Budget Review Panel Report

8/14/2019 Budget Review Panel Report

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Findings on Oversight and Transparency

Public Meetings

Panelists have repeatedly attended public hearings of the Finance Committee at whichhours of testimony was presented by representatives and supporters of institutions whoreceive funding from the city.

Waiting until 9:00 PM or later to testify at a meeting at which you were the first namesigned on the public sign-in sheet is discouraging to citizens who wish their voices tobe heard in the budget process.

The institutions which receive funding from the city have many other opportunities totestify before the Board and the Finance Committee, when their funding is reviewed.

Results-Based Accountability

Results-based accountability is a promising trend in government and public

administration. The state legislature has a committee devoted to the topic.

Institutions are most effective when they analyze their own performance to identify theirstrengths, weaknesses, opportunities, and threats.

Financial Reporting

Citizens should have easy access to clear information about what their government isresponsible for, what it is not responsible for, and how well it meets thoseresponsibilities.

Current financial documents produced by the city make it difficult to determine how

much the city spends on different core services, and personnel vs. other operatingcosts.

Education Reform Oversight

The Mayor and Superintendent have recently announced an ambitious educationreform initiative. As education is the single largest cost center in the city budget, it isimportant that the aldermen and their constituents have clear insight into this processand its effectiveness.

Findings on the Budget ProcessShifting the Fiscal Year

It is inefficient to debate and pass a city budget before it can be definitively known whatfunds will be available from the state, yet this is our current process.

An in-depth cost-benefit analysis should be conducted before deciding whether to shiftthe financial year. The Budget Review Panel did not have the resources to conduct thisinvestigation. The Board of Aldermen do, and should make it a priority.


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Educational Services DetailAmount Personnel Amount Personnel Amount Personnel Amount Personnel

General 173,019,297 2,301 1,100,000 0 4,084,673 50 178,203,970 2,351Pension & Benefits 53,766,020 0 1,168,319 54,934,339Special 73,989,362 1,071 0 0 47,849 1 74,037,211 1,072Capital 50,532,002 0 620,000 51,152,002Debt Service 44,160,440TOTAL 351,306,681 3,372 1,100,000 0 5,920,841 51 402,487,962 3,423

Public Safety DetailAmount Personnel Amount Personnel Amount Personnel

General 37,309,457 614 31,029,701 399 68,339,158 1,013Pension & Benefits 14,346,952 9,323,182 23,670,134Special 625,066 3 2,075,284 20 2,700,350 23Capital 1,130,000 575,000 1,705,000Debt Service 4,724,624TOTAL 53,411,475 617 43,003,167 419 101,139,266 1,036

Infrastructure DetailAmount Personnel Amount Personnel Amount Personnel

General 5,679,456 69 14,155,756 132 3,523,292 9Pension & Benefits 1,612,280 3,084,361 210,297Special 488,913 4 0 4 0 0Capital 2,278,123 3,687,992 4,115,000TOTAL 10,058,772 73 20,928,109 136 7,848,589 9

Amount Personnel Amount Personnel Amount PersonnelGeneral 2,137,469 33 881,807 16 26,377,780 259Pension & Benefits 771,090 373,862 6,051,890Special 0 0 0 0 488,913 8Capital 465,000 0 10,546,115Debt Service 4,724,624TOTAL 3,373,559 33 1,255,669 16 48,189,322 267

Total Educationducation (900) Library (152)

Police (201) Fire (202) Total Public Safety

Non-Public Transportation (405)

Parks & Recreation (160) City Engineer (502)

Total Infrastructure

Public Works (501)

Transportation (704) Building Inspection (721)


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Human Services DetailAmount Personnel Amount Personnel Amount Personnel

General 3,407,304 68 979,712 11 135,921 2Pension & Benefits 1,588,913 257,030 46,733Special 9,231,686 35 150,776 1 2,344,485 5Capital 0 0 0TOTAL 14,227,903 103 1,387,518 12 2,527,139 7

Amount Personnel Amount Personnel Amount PersonnelGeneral 131,392 2 2,322,696 9 6,977,025 92Pension & Benefits 46,733 210,297 2,149,706Special 0 0 984,583 12,711,530 41Capital 0 0 0Debt Service 4,724,624TOTAL 178,125 2 3,517,576 9 26,562,885 133

Administration DetailAmount Personnel Amount Personnel Amount Personnel Amount Personnel

