NB Politicus

New Britain’s Bond Rating Drops From Stable To Negative: Huge Spike In Debt Through 2021 Cited By Moody’s

Posted in city government, City Hall, municipal budget, New Britain, Uncategorized by nbpoliticus on November 4, 2017

By John McNamara

Republican incumbent Mayor Erin Stewart, in her re-election campaign this year and throughout her second term, has touted improving municipal bond ratings for New Britain’s fiscal solvency, claiming credit for budget surpluses of $15 million and pushing spending up at City Hall with no need for an election year tax increase.

Fiscal stability is the cornerstone of her platform and a main talking point in her aspirations to leave the mayor’s job for statewide office. Her campaign’s website points to New Britain “gracing the cover of the Bond Buyer, a trade publication covering the municipal bond market, “not once but twice. The city under her management is a shining example for how to make a financial turnaround work during a difficult economy.”

The November 2nd edition of Bond Buyerhowever, paints a different picture for the city’s finances in the  latest analysis, portending a difficult road ahead for the city’s budget over the next four years.  Moody’s Investor Services, which along with Standard & Poor’s, assesses the borrowing ability and fiscal health of cities in the municipal bond market, has downgraded general obligation borrowing to Baa2 from Baa1. “Moody’s cited New Britain’s reliance on nonrecurring revenues to stabilize its financial position in recent years. The rating agency also revised its outlook on the 73,000-population city to negative from stable,” Bond Buyer’s Paul Burton reported. “The rating also incorporates the city’s elevated debt profile with rapidly escalating debt service and its modest pension liability,’ the rating agency said Tuesday.”

In contrast to Moody’s downgrade four months into the 2018 fiscal year, Standard & Poor’s has previously affirmed  a more favorable A-plus rating for New Britain after upgrading the city four notches through two upgrades.   Moody’s last assessment came in 2014.

According to the Bond Buyer story:

Moody’s said the negative outlook reflects the short-term challenge New Britain will face to match recurring revenues with recurring expenditures while managing its debt service pegged to spike through fiscal 2021. New Britain, said Moody’s, could earn an upgrade through a sustained trend of structurally balanced operations without one-shots, a material reduction in debt burden, growth in its tax base or an improved resident wealth and income profile.  By contrast, continuing reliance on nonrecurring revenues, erosion of its financial position, taking on more debt or deterioration of New Britain’s tax base or wealth profile could lead to a downgrade.

The Moody’s downgrade may be related to action taken by the Common Council prior to the end of the 2017 fiscal year at the behest of the Stewart administration when debt payments were deferred in the last fiscal year pushing the debt into this year and succeeding years when interest rates on the city’s borrowing will be accelerating.

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Did Stewart Get A Prohibited Campaign Freebie In Mailing Of Car Tax Bills?

Posted in city government, city politics and government, ethics, municipal budget, Republicans, Tax Policy by nbpoliticus on September 2, 2017

By John McNamara

New Britain motor vehicle owners finally got their bills on September 1 along with  a glowing missive from Mayor Erin Stewart that makes the case for her re-election.

The city held up auto tax notices this year, blaming the state budget impasse for the two month delay. Uncertain was whether the auto levy would be lowered to 32 mills or stay at 37.  Given the state deficit then and now,  it would have been a safe bet to go with the 37 mill rate in July rather than wait.  The $241.5  million municipal budget for the year that began July 1st is based on what New Britain got from the state in the 2017 fiscal year.

In a city election year the delay in mailing tax bills is giving incumbent Stewart a prohibited taxpayer-funded freebie — an expensive city-wide mailing to everyone who owns a car or truck — to boost her campaign closer to the election.

Don’t expect Stewart and her full-time image team in the Mayor’s office  to miss an incumbent’s prerogative of using public funds to deliver a not so subtle piece of campaign promotion. Normally there’d be nothing wrong with it.  It’s done here and in many places all the time — an advantage to incumbents in local races with no public financing

Brochure advancing Mayor Stewart’s candidacy sent with motor vehicle tax bills this week. State law bars use of public funds for candidate promotions within three months of elections.

The issue usually arises over “franking privileges” for state and federal lawmakers who send their own positive mailers back to their districts on accomplishments and legislation.

