Saturday, May 22, 2010

Budget Update - 5/28/10

 BOA passed a Budget for FY10-11 last night.  I'll try to summarize the proceedings and the results soon... for now, this NHI article provides a good summary of the meeting and includes NHI's Thomas MacMillan's minute-by-minute blog of the 4.5 hour meeting.

Tuesday, May 18th, the BOA's Finance Committee held an additional Budget deliberation meeting.  This unusual addition to the Budget Season calendar was in response to an increase in Aldermen and City resident demand for more scrutiny, discussion and debate of the proposed FY11 City Budget.  Several amendments to the Mayor's Proposed Budget were introduced, discussed, debated and ultimately recommended favorably out of committee Tuesday evening.  While I'm not a member of the 10 member Finance Committee, I did attend all but one of the "Budget Season" Finance Committee meetings/workshops/public hearings. (I missed the BOE presentation ironically scheduled for the week of NHPS spring break.)

A truly important role of the BOA is to scrutinize, amend as deemed necessary, and ultimately pass the City's annual Budget, thus appropriating the money budgeted and setting the tax rate necessary to balance revenues and expenses.  This year there seems to be an increase in Alderman concern and participation in this oversight process.  There has also been an increase in the collaboration between the Aldermen and the Administration and City Departments in this budgeting process.  With concerns of their own and their constituents, many colleagues have worked hard to scrutinize the proposed budget and to propose cuts and revenue solutions.  From this scrutiny, listening to testimony from Department Heads,  and hearing concerns from the public, it became clear this year that all involved should collaborate to reduce proposed expenditures, find additional revenue, and thus mitigate the proposed tax increase.

The short summary for now of where we are after this week as we head toward next Thursday's (5/27) Special Budget session of the BOA...

Per amendments favorably recommended by the Finance Committee, the proposed budget to be considered next week has been reduced by $4.6 million down to $471.6M.  These amendments primarily came from small working groups of Alders, the Administration, and Dept. Heads. This represents a budget increase from FY 09-10 of 1.64% ($7.6M).  In comparison to the modest increase, significant cost increases include $7.7M in increased medical costs (which are contractual).

So, including these collaborative cost cutting efforts so far, the resulting residential property tax increase would thus be 4%.  This increase is the net result of total spending (decreased with numerous cuts from the original proposal), and offset by: other revenue (mostly State aid which decreases significantly from FY10), an increase to the Grand List, and the freezing of the revaluation phase in to Phase-in YR 2 (like last year).  The assessment value "freeze" sets residential values closer to today's fair market value and limits the effects of the revaluation done at the height of the market.  Instead of tax burden increases to residential tax payers from revaluation, any FY11 tax increase will be entirely based on the total budget that is not covered by other revenues like State aid, Payments in lieu of taxes (PILOT), asset sales, non-profits' contributions, rents, fines, etc.

While a goal of a zero tax increase is desirous of all, there are many factors as to why this may not be achieved for FY11.  There has indeed been thoughtful collaboration and cooperation as the original proposed budget was cut significantly, other revenues added, and the assessment policy changed to more than halve the proposed tax increase yet still fund the City's commitment to schools, public safety and many, many other valued city services.

I did indeed contribute to the collaborative efforts (despite not being a member of the Finance Committee) and to many cuts contained in this amendment - as did many of my colleagues.

There is a lot more to this story and to this process.   There will also be efforts made to make more cuts as amendments are presented on the floor this week.  The work for a fiscally responsible budget will continue right up to the vote.  Most of my colleague and I believe it is our job to pass a budget that our constituents too would support.  I believe it is not our job to simply "reject" or "send the budget back."

Here's the pdf of the amendment.  Here's some explanation of this package of amendments...

Page A has the summary and also includes the 38% reduction in Capital Budget requests that represents CANCELING the last 4 school projects.  While this reductions doesn't really result in a tax reduction this year, it is still a positive CUT which will indeed help in future years.

The new Revenues and itemized cuts are shown on page 1, with more details/explanations on pg. 2.

Cuts Highlights include:
$1.5 from BOE including: $300K in non-academic summer programs, $800K for half of TAG (the current form of the district wide program), $200K athletics reorg. which will cut certain sports and related transportation), $200K of the "double dippers."
$736K for all of the new to FY11 proposed positions (no new hires)
$1.185M from NHPD including delaying new police class, OT reduc, eliminate mounted unit
$294K by delaying fire class (additional paramedics)
$500K by reducing trash (we have to pay to get rid of our trash) through more recycling (we get paid for recycling)

Note: the Technical Amendment on page 3 accounts for errors in the original budget and unfortunately those errors are slightly positive, $40,879

The Mil Rate... Yes, it goes up with this budget.  HOWEVER, it goes up because we are freezing the assessment valuation at YR 2 levels (same as last year) and the budget has gone up modestly (1.64%), but other revenues (State Aid) decreased drastically.  The assessment freeze though truly benefits residential tax payers and the net result is that any tax increase won't relate to inflated valuation (from reassessment done at the height of the market) nor the shift of the tax burden from commercial to residential.  Also worth noting:  comparing the mil rate to other towns in CT is NOT possible or fair as other towns assess in different cycles and "fair market value" is very often very different from town to town.  It's not supposed to be, but it is for many reasons, including the timing.

For taxes to not go up at all, we would need to cut another $10M+.  This may seem simple to some.  Simply cutting this amount from the total appropriation by means of % reductions for departments as some suggest may be just too blunt.  Budgeting usually appropriates $ to described line items (actual, planned expenses).  So, the cuts made so far (in the "favorably approved Finance Committee amendments") are a $ amounts attributed to a defined/described expense that has been cut.

Budget "holes," "place holders,"and "non specified expenses" are also in this budget.  To account for this approx. $11M would require much deeper cuts.  +$6M however is accounted for as targeted cuts that are in development, and in some cases will require negotiations (that is be realized throughout the year).  There is an itemization for $4.4M of these types of cuts outlined in a 5/17 press release (link here).  The other $5M is a whole other story for another Blog (not written yet): Monitization of a Revenue source (borrowing against future parking meter revenue was what was proposed) or sales of other assets.  I've included this explanation that there are "holes" in this budget for transparency and as illustration that there is indeed more hard work to come.  Not all budgeting can be done for a whole year at one instant; it is a dynamic process, there are contractual obligations, new negotiations, new technology to implement, reorganization, etc.  While many, many expenses, and then cuts to those proposed, have us where we are today, getting all the way to a zero tax increase requires truly thoughtful and truly difficult decisions.

As I said, most of my colleague and I believe it is our job to pass a budget that our constituents too would support, and this effort will take us right up to the vote on Thursday.