General 716,498 10 855,873 11 517,649 7 1,790,254 22Pension & Benefits 233,664 257,030 163,565 514,060Special 0 0 0 0 168,000 0 0 0Capital 60,000 0 0 0TOTAL 1,010,162 10 1,112,903 11 849,214 7 2,304,314 22

Amount Personnel Amount Personnel Amount Personnel Amount PersonnelGeneral 163,868 2 929,028 7 10,689,254 73 577,781 7Pension & Benefits 46,733 163,565 1,705,745 163,565Special 0 0 0 0 670,504 7 0 0Capital 0 0 1,400,000 0TOTAL 210,601 2 1,092,593 7 14,465,503 80 741,346 7

Amount Personnel Amount Personnel Amount Personnel Amount PersonnelGeneral 497,618 5 517,672 6 62,444 1 680,960 9Pension & Benefits 116,832 140,198 23,366 210,297Special 0 0 0 0 0 0 3,833,776 2Capital 0 21,723 0 1,915,134TOTAL 614,450 5 679,593 6 85,810 1 6,640,167 11

Amount Personnel Amount Personnel Amount Personnel Amount PersonnelGeneral 200,843 3 1,359,636 9 1,050,407 16 20,609,785 188Pension & Benefits 70,099 210,297 373,862 4,392,878Special 1,356,224 10 757,538 5 5,558,356 38 12,344,398 62Capital 0 3,305,000 1,225,000 7,926,857Debt Service 4,724,624TOTAL 1,627,166 13 5,632,471 14 8,207,625 54 49,998,541 250

Corporation Counsel (133)oard of Aldermen (111) Mayor's Office (131) CAO's Office (132)

Health Department (301) Elderly Services (303) Youth Services (304)

Disabilities Services (305) Total Human Servicesomm Srvc Admin (308)

Comm on Equal Opp (705) Economic Devel (724) Livable City Initiative (747) Total Administration

Labor Relations (135) Human Resources (136) Department of Finance (137) Assessor's Office (139)

City/Town Clerk (161) Registrar of Voters (162) Fair Rent Commission (302) City Plan (702)


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Other ExpendituresGeneralCapitalTOTAL

GeneralCapitalTOTAL

Debt Service Ratio Estimates for FY08-09Based on the city indebtedness break-out provided on page 188 of the FY08-09 Approved Budget.

Amount PercentageNon-Education 203,032,648 29.97%Education 474,429,914 70.03%TOTAL 677,462,562 100.00%Debt Service 63,058,935

12,696,356

4,454,500 881,916

(5,855,879) 4,454,500

11,814,440

Amount Amount Amount(5,855,879)

900,000

900,00011,814,44013,009,440

Contract Reserve (402) Various Organizations (404) Development Subsidies (701)

Concessions/Layoffs (999) Self-Insurance Total Other

Amount1,195,000

Amount

188,295

Amount188,295


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Fact sheet on the New Haven Board of Finance

Created in the early 19th century. (Dahl, p. 25.)

Boards of Finance continue to function in many other Connecticut towns.

Held considerable power throughout its life.

One recurring source of disagreement, to be sure, is the proper level of expenditures aparticular agency is to be allowed. ... [D]isagreements had to be settled by ad hocnegotiations among the leaders, the most important of whom were the mayor and themembers of the Board of Finance.

Dahl, p. 191

When he made a deal to sell three high schools in the center of the city to Yale for $3M,Mayor Lee had to "persuade" the Board of Finance to accept Yale's offer. (Dahl, p.206-7)

The Board of Finance rejected a $30M increase in the funding of the Board of Educationin 1988. (New York Times, April 28, 1988.)

Eliminated by the 1992 Charter Revision Convention.

"[T]he board of finance, which is now the finance committee of the board of aldermen...."Broadnax v. City of New Haven (SC 16786), July 13, 2004

The Financial Review and Audit Commission was created by the same Charter RevisionConvention.

Membership of the Board of Finance (per the 1976 Charter revision)

The Mayor

The Controller

One alderman elected by the Board of AldermenSix citizens appointed by the Mayor for staggered five-year terms

Possessed significant control over both revenue and expenditure.

Stipulations from the New Haven Charter, Article XI (1976 version).

In the months of March and April in each year, the board of finance shall makeestimates of the amount of money necessary to be appropriated for the expenses ofsaid city for the fiscal year next ensuing, beginning July first, and of the rate of taxationrequired to meet the same, and shall classify such expenses under appropriate headsand departments. [From Section 58]

The Charter called for two public hearings on the Board's estimates of appropriationsand taxation rates.

