November 24, 2008

City may need to dip into rainy day cash to weather fiscal storm

Faced with dire budgetary  predictions, officials are considering the option of dipping into the city’s rainy day fund next spring to keep property taxes from skyrocketing.

A “tidal wave of taxes” looms, city Comptroller Glenn Klocko said, unless the economy turns around.

This may be the time that fund balance is tapped into,” Klocko said.

The city is struggling to hold spending in check enough to prevent a deficit during this fiscal year, but the real crisis is likely to take hold next year when the state’s fiscal collapse could mean sharp cuts to the aid Bristol and other municipalities depend on.

With the state eyeing shortfalls that could top $6 billion over the next three years, the city is worried its finances could take it on the chin, too.

Klocko said that he “can’t see how we’re going to sustain” education funding the way things look now. “It’s scary,” he added.

Both Mayor Art Ward and Klocko said that Bristol is fortunate to have more than $17 million in its rainy day account, about 10 percent of its overall budget.

That money can perhaps be tapped somewhat to lessen the mill rate increase that appears likely next year simply to preserve existing school and municipal services, officials said.

As city departments begin to look at possible budgets for the next fiscal year, which starts July 1, they have been told to keep increases to 2 percent or less.

“It’s not going to be a normal year,” Klocko said.

To keep the city’s education system going at the same level as this year will require an additional $5 million, officials said. Combine that with a possible $5 million reduction in state school aid, Klocko said, and it would take a 2.5 mills increase just to leave the school system the way it is.

That means residents would face a 10 percent tax increase for school spending alone unless something gives in the meantime.

With the state deficit at unprecedented levels and unemployment rising steadily, Klocko said the situation is dire. He said he’s worried there may be mid-year cuts in state aid tha would be “very scary” for local finances across Connecticut.

In Bristol, Klocko said, the city can hold out this year because it’s got a healthy reserve.

But after that, things look pretty bleak.

At this point, “the doom and gloom” of big city leaders doesn’t fit with Bristol’s situation, Klocko said.

But, he said, it’s likely to get a lot worse.

“Next year, I have no clue” how to deal with the financial crisis if it remains so dire, Klocko said.

 Budget woes already hitting home

The city may face as much as a $1.6 million deficit during the current fiscal year.

City Comptroller Glenn Klocko said that $900,000 of the shortfall is the result of the extraordinarily high utility and fuel costs the city has had to shell out.

The rest of the potential red ink is the result of a slowing economy.

The lack of new construction means that building permit revenue is coming in well short of projections while lagging home sales have sliced conveyance taxes.

In addition, the city isn’t earning much on the cash it has sitting in bank accounts because interest rates are so low.

All told, the three revenue categories are projected to come up $700,000 short of expectations, Klocko said.

Officials are watching closely to see whether property tax collections fall off in January, which would make the situation worse.

Klocko said the city has seen 98 percent of its tax bills paid so far this year, which is excellent. Whether it will stay that high, though, is unclear given the struggling economy. 


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Copyright 2008. All rights reserved.
Contact Steve Collins at scollins@bristolpress.com

39 comments:

Anonymous said...

This also means that the City should put a spending freeze in place (no new schools, renovations of old buildings, special projects, etc.), evaluate all spending and cut what is not necessary. Layoffs as hard as they are may also have to occur to better manage overall expenses. These are unpresidented times and now is the time to act. The rainy fund should be a last resort and used only after all other alternative are explored.

Anonymous said...

The city is left with no choice but to start cutting back. Close city hall on Fridays...Close the dump on Mondays and Wednesdays...Those little things add up to big savings in little time. Come on Artie stop catering to your union friends. The time has come to show some b@lls!

Doug said...

I warned the city council and the Finance Comittee about this two years ago. Art Mocabee and Ellen Zoppo were the only one's that gave me the time of day.

The city is in for more trouble and it will be the taxpayer that will pay the price.

Bristol better start getting serious about it's and Connecticut's fiscal problems. This means bringing the Unions to the table to share their part of the pain. The taxpayers don't have anything left to give.

Anonymous said...

Don't worry....Ward will save his union buddy's!

Anonymous said...

rainy day funds are for rainy days - use it and don't cut education to set up back to where we were ten years ago. The state should also relax mandates, which is what eats up a bunch the education dollars.

Joey Garlic said...

and don't forget, the mayor and council are up for re-election next year - don't want to riase taxes and get them in trouble!

High Noon said...

Hasn't Klocko and the BOF been monitoring the budget during the year?

Anonymous said...

