Impact of No State Budget on Fairfield

I expect we will see an increasing number of stories on the devastating impact of no State budget on towns and cities around Connecticut.  I just want to remind residents that my administration has been taking steps to protect Fairfield. We have had a strategic hiring freeze in place since early last spring.  We managed our expenses to generate a surplus last fiscal year.  We also have a hold on capital projects and have made adjustments to the current fiscal year budget.

All of these proactive measures have put Fairfield in a position to survive the year with no state budget if required.  These moves also provide a certain amount of financial flexibility to handle some of the new State budget proposals being discussed.

You will continue to hear about the trauma many towns are going through. We have planned ahead, anticipating the difficulties at the State level.  We started earlier than most towns. We are better prepared than most towns to navigate the challenges of the year ahead.

As always, thanks for your support.

Mike

A Budget Compromise or an Abdication of Responsibility?

The following entry was written in collaboration with Selectman Kevin Kiley.

The latest State budget proposal is being touted as a compromise. The compromise is to transfer less of the State Pension costs to the Towns than originally proposed last spring. This is not a compromise. This is an attempt to pass the cost of the State’s mismanagement of the Pension program on to the Towns.

Let’s review what has transpired:

  1. The State promised all Connecticut teachers a pension.
  2. The State promised the Towns that the State would fund the Pension program.
  3. The State did not fund the Pension program as promised.
  4. The State took money from the Towns’ residents. In Fairfield’s case, taxpayers pay $200 million a year in state income tax. This money was supposed to go to fund State expenses including the Pension program.
  5. The State now does not want to manage their expenses better.
  6. The State is now asking the Towns to pay even more to cover the State’s mismanagement.
  7. Because of the State’s mismanagement, the annual cost of the Pension program is projected to increase 500% over the next 12 years.
  8. The State is refusing to make any changes to the Pension program that it cannot afford.

Our town has managed our Pension costs well. We have lowered our long-term liabilities and have a 90% funded pension.  The State did not do the same.

Fairfield taxpayers already pay the State $200 million per year in income tax. $200 million a year adds up to $1 billion over the last five years. Now the State wants the Towns to pay for its mismanagement. The annual cost for this Pension will grow 500% in the next 12 years. This will be the fastest growing line item in every Town budget. It will force towns and cities to increase property taxes every year going forward. Raising property taxes at the local level unfairly punishes low income property owners and seniors. It raises the cost of home ownership and may force people out of their homes. It raises taxes on people regardless of their ability to pay.

This proposed transfer of costs allows the State to avoid finding real solutions to its fiscal crisis.  It allows the State to avoid facing the difficulties of reining in expenses.  This is not a solution.  This is not a compromise.  This is an abdication of responsibility.

Here is a link to an article providing some more background:

https://ctmirror.org/2017/09/07/malloy-eases-cost-shift-onto-cities-and-towns-by-nearly-775m/

We will continue to fight for Fairfield and keep our community informed on this matter which is so crucial to the future of Fairfield and our State.

Thank you.

Governor Announces Municipal Aid Update

Today, the Governor gave his update on the Municipal Aid levels for each town. This is the State operating plan until a State Budget is passed. Here is a sampling for selected Towns:

Fairfield is reduced by $4 Million

Milford is reduced by $14 Million

Newtown is reduced by $7 Million

Stratford is reduced by $23 Million

West Hartford is reduced by $24 Million

Westport is reduced by $1 Million

Hartford is reduced by $55 Million

Greenwich is reduced by $500,000

Darien is reduced by $600,000

New Canaan is reduced by $500,000

Bridgeport is reduced by $31 Million

With the exception of Hartford and Bridgeport, the towns listed have been reduced to virtually zero in Municipal Aid.

In Fairfield’s case, we have been planning for a significant reduction in Aid if no State Budget was passed. We have taken actions since the start of the fiscal year on July 1st including a strategic hiring freeze and a hold on capital purchases.  I have also asked for a survey by our Department Managers of other towns’ procedures to share best practices and learn what we can do better.

The Governor’s update is disappointing, but not a surprise. We have taken the steps needed to minimize the impact on our residents and town services. I want to compliment our Department Managers for their help and creative approaches in handling the hiring freeze in each of their departments. This is not an easy adjustment to lose $4 million in revenue this far into the fiscal year.  By planning early and being proactive, we have worked together to minimize the impact on our residents.

When you look at the size of these reductions to towns across the State, you realize how important getting a State Budget passed is to everyone. Let’s work together to call on our State Assembly to pass a well-balanced state budget as soon as possible.

Thank you, Mike Tetreau

Now that budgets and Mill Rates are set for the year, let’s take a look at how Fairfield stacks up against other Fairfield County towns. Fairfield has the 6th lowest Mill Rate in Fairfield County. We come in after the big four – Greenwich, Darien, New Canaan and Westport.  Shelton also has a Mill Rate just a little lower than ours.  I have listed a selection of towns in Fairfield County and their Mill Rates below.