The Charter allowed the Board of Aldermen to decrease rates of taxation specified bythe Board of Finance, but not increase them.

If the alders did not "act on" the recommended appropriations and taxation rate of theBoard of Finance by the first Monday in June after their submission, they wereconsidered final for the fiscal year.

The Board of Finance had the authority to borrow in anticipation of taxes or bond sales.


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Tweed-New Haven Airport

During major events at Yale University, the general aviation ramp is often crowded withprivate jets - for the 1997 graduation, the corporate jets of Coca Cola and Procter & Gamblewere parked nose to nose on the tarmac. The airport also gets heavy use during the annualPilot Pen Tennis tournament.

-- Wikipedia article on Tweed New Haven Regional Airport

Findings

The citizens of New Haven receive no quantifiable benefit from Tweed.

The majority users of Tweed tend to fall into two categories:

Individual and corporate owners of private planes.

Business travelers employed by suburban companies.

Citizens of New Haven are unlikely to fall into either of those categories.

Tweed is unlikely to become self-sustaining any time soon.

An industry expert estimates that Tweed would require 300,000-400,000 departingcommercial passengers annually to break even.

The current figure is around 20,000.

The ground transportation infrastructure around Tweed could not support that levelof traffic.

The suburban neighborhoods around Tweed would not put up with that increase innoise and disturbance.

There is no direct financial upside to Tweed.

All profits generated by FAA-supported airports must be re-invested in the airportsthemselves, so the city can never realize a profit from the airport.

The town of East Haven receives all property tax revenue from the airport, since allTweed-based planes are "tied down" or hangared in East Haven town limits.

Tweed represents a significant potential financial liability for New Haven.

If US Airways leaves, the airport will lose considerable revenue generated bycommercial flights.

Given the state of the economy and the finances of the carrier in question, it is

impossible to predict the likelihood of this event.If the airport is not maintained to FAA commercial aviation standards, the FAAsubsidy will decrease by approximately $900,000.

The city will be obliged to repay millions of dollars worth of FAA grants if the airportceases operation altogether.

There are many opportunities to increase revenue and decrease costs at Tweed.

Some landing fees are well below those at the nearest GA airport, Oxford-Waterbury.

Other usage fees that could be increased:


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Fuel flowage fee (currently $0.10).

Monthly "tie-down" fee (currently $85.00).

Monthly heated hangar fee (currently $1,200 with no vacancies).

No information on salaries of Authority staff is publicly available, but other CTairports of a similar size are run with much smaller staffs.

The FAA requires that certain positions be filled, but allows multiple positions to beheld by a single individual.

Small airports like Tweed are a regional resource, not a municipal one.

All other airports in Connecticut are owned and run by the CT Department ofTransportation.

There are significant administrative and operational economies of scale to stateownership.

There are 14 municipal members of the Tweed-New Haven AIrport Authority. OnlyNew Haven provides funds for the airport's budget.


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! ! June 18, 2009

Page 1 of 1

Questions for Accounting City Liability

I. Pension Funds

What is the unfunded liability for the Policemen's & Firemen's Retirement Fund?

Data Value Source

Actuarial Accrued Liability (512,853,088) as of 6/30/2008 (Hooker & Holcombe)

Market Value of Fund Assets 218,088,480 as of 3/30/2009 (Mark Pietrosimone)

Net Unfunded Liability (294,764,608)

What is the unfunded liability for the City Employees' Retirement Fund?

Data Value Source

Actuarial Accrued Liability (344,861,529) as of 6/30/2008 (Hooker & Holcombe)

Market Value of Fund Assets 133,680,446 as of 3/30/2009 (Mark Pietrosimone)


What is the total unfunded pension liability?

Data Value

P&F unfunded liability (294,764,608)

CERF unfunded liability (211,181,083)


II. Other Post-Employment Benefits

What is the total estimated liability for post-employment healthcare?

The Hooker & Holcombe report of 12/17/2008 estimated this to be $430MM.

III. Banked Employee Sick-Time Compensation

What is the total liability for banked sick days that may be due on retirement?

At a Budget Review Panel meeting on the topic of debt (2/18/2009), MarkPietrosimone estimated this liability to be approximately $28MM. Does the city

keep an account for this liability?


