New Britain City Journal

New Britain's Weekly Online Newspaper

Commentary

Surplus or Deficit?

This past week the Common Council of New Britain passed a resolution that declared the city, at the close of fiscal year 2013, had a $330,362 surplus. However, this figure is extremely questionable considering some of the budget manipulations that have taken place throughout the year, as well as some of the information that was included in the resolution itself. The city, through budget manipulation, created a situation where they were able to claim a surplus, even though the city is no better off than we were a year ago.

First, to understand the current budget situation, you need to understand a budget amendment that took place back in April. In this amendment the city claimed there were unforeseen expenses that needed to be covered, so they reduced the amount that they would contribute tom the self insurance fund in 2012-2013 by $6.6M and use that money to cover other shortfalls.

By reducing this payment to the Medical Self Insurance Fund the city put itself in fiscal risk, because that fund has a history of running a deficit year after year. This year alone the deficit between payments received and payments made from that fund was over $10M.

In essence, however, what this April resolution did was remove the budgetary obligation to properly fund the Self Insurance fund and shift those allocated funds to cover a number of areas of shortfall.

Now to this month’s resolution. In the resolution was a hastily scanned copy of a 2012-2013 budget analysis that provides a list of large overruns and underruns. Revenue underruns means revenue we expected to come in that did not and revenue overruns means revenue we did not expect to see, but were able to claim. On the flip side, expenditure underruns are areas where we spent less money than we expected to while expenditure overruns are areas where we went over our budget.

Some of the areas of revenue underrun included revenues I have said wouldn’t materialize since this budget was presented, such as “Transition Revenue” and “Police and Fire Hotspots”. All in all there were $10M in revenue underruns. These were offset by $12M in revenue overruns, but nearly half of the revenue overruns came from one time revenues. Most notably the sale of property (Alton Brooks Way) and the sale of Tax Liens.

This last one, the sale of $4.3M in Tax Liens is a major issue. Tax Liens are money owed the city for back taxes. When the city sells the liens they are basically giving another agency the right to collect on that debt for themselves. Debts like this are usually sold at a loss, since the purchaser has to spend money to collect these debts. But the bigger issue is that once the city sells the debt they can no longer collect interest on these debts. To put this in perspective, in 2013 alone the City of New Britain brought in over $3.6M in tax liens and interest. Due to the sale of our outstanding liens we won’t see income like that again for a long time.

So when you add these pieces of information together, the fact that had to sell close to $6M in city assets and we had to underfund our medical self insurance obligations to the tune of an addition $6.6M to create a surplus is it really worth it? This surplus is more a product of clever accounting and budgetary chicanery than it is a sign of prudent fiscal management in city hall.

Nicholas Mercier is the President of the Citizens Property Owners Association and former chairman of the Board of Finance. He is also running for the Board of Education on the Republican slate.