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New Haven Budget Tightens as $66M Shortage Looms

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In a financial news conference Thursday, New Haven budget director Michael Gormany said the city's budget for this year is projected to come up short.

“Depending on where we end up, the deficit I think could land between $13 and $16 million,” said Gormany. “The city is doing everything in its power they can to maximize savings on city expenses so hopefully we can get that number down like we did in fiscal year 20.”

Heading into budget planning for next year, the deficit is projected to be worse. A $25 million recommended increase in pension payments means a total possible $66 million shortfall.

“It is completely unrealistic for anyone to think we can cut this kind of money,” said Mayor Justin Elicker. “Our city would not function.”

The pension payments continue to rise each year putting a strain on the budget. The city is researching their legal obligation to follow that $25 million suggested increase by the pension boards, and the impacts if they don’t fully meet the amount.

Elicker said he’s not considering bonds to cover those costs. The payments will have to come from somewhere in the city.

That will be tough, he said, because according to a chart shown during the meeting, two-thirds of the city’s budget are contracted items that have to be paid. They include the pension payments, employee salaries, insurance, and state-funded portions of the education budget.

What’s left is about $196 million that funds city services. Cutting $66 million from there is impossible, he said.

“You have the remaining things that most people care about in our budget that fund the things like plowing our streets, police officers, fire department,” said Elicker.

Mathematically, they’d have to eliminate the library, fire department and half of the police department to get close. 

“Clearly we’re coming to a breaking point,” said Elicker.

The deficit looms from $16 million in projected revenue reductions from building permits, parking meters, tickets and state construction reimbursements.  

Elicker said there are two options: either a 23% tax increase, or outside funding from Yale University and the state. He said 60% of city property is tax-exempt, and both options could help fill the gap.

Yale University owns $3.5 billion in tax-exempt city property, and Elicker said he’s asked the university for $50 million to help.

When asked for comment Thursday, the university provided a statement which reads in part:

“We play an active role in supporting our community and are regularly engaging in discussions with the city to address ongoing challenges, most recently COVID-19.”

The university spokesperson went on to describe the Yale Community for New Haven Fund that gave $2.7 million to local profits during the pandemic, including $250,000 for Chromebooks for New Haven Public Schools.

They’ve also provided space at the Lanman Center and Yale West Campus for Yale New Haven Hospital to set up COVID vaccination sites, and they allowed 1,800 first responders to stay for free during the early stages of the pandemic.

Finally, the statement says the university has “$700 million spent annually on New Haven includes compensation to  New Haven residents who work at the university and many programs and initiatives that we support throughout the city. Yale University’s $13 million voluntary payment in FY21 to the City of New Haven was the highest from a university to a host city anywhere in the United States.”

State Senator Martin Looney is proposing a new tiered plan for the state’s tax-exempt PILOT reimbursement program to help municipalities like New Haven that are in need.

“That program, that readjustment would require about another $114 million more into the PILOT to create that 50, 40, 30-tiered structure,” said Looney.

Elicker joined more than twenty municipal leaders earlier this month in signing a letter urging Governor Ned Lamont to increase PILOT funding.

University of New Haven economics lecturer Brian Marks said pandemic-induced stress on local budgets could be widespread.

“I would not be surprised if many if not all our municipalities in the state of Connecticut face a budget shortfall. This pandemic was an exogenous shock to everyone’s budget plans,” said Marks.

 But he added, there’s hope. The state’s budget is now looking better during the pandemic.

“Therefore, there may be an opportunity for the state of Connecticut prudently to help some of the municipalities in ways in which were not previously anticipated,” said Marks.

Elicker is hopeful a budget fix can be found as they ready for a tough budget season.

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