At issue here is whether Stewart used the good offices of the Tax Collector to promote her candidacy within three months of an election.  That’s where the Connecticut General Statutes come in. State law prohibits any use of taxpayer money by incumbents within 90 days of an election for self promotion.

From Connecticut general statutes 9-610

(d) (1) No incumbent holding office shall, during the three months preceding an election in which he is a candidate for reelection or election to another office, use public funds to mail or print flyers or other promotional materials intended to bring about his election or reelection.

Using her campaign slogan “Leading The Way” in the taxpayer-funded brochure, Stewart cites saving the city from fiscal ruin, good bond ratings, reorganizing city hall departments “to find efficiencies and improve customer service and “a continuous commitment to provide our teachers and our children with the proper tools for learning and exploring.”  The official message is a carbon copy of what can be found on Stewart’s campaign website.

Any and all of the Stewart’s tax mailer assertions, of course, can be challenged in an election year.  A closer look at the  municipal budget shows higher spending  trumps efficiency at City Hall. A hefty jump in interest payments looms on short-term borrowing because Stewart and the Common Council deferred on paying bills coming due last year. And that  “continuous commitment” to education?  It’s  hard to find in a Stewart budget that continues to spend more at City Hall but didn’t add a dime to schools in the current budget.

In politics timing can be everything and can determine what is allowed and what isn’t under the law.

By incorporating her campaign promotion in the late auto tax notices , Mayor Stewart ignored the law that bans incumbents from using public funds “to mail or print flyers or other promotional materials” for reelection.

 

 

City Hall Watch: Deferring Municipal Debt Payment Means Cash Now, Higher Interest Next Year

Posted in city government, municipal budget, New Britain, property tax by nbpoliticus on February 10, 2017

By John McNamara

The Stewart administration is shifting $6 million from a scheduled payment on the city’s rising municipal debt— creating an election year windfall to avert yet another tax increase.  The Common Council approved what representatives of William Blair & Company, the city’s bond counsel, called a “re-structuring” of  a $28 million bond at a special meeting  on January 11th.

Expect Mayor Stewart to trumpet a “savings” to avert her third property tax hike or claim a hefty boost to the city’s “rainy day fund” as municipal budget talks get underway in a few weeks.

CITY HALL WATCH

CITY HALL WATCH

But using the city’s credit card to increase cash flow in the current fiscal year is hardly a savings or proof of Stewart’s fiscal prudence. It obligates the city to shell out more to bond holders in the out years. Pushing debt obligations to 2018 and beyond  guarantees all the borrowed money (short and long-term debt for capital projects and allowable expenses) will come with considerably higher interest rates.

“We’ve been seeing  the rates increasing from last year,” William Blair’s Richard Thivierge told the Common Council. “Some debt rates have gone up 60 to 80 basis points.”

Ward 5 Alderman Carlo Carlozzi, who extensively questioned bond counsel along with Alderman Manny Sanchez on January 11, expressed some frustration on the new deal with creditors which will lower the payment this year from $28,315,000 to $21, 600,000. “The city always seems to be restructuring its debt.”  Carlozzi said,  wondering out loud if moving the debt was kicking the can down the road at higher interest rates.

Bond counsel representatives explained that the city is not re-financing — which is usually done to get lower rates — but is deferring the debt a portion of which stems from borrowing  in Stewart’s first two terms. Because of the city’s “high debt base” Thivierge said the city needs to “levelize” its debt service by slowing down its payments. Always the obliging middle man in extending the debt, Thivierge called it “budgetary prudence.” In political terms that’s a euphemism for not having to raise taxes or cut services in an election year.  Pressed by Carlozzi’s questions, the Mayor,  Finance Director Lori Granato and Bond Counsel tacitly acknowledged the city could pay down its debt at a lower interest rate this year, but that the extra $6 million will be needed in the next budget after July 1.

