Republican Mayor Erin Stewart has called the New Britain City Council into a special meeting to consider what has been described as a plan to increase city borrowing to cover annual city budgets.
The $70 million borrowing and refinance proposal, if approved, would be the latest plan in which critics have said that the city, under Stewart, has borrowing to cover the cost of regular city spending.
The most recent plan would reportedly add $29.9 million to the amount of money owed by city taxpayers, specifically to cover shortfalls in the city budgets in budget year that starts July 1st of this year and the following budget year.
The plan is to be considered at the special Council meeting on June 24, 2020 at 6:30pm.
The meeting announcement says that the meeting will be held via teleconference, adding, “Public Participation will begin at the start of the meeting. Dial-In Number: 1 (855) 369-0463. Access Code: 11303366#. Streaming of Meeting: http://newbritainct.gov/gov/common_council/agenda_minutes_live_stream_n_video.htm.”
Stewart has come under great criticism for repeatedly turning to borrowing to balance the city’s budgets in the present, while adding to taxpayer debt into the future. The most notable was her controversial 2018 proposal to borrow $115 million to push city debt into the future.
Ald. Chris Anderson (D-AL) raised critical questions about the most recent plan at a meeting of the City Council’s Bonding Subcommittee on June 11th.
In questions to city Finance Director Lori Granato, Anderson noted that the proposal would decrease the city’s debt costs in fiscal year 2021, the budget year that begins on July 1st of this year, by $11.2 million. Then, questioning John Healey, who is with the city’s debt underwriter, Anderson asked,
On a cash basis, we’re adding $29.9 million to our debt service. Essentially, can you just verify that’s being acheived by reducing debt service over the next four years and essentially tacking it onto the very end of debt repayment cycle in the 2040s?
“Correct,” Healey responded, adding,
On a cash basis, we project that it would generate about $29.9, we can round up to $30 million, of dissavings, and that is because, yes, you are achieving savings in the short term and then you’re financing the cost of those bonds, the cost of that savings, over the life of the bonds.
Noting a $9.9 million shortfall in the city budget just approved for the budget year beginning July 1st, in the city’s Medical Self-Insurance Fund, Anderson asked Granato if the $70 million borrowing and refinance plan would balance that upcoming budget.
Granato says that it would allow the city to break even.
Healey noted that the borrowing and debt refinance plan would reduce city costs by $19 million in fiscal year 2022, the budget year that starts on July 1, 2021, and that, without that, the city could be facing a budget deficit of $14.77 million for that budget year.
The current proposal calls for the Council to approve,
that the sum of $70,000,000 be appropriated for the purpose of paying, funding or refunding prior to maturity any of the City’s outstanding General Obligation Bonds, applicable redemption premiums, if any, with respect thereto, and to pay related costs with respect to the issuance of any and all such bonds, and to fund one or more escrow accounts, if any, for such purposes, and to meet said appropriation and in lieu of a tax therefor, bonds of the City be issued pursuant to Article XII of the City Charter and Chapter 109 of the Connecticut General Statutes, as amended, or any other provision of law thereto enabling, in an amount not to exceed $70,000,000 or so much thereof as may be necessary after deducting other sources of funds available therefor.
Stewart has come under intense criticism in the past for having repeatedly borrowed money to push millions of dollars of debt into the future to artificially lower costs during her administration at the expense of higher future debt payments for city taxpayers.
Stewart was heavily criticized, as well, after the 2017 City elections, for strong-arm tactics to pressure the, then, newly-elected Democratic majority City Council to approve $115 million in additional borrowing to pay for an anticipated increase in annual debt payments that would have occurred over the following few years.
Critics pointed to the spike in annual debt payments Stewart sought to address with increased taxpayer borrowing as having been caused by past borrowing Stewart had employed to balance the city budgets without increasing taxes more than she had or cutting spending.
Stewart has also be criticized for budget practices that have increased City Hall spending, while largely flat funding annual operating funding for the city’s schools.
The $115 million borrowing plan, which had been reduced to $99 million by the time it was approved by the Council, was not the end of the cycle of increasing city borrowing to pay for city spending in the present, with another $70 million plan now under consideration.
At the recent meeting of the Council Bonding Subcommittee, Healey noted that, even after approving the current $70 million proposal, it would be likely that the city would likely need to “restructure” its debt, again, in another three and a half years.