Don't they get it that not only is the city in trouble so are individuals? To even mention a 2% increase in budgets is disgusting! Fuel prices are way down so they can't use that excuse anymore.
Property taxes cannot be increased one cent next year. In fact, they should look at ways to reduce taxes to help us out. You do the same with your city budget as we are doing with our personal budget---cut back everywhere!
My taxes already went up $76 a month this year and my pay got slashed.
It's going to take a true leader to do what it takes to hold the line on taxes. I'm not for layoffs but giving concessions to help each other out is better than no job. Let's have a 9/12/01 mentality here and start looking out for each other.

Anonymous said...

Closing buildings will not save very much money UNLESS you reduce staff.

Ward will not do that.

The last mayor that did, didn't get reelected.

Don Quixote said...

Where is the Audit report for last year??

Anonymous said...

The City Council and Board of Finance were given a warning, a little over a year ago when the mortgage situation broke.

Guess they didn't listen.

SHANE said...

Ward doesn't have a clue and Klocko is looking out for Klocko.

Anonymous said...

I thought that the Finance Board was supposed to step in when a department was going over Budget.

Where were they.

Theyt should ALL resign.

Anonymous said...

I am sure glad we used the Rainy Day fund to buy the mall property. That was a really good expenditure of rainy day money!!

Anonymous said...

Cockayne offered a solution, not the total solution - GASB 45. Too bad Mayor Ward stacked the committee. He is going to look like such a fool with this one.

Brer Rabbit said...

The Mall situation was a loan: when it is sold, the money will go back into the fund.

But, where were you then?

Snow White said...

I can smell Nicastro lurking in the wings!

Heavens forbid.

Anonymous said...

" “Next year, I have no clue” how to deal with the financial crisis if it remains so dire, Klocko said."

Wow Mr. Klocko tells the truth with this quote! He really doesn't have a clue. He is botching the GASB 45 issue at every turn. He was the driving force in creating a trust fund for retiree health care that turned out to be unuseable. He either misunderstood or misrepresented the 401h language in the power point presentation posted on the comptroller's website. He doesn't understand how a VEBA (Voluntary Employee Benefits Association) works. He stated in public that municipalites and state governments can't use this valuable tool to fund health care for retirees. That statement was flat out wrong. The list goes on...

Anonymous said...

Thank goodness there's a true conservative chairing the committee not a stooge.

(ha ha)

Anonymous said...

"Cockayne offered a solution, not the total solution - GASB 45. Too bad Mayor Ward stacked the committee. He is going to look like such a fool with this one."

The mayor's problem is that he has too much faith in Mr Klocko. Mr. Klocko is really botching the retiree health care issue. There are literally millions in savings to the city being left on the table because Mr. Klocko is in way over his head. The mayor , as head of all the retirement boards should reccomend hiring a pension specialist to explain all the details of the Pension Protection Act of 2006 (title 8 part d) to the individual pension boards and how it can be used to not only improve the retiree health care system in Bristol, but also help control municipal spending.

Anonymous said...

STOP SPENDING ON ALL THESE NEW PROJECTS. FORGET ABOUT THE NEW SCHOOLS I THINK WE CAN ALL AGREE THAT IS ANOTHER PIPE DREAM LIKE THE MALL WE CAN NOT AFFORD IT. AS FOR PROPERTY TAXES EVERYONE WAKE UP YES THE COUNCIL IS GOING TO RAISE TAXES NEXT YEAR OF COURSE THEY ARE.SOON ALL OF US WILL BE LIVING IN CARDBOARD BOXES. USE THAT RAINY DAY FUND PLEASE BECAUSE IT SURE IS RAINING OUT THESE DAYS.

Anonymous said...

When will the mall sell? I doubt it will be for enough to cover the loan to the rainy day fund. Until then the rainy day fund does not have the 17 million it is supposed to have does it?

Anonymous said...

1.5 mill. shortfall. $900000fuel and electric no surprise there it sounds like the homework was not done on that area.Steve how much money was returned at the end of the last budget year,dept. by dept. would be best so we all can see who is being a team player.

Bashful said...

Are they checking to see if it was unit price or usage?

Was it Russo, or the other department users?

The best hope said...

Bankruptcy of Bristol is the ONLY way things will get resolved .

That is the ONLY hope these ridiculous union labor contracts will get addressed .

Anonymous said...

START THE LAYOFFS MAYBE WE WILL HAVE A CHANCE.

Anonymous said...

WARDS UNION FRIENDS ARE BRING US DOWN

Anonymous said...

Ward+Unions=Bristol Tax Increase=property value decline=ghosttown.

Thank You Unions and the Democrata panders Ward Nicastro McCauly Block

Anonymous said...