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Initial Draft 3/4/09

b. Unfortunately, since the market has had many losses in 2008 & 2009, the contributionsthat will be required next year, and in future years, will need to be increased to make upfor the losses now happening in the market.

7. How to reduce pension contribution?a. Since we dont control the market (performance of the fund), the best way to bring the

contribution expenditure under control is to change the pension commitmentb. Additionally, increasing the employee contribution levels annually will share the costsmore equitably

Pension Commitment

1. Defined Benefita. Plan is a Defined Benefit plan meaning the amount of the payout to the employee is

predefined upfront and will not change.a. 20 year = 50% of base salaryb. 3% for each additional year up to the maximum of 80% of base for 30 years of

service.

b.

Defined Benefit is much more expensive and risky for the city because the city needs toensure that no matter what the market performance is or what peoples life spans are,that they put enough money aside to have enough to cover the predefined payouts

c. Conversely, in a Defined Contribution Plan the city defines how much gets contributedto the fund for an employee upfront (usually employees can add to this amount) andthen the city does not need to alter the contribution regardless of what the market does.Instead, the city can increase the contribution with an annual cost of living increase. Adefined benefit plan is what employees of most public companies have.

d. In 2003, the city put aside $9,285 per employee in the Defined Benefit plan for a totalContribution of $14.3m. Over six years, the citys pension contribution per employeerequired by the Defined Benefit plan has risen 111%. If the city had instead put thatsame amount $9,285/employee) in a Defined Contribution plan for the unions andadded a 4% cost of living increase each year, the overall contribution for the city in2009 would only be $17.5m, a 26% increase (instead of 111%)


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Initial Draft 3/4/09

2. Sick Time Sell Backa. Currently, 30 days of sick time can be sold back for 1 year pension creditb. Adding sick time to the pension is a greater cost to the city over the long run than just

providing a cash payout for selling back the time

c.

Sick time sellbacks are not currently deposited into the pension fund (goes into thegeneral fund). Therefore, we are increasing our obligation without adding any funds tocover it the obligation.

d. Employees who sellback their sick time can end up with a pension > 100% of their basein pension

3. Overtime in Pension calculationsa. Employees who work much overtime in their last years of employment qualify for

greater than 100% of their base in pensionb. Overtime payments should compensate a worker for the inconvenience/hardship of

having to work unscheduled extra hours. Therefore, the worker should only benefit forovertime when it is worked. It should NOT be included in the Pension calculation.

4.

Current Pensionersa. City Employees Retirement fund - 1052 retirees receiving about $20 million annuallyb. Police and Fire - 1055 retirees receiving about $28 million annually

Negotiations with the unions

1. Negotiations with the union need to balance long term and short terma. Impact to / benefit for the employees needs to be considered in both the long term and

short termb. Impact to the city taxpayers much be considered benefits as well as for the taxpayersc. Based on the growth in the pension commitment outlined above, it is clear that the long

term impacts to the city have been disregarded in recent negotiationsd. Due to the unsustainable pension commitment growth, the city needs to focus on these

long term impacts during its next contract negotiations with each union2. Binding arbitration

a. Binding arbitration is a risk, but the city can not benefit if they dont utilize itb. Need to be smart about arbitration and break up the negotiation points so the arbitrator

can award pieces independently, not an all or nothing strategy3. Rules of the negotiation

a. The mayor has stated that the rules that we are bound to in our negotiations (likebinding arbitration) have an impact on the outcome of the negotiation. (This is a verytrue fact of negotiation regardless of whats being negotiated)

b. What defines the rules of the contract negotiations with the city? The charter?Legislation?

c. The city needs to think about changing some of the rules, even if its not easy. Forexample, the ability to strike or residency rules.


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Findings on Transportation

Red Light Cameras

It is estimated that a red light is run every 3 seconds in New Haven

In 2002, a study was performed that found over 400 violations in one 24-hour period on

one stop light alone.In 2006, we had nine traffic fatalities in the City of New Haven, and over 3,400 trafficaccidents.

Any ticket issued is not considered a moving violation and therefore does not affectlicensing.

The revenue from proposed legislation would give 50% of the fine to the municipality !sgeneral fund and 50% of the fine to the State Treasurer in the Special TransportationFund.

Proposed laws have been for $100 tickets.

In the test case of the 400 red lights ran, it would generate $20,000 for the GeneralFund daily or $7.3 million/annually.

Sharing Ticket Revenue

Currently municipalities receive only $10 per moving violation.

