An independent review board says New Haven will need to raise taxes 22 percent – double the hike proposed by Mayor Toni Harp – if it wants a balanced budget without cutting services.
In a report to the Board of Alders this week, the Financial Review and Audit Commission said Harp’s proposed $547.1 million budget for the new fiscal year, which begins July 1, could be out of balance by as much as $50 million.
The commission also estimated that this year’s budget could be short $34 to $54.6 million, due to overspending and declining revenue.
“Based on our collective experience, these budget imbalances are historically large for New Haven,” wrote the five-member nonpartisan advisory commission, which is appointed by the mayor.
In unveiling her budget proposal this month, Harp said the city would need to raise its property tax rate 11 percent to 42.98 mills to offset drops in revenue, mostly due to cuts in state aid.
But the panel estimated a much higher tax increase is needed — to 47.2 mills or more.
Among the major reasons: a history of overspending by the Board of Education, police and fire departments; the potential for bigger revenue shortfalls than the city is predicting; increasing debt service; and unrealistic assumptions about medical costs and rates of return on the city’s pension funds, the panel said.
For example, the panel said the city should plan to spend at least $93 million next year on medical costs, but it only budgeted for $76.7 million. Meanwhile, the report cited 5.75 to 6.75 percent as a realistic rate of return on pension funds, but the city budget assumes returns of 7 to 8 percent.
Laurence Grotheer, spokesman for the mayor, said in an emailed statement that the administration is working to stabilize pension and medical costs, which are major drivers of the budget.
“Continuing progress on these fronts, continuing predictability on the revenue side and a productive partnership with the Board of Alders will lead to the responsible city budget commission members envision,” he said.
The panel said it does not make recommendations on how money should be allocated across departments or programs.
Commission co-chairs are retired investment banker Jim Alexander and Joe Dolan, former New Haven treasurer and retired CFO for the town of Wilton.
Natalie Missakian can be reached at news@newhavenbiz.com