Obligating the city to pay more for debt at the start of 2017 stems from structural factors that cash-strapped cities face. New Britain, according to the state Office of Policy and Management (OPM), is the slowest growing grand list in the state with 97% of the land developed and a considerable amount of real property owned by the state or nonprofit institutions. This inelastic tax base, reliance on the property tax and dependence on state aid that this year exceeds $100 million makes the current system unsustainable no matter who is mayor or serves on the Common Council. All of this is why the bond lenders hold cities in a cycle of  borrowing for needed capital improvements not favorable to fiscal stability and residents. Raising taxes is good. Cutting services is better. Selling off municipal assets (such as watershed) is even better for improving your bond rating and pleasing the lenders on Wall Street.

The situation has been made worse in New Britain by “structural deficits” first identified by Mayor Tim O’Brien when he took office in 2011 and quickly acknowledged by Erin Stewart when she succeeded O’Brien despite her politicking that the budget mess was created entirely by O’Brien in one term.

Both mayors pointed to the four terms of former Mayor Tim Stewart who, with the acquiescence of Democratic common councils between 2003 and 2010, relied on one-time fixes and phantom sales of land.  With increases in spending and freezing the tax rate year after year during the first Mayor Stewart’s terms,  a financial hole was created that the city is still climbing out of.

“We had an issue a few years back when someone came into office and said there were structural problems in the budget,” said Carlozzi at the bond authorization meeting, alluding to former Mayor O’Brien sounding the alarm more than five years ago. “That person was heavily criticized. We now have heard for the last three years that we have structural issues with the budget. That individual was correct.”

As Alderman Carlozzi made clear at the Council meeting paying off your credit card debt sooner rather than later would be a good thing.  In 2017, however, the restructuring of debt is a way to paint a hunky-dory financial picture that relies on the city’s mountain of debt getting higher.  What is especially misleading is the “rainy day” or “tax stabilization” fund being counted in the millions of dollars. Implying that the surplus stems from more efficiencies and prudent fiscal management as Stewart boasts is false. It is based almost entirely on restructuring borrowed money and a 2014 property tax increase — the largest in city history.

The bottom line is that in a municipal election year all that glitters is not gold when it comes to city finances. Bond authorizations cannot be used to meet current operations only capital improvements.  But in New Britain and other financially struggling cities increasing debt costs for ready cash carries a heavy price tag due and payable sooner rather than later.

 

City Council Gives Nod To $10.10 An Hour A Year Early

Posted in economy, minimum wage, municipal budget by nbpoliticus on April 18, 2014

Council President Mike Trueworthy’s resolution on a $10.10 minimum wage for city employees not covered by labor agreements or other contracts won a 10-5 vote at the Common Council April 9th.

It came on the heels of President Obama’s visit to CCSU to rally support for federal legislation that languishes in the GOP controlled U.S. House of Representatives.  The point of Obama’s visit was that states and localities now need to lead and pressure Speaker Boehner & company to adjust the federal minimum which hasn’t changed in a long time.

Front Page from The Recorder, CCSU’s student
newspaperafter President Obama’s visit.

Thinking nationally and acting locally worked.  Nine Council Democrats were joined by Ward 4 Alderman Don Naples, an unaffiliated who ran with GOP Mayor Erin Stewart last year.

Ward Five Alderman Carlo Carlozzi, Jr. led the majority’s argument for the city to go to $10.10 in 2015-2016 after a council committee exempted independent contractors from the increase.  Carlozzi, pretty much a fiscal conservative with a record of voting against municipal budgets, made the “moral’ argument. Invoking the experiences of his labor Democratic parents Carlozzi noted that the compromise measure on $10.10 won a unanimous vote in committee and he was surprised to hear opposition on the Council floor. “Are we really telling people we can’t afford paying them 50 cents more an hour?” asked Carlozzi, noting that the state minimum goes to $9.60 the year after next and won’t reach  $10.10 until 2017.

City officials estimate the impact of $10.10 for eligible employees would be somewhere north of $80,000. But Carlozzi, who delivered a budget-cutting soliloquy on ways to avoid tax hikes at the start of the meeting,  insisted that even the most austere municipal budget should find room for half a buck an hour more for entry level wages in city jobs.  Approximately 160 employees, part and full time, would be covered by the new minimum.