The different speed-related offenses are penalized as either infractions or as violationswhere the statue specifies a fine range.

For infractions, the judges of the Superior Court set the specific fine for each type ofinfraction within a general range of $35 to $ 90.

For the statutorily specified fine ranges for violations, the judges use a uniformschedule that specifies an amount for a specific range of speeds with a base fee from$100-150.

Besides the actual fine, speed-related offenses are subject by law to severalsurcharges, fees, and cost assessments that make the actual amounts considerablyhigher.


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Tax Rate Principles for New Haven

By: Christine Bishop (member: Blue Ribbon Budget Panel)6/29/2009

Mill Rate Findings

The Mayor has stated that his budget plan does not require any new taxes to create abalanced budget. This is being touted as fabulous in this down economy but shouldntthat be the baseline expectation every year? Unfortunately in New Haven, that does notseem to be the case as the citys expenses have increased every year and the tax burdenon the citizens has increased as well. Continually increasing the burden on citizens is nota sustainable trend.

As the taxes go up, seniors and others on a fixed income are less likely to be able toafford their taxes and will be forced to move out of their homes. The increase in taxes isalso passed on to the renters thereby increasing rents each year which is a big impact tolow income and fixed income individuals. As the mill rate portion of the equation

increases, as it has for more than 10 years, it outpaces the mill rates in surrounding towns,thereby making it attractive for people and businesses to move out of the city. Bycomparison, Hartfords mill rate has increased 60% over the last 10 years and has lostmany businesses, both small and large, to the surrounding towns thereby reducing itsgrand list from $5.75 billion to $3.47 billion over that same period.

The Mayor has stated that new valuation is causing a shift in real estate burden fromCommercial to Residential and that by freezing the phase-in that shift in burden wouldnot occur. Any freezing of the phase-in is an artificial stagnation of the grand list whichhides the real economic picture of the city. The city should have allowed the phase-in tooccur and reduced the mill rate to provide the following benefits while maintaining aneven amount of revenue.

Benefits of a lower mill rate:

Given the current economic crisis, businesses are looking for ways to decreasecosts. If the business has much property and assets on which to pay taxes, theycould choose to go to a neighboring town with a lower mill rate to lower its taxburden.

A lower mill rate encourages companies to buy new equipment. They can affordmore equipment for the same tax burden, thereby allowing them to grow.

New Havens mill rate is much higher than all of the surrounding towns.Lowering the mill rate closer to the other towns (we know we cant be the same asthe smaller towns that dont provide the services that we do) will put New Havenon a more level playing field tax-wise for businesses looking for a place to start.

(continued)


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Comparative tax rates:

Municipality Mill Rate

Branford 23.21

East Haven 22.85

Hamden 29.42

Milford 28.23

North Haven 23.50

Orange 27.94

Wallingford 22.90

West Haven 27.96

While there is general concern that a lower mill rate will have a negative effect onthe PILOT reimbursement, the impact will be a very small (less than $100,000decrease in the tax loss basis used to calculate PILOT)

Keeping the mill rate the same year after year encourages the administration to

continue keeping it the same and numbs the taxpayer to the hidden increaseswhen the phase in does happen and the rate remains the same. For example, inFY2008-09, the taxpayers received an 11% increase in tax burden by keeping themill rate the same as the previous year and having the 2nd year of the phase inoccur. This allowed the administration to expand the expenses of the city to fillthe new revenue level. Historical data shows that once expenses go up, its a fightto reduce them. So, by the city spending this additional 11% tax revenue, theyveset the new standard higher.

As a standard practice, as the grand list value goes up, the mill rate shoulddecrease. So, as the phase in occurs over the next several years, the mill rateshould continue to decrease while keeping costs in check. If we artificially stop

the grand list increase now, we get the public in the mind-set that 42.21 is thestandard mill rate (at least they havent increased the mill rate the last fewyears) and provides no incentive in future years for the mayor to decrease therate as the grand list grows in the future, forcing taxpayers to continually paymore.

The taxpayers are protected over the long term by starting to reduce the mill ratenow instead of artificially keeping the grand value list low and then to decreasethe mill rate as the grand list value goes up.

In summary, in order for New Haven to remain competitive and grow, the city must workto minimize its taxes burden by decreasing the mill rate as the taxable grand list grows

which is enabled by reining in expenses to fit within this level tax revenue.

Budget Review Panel Report

Documents

Transcript of Budget Review Panel Report