"I've looked at the city's side of the financials and they do look favorable" with regard to the prospect of finishing the current fiscal year with a balanced budget, McNabola said. "I have a good feeling about this fiscal year."
But he said he doesn't have the Board of Education's numbers yet. McNabola pointed out that the last fiscal year's deficit was largely driven by unexpected Board of Education health insurance, workers compensation and special education costs.
Quagliani later said, "I'm going to support the move to a first read tonight. To me, a vote to move this forward is a move to public participation."
Councilman David Riccio, R-at-large, wanted to know why the city's bond counsel wasn't there.
McNabola said the bond council will be there on June 26.
"The good news is that by bonding the deficit, you're going to be getting a cash infusion" that will ease some of the city's cash flow problems, McNabola told the council.
"But it's not free money," said Riccio, who also is running for mayor in November.
"Let me tell you, the bond rating agencies are looking at this" in a positive light, as evidence that the city is finally taking care of it's problems, McNabola said.
Before the full council, Mayor Ed O'Brien told the council that the city needs to use the deficit financing tool to put itself back on firm footing.
"The city, the way it is right now, it's just not working," O'Brien said. "To cut the deficit" strictly by cutting the budget is "just not the recommended way to do it. It's not the right way to do it. Everybody has been telling us that this is the way to do it ever since I've been in office.
"We were told" by experts and advisors, "You cannot cut your way out of this," he said.
In the City Hall administration, "we work daily to make sure we cut the budget," O'Brien said, thanking McNabola for his efforts. But last fiscal year, "our healthcare and our special ed. costs increased at the 11th hour."
Riccio cast the one vote against the original deficit financing ordinance last year. On Monday, he voted in favor of slating the proposed amended ordinance for a public hearing after initially abstaining in the otherwise unanimous vote to move it out of the Finance Committee.
The full council vote was 11-0 with Councilwoman Stacy Riccio, D-4, abstaining.
Michael Last, another former Democratic City Council member who plans to run for city treasurer on Rossi's challenge slate, said Tuesday that "Mayor O'Brien and his administration have run three consecutive general fund deficits of $700,000, $1.7 million and now $2.5 million for fiscal year 2016, bringing the cumulative deficit to $16.8 million.
"The deficit was $7.8 million when Mayor O'Brien took office and he doubled it in three short years," said Last, who attended Monday's council meeting but did not speak at that time. "The City Council should not move forward with deficit bonding until this Mayor can show fiscal responsibility and balance a budget. Borrowing money and continuing to run deficits is irresponsible."
Auditor Scott Bassett of the New Haven office of RSM US LLP, formerly McGladrey LLP, appeared before the council's Finance Committee on May 1 to report that while the audit was not yet done at that time, officials knew enough to report that West Haven ran a $2.5 million operating deficit and, once all was accounted for, added $500,000 to its cumulative General Fund deficit.
That raised the General Fund deficit from about $16.3 million to $16.8 million.
Looking at all of the city's various funds, however, the aggregate deficit is now about $17.8 million, Bassett told the committee at the time.