“Democrat” Daniel Salerno, a member of the Council’s Republican caucus, and Minority Leader Jamie Giantonio, led the opposition to the measure on jurisdictional and fiscal grounds.  Salerno, being a good soldier for the Stewart Administration, argued minimum and living wages are not the concern of elected officials in local government.  Giantonio, noting the precarious financial condition of the budget, indicated that the city could use the money for other things instead of upping the minimum for a limited number of city employees a year ahead of the state mandated wage policy.

The GOP Aldermen, wanting to have it both ways, quickly endorsed “living wages” that exceed $10.10 in theory but fell back on familiar arguments used whenever proposals to have minimums catch up with the cost of living: it’ll kill jobs and drive costs up for consumers (taxpayers).

Alderman Salerno makes a good point: if Congress, specifically the GOP House was doing its job to adjust the $7.25 federal wage, neither city nor state would need to debate the issue.  The $10.10 an hour would already be in the calculations for the current budget let alone next year’s or the year after that.

The Common Council, however, did the right thing in passing more than a  feel good resolution backing state and federal action after the Obama visit.  The need for constrained spending and austerity in municipal budgets is undeniable. But paying an additional 50 cents per hour for the least paid among city workers is a step toward fairness and away from the excuses and myths that always come from opponents.  Excuses and myths are holding the minimum to $7.25 nationally but not in Connecticut nor New Britain.

Absentee Landlord Licenses, Fees Exist In Many Communities

Posted in Housing, municipal budget, Tax Policy by nbpoliticus on October 6, 2012

Updated November 21, 2012: Legitimate concerns about the city’s licensing of absentee landlords (all owner-occupied dwellings are excluded) have been drowned out by a phony anti-government coalition fueled by out-of-town interests and a failed GOP leadership seeking once again to use divisiveness for political gain.   The well-publicized and well-financed campaign of distortion is  now replete with paid protestors, intimidation of tenants and outrageous lies about the ordinance and who would be affected by it.

The absentee landlord lobby frets and whines that if this happens in New Britain, it will spread to other communities.  What they don’t want you to know is licensing and fees for absentee owners and investment properties exist from the Redwood forests to the New York highlands as a means of maintaining housing stock and improving landlord and tenant relations.  As the following post from NB Politicus noted in early October  the absentee landlord law suit flies in the face of similar ordinances in Connecticut and around the country, including laws that go far beyond what has been proposed for New Britain.

On October 4th, New Britain’s Common Council adopted new fee ordinances on landlords owning non-owner occupied, multi-unit apartments  —  policies designed to raise an alternative source of revenue as well as to strengthen anti-blight enforcement in multi-unit housing.

The $150 per unit flat fee represented a compromise over an earlier proposal that the Council’s Planning and Development committee left on the table. It will raise an estimated $1 million on rental properties with absentee owners.

A second ordinance known as a “hot-spot fee” would charge landlords $500 when emergency and public safety personnel are called to an apartment house five or more times in a year.  It is expected to generate another $1 million.

The combined measures can avert some service cuts and improve the anti-blight efforts as Mayor O’Brien and the Council seek to fill a $4 million hole growing out of  the structural deficits identified in the last fiscal year when O’Brien took office.  Clearly, they are not a panacea for the budget woes that stem from nearly a decade of gimmickry and one-short revenues of prior administrations. The license fee  is part of a strategy to avoid regressive taxation in tough fiscal times: raising the property tax  always falls disproportionately on homeowners and those least able to afford it.

The Common Council’s actions occurred amid a raucous and at times churlish crowd of opponents prominently led by the statewide landlord lobbying group which opposes the fees and previously opposed tougher anti-blight measures that the O’Brien Administration has adopted.

According to press reports, Bob De Cosmo, president of the Waterbury-based Connecticut Property Owners, said his group will file a class-action lawsuit against the city.  In an effort to bully and intimidate city councillors DeCosmo was quoted as saying “we will be looking into suing each individual council member that voted for this illegal tax.”

The hollow threat of a legal fight over the modest New Britain flat fee flies in the face of policies and fees that are found in many other  communities throughout the country and that have been on the books for a good long time.