Layoffs need to start with teachers and principles that make 150K a year...we have to many! That make to much!

Grumpy said...

Where the heck has Mize and the Board of Finance been all this time????

Anonymous said...

We in Bristol are fortunate to be living in one of the most fiscally sound communities in Connecticut.

The whole WORLD is in crisis right now. Everyone is feeling the pain. We are in a much better postion to whether the financial storm than others. Thank goodness that we have a rainy day fund since it's been pouring since September!

Bristol is not in a position to go bankrupt. Those comments are just plain ludicrous.

Anonymous said...

It ain't the unions, it is inadequate management, including the Board of Finance and the Controller.

Anonymous said...

"WARDS UNION FRIENDS ARE BRING US DOWN"

....MORE LIKE RECESSION ARE BRING US DOWN

observation said...

truly have to believe that the majority of the comments written on this site are only submitted in an effort to promote negative input because no one could really feel that bad and still live here - at least I hope not because nothing positive is coming out of here as a result.

Birdman said...

And Obama wasn't negative about Bush and McCain?

Anonymous said...

"Bankruptcy of Bristol is the ONLY way things will get resolved . "

Is it cynicism ignorance or jealousy that fosters such rediculous ideas?

It is true that promises made to workers by employers are harder to break in government than in the private sector. Too bad honesty and integrity has to be legislated.

Pancho Cisco said...

Thank God for the conveyance tax.

Without it, we'd be hurting worse.

I applaud those that supported it, even though they took flak.

Bill Stortz said...

It is somewhat surprising AND disappointing that it has taken this long for the city to point out that we are in a tough economic situation here in Bristol. Also, it is disappointing that we are not given a clearer picture of where we are and what potentially lies ahead.

The city was given an early on warning that the economic situation was at best questionable and should be monitored.

In October 2007 (yes, over a year ago), after getting feedback that I requested from several department heads, as Mayor, I sent a memo to the Board of
Finance and the then City Council, suggesting that things did not look good, and steps should be considered that would hopefully minimize the need for more drastic steps at a later date.

Her is a copy of that letter.

To: Board of Finance
From: William T. Stortz
Date: October 23, 2007

Sub: Budget concerns

As you are aware, there has been some interesting activity in the economy in recent weeks.

The issue of sub prime mortgages, and resulting foreclosures, the acting of the Federal Reserve Board and interest rate changes, the rising price of oil, all can affect our budget, the current one and next year’s also.

With that in mind, I have asked some departments to document their thoughts in this regard. Granted theses are somewhat subjective, and they were not asked to do extensive research, but only to provide some basic thoughts and awareness.

I have included these reports for your review and consideration.

Keep in mind that some costs have increased, and we will be over budget because of that. Fuel oil and heating oil are good examples. This could cut into our contingency account, or at least affect these departments that budget for fuel and./or heating fuel.

While the conveyance tax make still make budget, keep in mind that the past years showed a surplus in this account, which affects other items that were over budget.

Also, last years interest income exceeded budget. This was taken into consideration in developing the budget, but with interest rate changes, this account could be affected even more. This account also was over budget last year and provided us with a buffer also; we may draw down money short term to meet Mall needs which could reduce interest even more.

Tax collection also might be affected.

Due to the efforts of the Tax Collector, over the past few years we have realized increased results in back tax collection.

Because of this, the amount left to be collected has been reduced, and has become more difficult.

At the same time, current foreclosures might delay some collection to subsequent budget years.

We will virtually always get our money, but the back tax amount may increase for the short term.

Vehicle tax collection may also be affected. In some cases we may lose the taxes altogether, as vehicle tax collection is difficult if cars are not reregistered.

While the situation is not dire yet, it is more problematical than it was 6-8 months ago, and there is no consensus that it will recover overnight.

Now is the time to take these factors into consideration, and see what can be done to evaluate the impact, as well as to see where current expenditures can be reduced or better controlled. Small changes made early on can educe the need for drastic changes in the latter part of the budget year.

cc City council

Encl.

(End of letter)

I am aware that that some steps are now being taken. Based on what I have read, I wonder if they are/and will be enough to avoid a huge tax increase or drastic cuts in service. Certainly there are many ideas that people, including myself, have that might help, and I did offer, and it would behoove this administration to take advantage of those resources so that we experience minimal impact.

Bristol is a good city, with good people, and working together, we can and will work through this situation. But it will best done utilizing the efforts and help of many, not just a few.

I have submitted a follow up letter to the media, but it is equally lengthy and probably will not get printed. If so, it will be submitted to this blog.

Anonymous said...

Klearly Klocko and Mize are anti-education!