In Connecticut, for example, Stamford has an annual fee structure on multi-family units tied to housing code enforcement: a $60 fee and $30 per additional unit for three to nine apartments; $75 and $40 per additional unit for 10 to 39 apartments, and; $200 fee and $60 per unit for 40 or more apartments. Sounds doubtful absentee landlords will dump their New Britain properties to go buy dwellings downstate.  Nor will they pull up stakes and go to places like Gainesville, FL, North Chicago IL, Burlington, NJ, Cedar Rapids IA, Salt Lake City UT, Minneapolis, MN (and many more). They’ll find landlord fees and licenses and charges for rental units in all of them.

One other thing municipalities here in Connecticut and elsewhere have as a sensible part of housing policy is a Certificate of Occupancy ordinance. That was lost to New Britain in the 1980s when Tom Bozek was the Council majority leader.  It would be a feather in the cap to Mayor O’Brien and the Council to restore the CO ordinance, not just for fees but to fairly handle the rights and responsibilities of landlords and tenants.

The Mayor and Common Council clearly didn’t deserve the insults and push back at the Council meeting from some of the attendees, particularly absentee landlords who need to learn a lesson in shared sacrifice without diminishing a return on their investments. They need to be responsible members of this community whether they live here or not.

Board of Ed Should Consider CT Health Partnership; "Significant" Savings To Support Services Possible

Posted in health insurance, municipal budget, property tax, public education by nbpoliticus on June 11, 2012

When State Comptroller Kevin Lembo talked with city officials last winter he came bearing potential good news that the city could gain hundreds of thousands of dollars for its municipal and schools’ budgets without a new tax or cut to services.

It may sound too good to be true but it is real and obtainable as the city grapples with the threat of cuts and layoffs and the need to adequately fund public education.  There is a way for cash-strapped New Britain government to realize significant dollars it doesn’t have now.

The new money — potentially hundreds of thousands of dollars — wouldn’t be part of  state aid allocations but would come from savings of the CT Partnership Plan,  a new state law that allows cities and boards of education to join the state health plan effective July 1, 2012.  In effect in more than 20 states throughout the country,  the partnership plan, adopted after a three-year legislative effort by House Speaker Chris Donovan, utilizes the power of pooling employee groups to lower insurance premium costs, which have been a rising cost item for City Halls and Boards of Education in recent years.

In rolling out the CT Health Partnership in March,  Lembo said his analysis found that 50 municipalities, including New Britain, would receive lower premium rates under the partnership for health insurance. “Over 50 municipal employers analyzed so far would receive lower premium rates under the CT Partnership Plan — 30 percent of those with rate reductions greater than five percent,” declared Lembo who prior to being elected Comptroller in 2010 was the State Health Advocate.

Opponents of the partnership, including former Mayor Stewart and former Ald. Lou Salvio, have complained that adoption of the health partnership would be a state takeover — a false and ridiculous claim that distorts the issue and continues a status quo of rising health premiums.  The partnership takes over nothing, but restructures good health coverage in a way the reduces the costs.

“Our initial analysis of more than 50 municipal employers revealed significant savings of five to eight percent in some cases — real money for municipalities seeking local property tax relief,” stated Lembo.

The O’Brien Administration and the city’s labor unions are apparently on board with the idea and ready to implement it.  To date the the Board of Education has yet to commit to the idea.

To achieve the savings in the partnership plan both school and municipal labor force need to be part of it. The Board of Education needs to give the idea fair and serious consideration.

2013 Municipal Budget Reality: Paying For Stewart’s Fiscal Irresponsibility

Posted in municipal budget by nbpoliticus on April 11, 2012

Mayor Tim O’Brien  delivered his first municipal budget proposal to the Common Council this week.  To the surprise of critics who always tag O’Brien as one of the  free-spending, tax-hiking liberals, the new mayor’s efforts at budget balancing exceeded the usual austerity measures used to hold the line on taxes and keep essential services going.

In broad terms, this unfinished blueprint for the year that begins July 1 calls for departmental consolidations, the elimination of 130 positions and measures to enhance revenues that leave the mill rate as is.  Instead of turning a deaf ear to the needs of the schools, however, it adds local funds to the Board of Education and leaves public safety alone

The severity of the budget is a reflection of O’Brien meeting the first obligation of an elected official — telling the truth to the people you represent. 
O’Brien is putting a halt to the “Robbing Peter to Pay Paul” methods of  Timothy Stewart, the four-term mayor, who over several fiscal years increased obligations on the city and relied on one-time fixes that ultimately put the budget  in a deep hole six months into the current fiscal year. The Common Council majority, in often bitter exchanges, stood in the way of the former Mayor’s budget maneuverings but ultimately approved prior budgets that met a June deadline.
Last winter O’Brien’s financial review team and independent auditors identified a $10 million gap for the current year that had to be addressed immediately.  It took another one-time fix of using Water Department reserves — the only option O’Brien could find to avoid a local government shutdown in the early months of the new administration.  
Balancing the municipal budget and delivering quality services to residents are a daunting enough task in 2012 because of the dependence on a regressive property tax structure, static state aid and the retreat of the federal government in its support to communities .  New Britain’s problems have been compounded by the fiscally irresponsible actions of the Stewart administration and his failure to be transparent when it came to spending tax dollars.  Unfortunately, O’Brien’s first budget proposal is paying for the sins of his predecessor. The notes are being called in on unrealized sales of development property and kicking the city’s financial obligations down the road.
With a final budget due to be passed in June there is plenty of work ahead for the Mayor and the Common Council to avert cuts and jobs losses of frontline, direct service employees.

Losing 130 municipal positions is unacceptable if the current level of services is to be maintained.

Good faith bargaining, finding additional savings, alternatives to the way the city pays for health insurance and energy and modernizing City Hall operations all will be needed to help the city get through a fiscal crisis that will persist into 2013 fiscal year and beyond.

Lowering Municipal Health Insurance Premiums: New Britain Should Adopt Partnership Plan, Join State Pool

Posted in health care, municipal budget by nbpoliticus on March 18, 2012

Energy in all its forms and health insurance are two of the most rapidly rising costs in most household budgets.  Municipal government is no different.  Lowering these two items in local government would be a tax stabilizer and would free up public dollars for schools, public safety and other essentials.


 In 2012 there is an option on the table to knock down the city of New Britain costs for health insurance without diminishing coverage. It will allow cities and towns to participate in the pooling of coverage offered to the state’s workforce.  State Comptroller Kevin Lembo last week announced that his office has analyzed implementation in 50 cities and towns, including New Britain, and has concluded  30% of towns would have savings of 5% or more in premiums


For cash-strapped cities such as New Britain the new Health Care Partnership law enacted last year offers the administration of Mayor Tim O’Brien an opportunity to save upwards of $900,000 or more on premiums for health insurance coverage of municipal employees.  Used in states as near as blue Massachusetts and far away as red Utah,  insurance pooling takes advantage of a larger pool of employees — spreading the risk — to maintain similar or even improved coverage on individual and family plans.

“The CT Partnership Plan is officially open for business to all non-state government employees, including Connecticut towns, cities and boards of education,” Lembo said. “The goal is to provide towns and cities with lower health care costs and long-term price stability, while also offering quality health care to employees. Our initial analysis of more than 50 municipal employers revealed significant savings of five to eight percent in some cases – real money for municipalities seeking local property tax relief.”

New Britain and other local governments will be able to join the partnership July 1, the start of the fiscal year.

Herald: Where Will Cuts Fall At Library?

Posted in Library, municipal budget by nbpoliticus on May 17, 2011

The public library, like public education,  is a  taxpayer-supported institution with a value that isn’t easily measured on a ledger sheet.  It’s value to a community exceeds what it costs by many measures of human capital and civic involvement.  The possibility of layoffs in city government could hit the library in terms of reduced hours and diminished services that will be painful as the  Robert Storace’s May 17th story in the Herald reports.

Hearing on FY 12 City Budget May 12th at Slade Middle School

Posted in city politics and government, municipal budget by nbpoliticus on April 21, 2011

Now that the Stewart administration has put a $216 million budget on the table officials have set a public hearing for Thursday May 12th at 6 p.m.   The hearing will be held at Slade Middle School, not the high school as originally announced.

With federal recovery act funds gone and a best-case scenario of level funding for state education aid, the operative word is “layoff”from the brass at the Board of Education and the Mayor’s Office.

At City Hall, Mayor Stewart says $11 million must be saved via layoffs or related reductions in or to the work force.