Fairfield has one of the lowest Mill Rates in Fairfield County and the State.

Town
Mill Rate
Greenwich11.369
Darien16.16
New Canaan16.669
Westport16.86
Shelton22.21
Fairfield25.82
Ridgefield27.21
Wilton27.7685
Weston28.91
Redding29.62
Easton33.38
Trumbull33.39
Newtown33.87
Monroe35.76
Stratford39.97
Bridgeport54.37

For Greenwich, New Canaan, Darien and Westport, their common attribute is much higher property values (see below, data current as of 8/9/2017).

Town
Median Home Value (in millions)
Greenwich2.195
New Canaan1.325
Darien1.3
Westport1.285
Fairfield0.525

The higher Average Price of a home in these towns is what drives a higher Grand List Value per capita. This means more Grand List value per resident to pay for town services.  These towns are able to spend more on Town services per resident than Fairfield does, yet have a lower Mill Rate.  Their lower Mill Rate is driven by higher home values, not by spending less.

When you look at the last twenty years, these towns haven’t managed their expenses better than Fairfield. They are not more efficient in providing town services. In fact, their town expenses as a percentage of total budget have increased more than ours.  Those towns are experiencing the benefit of growing their Grand List values more than our town.

It is clear that Fairfield needs to focus on growing our Grand List–the list of all taxable property in Town including Residential property, Commercial property, Motor Vehicles and Personal property. This is the best possible way to minimize tax rate increases and maintain our quality of life.

We must set a goal of strategic growth that will meet our town’s needs today and in the future while maintaining our Town’s character and charm.

Thank you for taking the time to read this perspective,

Mike

Comparing Mill Rates and Growing Fairfield’s Grand List

I was asked by a resident to explain why Westport has a lower Mill Rate than Fairfield. What is Westport doing differently?

I have looked at Mill Rate comparisons for a number of towns. Fairfield has the 6th lowest in Fairfield County. Only a few towns have a lower one….Greenwich, Darien, New Canaan, Westport and Shelton.

Let’s take a look at Westport.  Twenty years ago, Westport and Fairfield had comparable Mill Rates. In the last two decades, Fairfield’s has stayed in the 25 Mill range.  Westport has dropped its Mill Rate to 16 in the same time period.

I reviewed expense growth over the same time period. Fairfield’s total expenses grew less than Westport’s.  In fact, our Expense per Capita is much lower than Westport’s and many surrounding towns.  This is a good measure of our efficiency in delivering town services.

What has changed and allowed Westport to lower their Mill Rate is the growth of its Grand List. Our Grand List was $4 Billion in 1998.  Westport’s totaled $3 Billion.  We exceeded Westport’s total by 33%.

Today, the totals are different.  Fairfield’s Grand List has grown to $10.8 Billion.  Westport’s Grand List has grown even more and now exceeds ours at $11.2 Billion.  This is what has allowed Westport to spend more and lower its Mill Rate.

This by no means is to suggest that we cannot make improvements and lower costs.  We are going out reviewing other towns to look for best practices.  We are committed to continuous improvement.

It does suggest that we need to look at ways to grow our Grand List.  It is the one common attribute of each of the towns that have a lower Mill Rate.

Thank you, Mike

Town Budget Update as of June 27, 2017

Even though our Town has voted on a budget, set a Mill Rate and is sending out tax bills, Fairfield’s budget is not final. We are waiting on the State to approve its budget. We currently have $5 million in State Aid in our budget. When the State budget is finalized, we are expecting to see a reduction in this funding and must then adjust our budget accordingly.

Since the RTM has voted on the budget and the Mill Rate has been set, the Town is limited in the adjustments we can make. The Board of Education budget is 65% of our overall budget and cannot be adjusted without agreement from the Board of Education.
Debt Service is 10% of our budget and has to be paid. We are committed to making our Pension Fund and OPEB Retirement Fund payments. This totals about 80% of our budget that cannot be adjusted at this point.

The remaining 20% of the Town budget is about $60 million and includes Police, Fire, Public Works, the Library, and Parks & Recreation as well as a number of smaller departments. Finding significant cuts or reductions in these departments presents a real problem and will most likely mean reductions in Town services.

In Fairfield, we are doing our best to prepare for the unknown. We have instituted a hiring freeze and put a hold on capital purchases as well as other measures. Our goal is to provide the maximum financial flexibility to deal with the expected cuts. We are doing our best to avoid significant cuts in Town services. However, everyone should be ready for some changes if the State makes dramatic cuts to our funding.

I will keep you updated as changes come down from the State.

Thank you,
Mike

The RTM Budget Vote Weakens Fairfield

The recent RTM budget vote by the Republican majority weakens our town. Our 5-year average tax increase is the lowest in twenty years. We have strengthened our town’s financial foundation and improved services. In fact for the prior two years (Fiscal 2016 and Fiscal 2017), the Board of Selectmen, the Board of Finance and the RTM agreed with my budget recommendations and made virtually no changes. This year is different.

The Budget voted on by the RTM Republicans is not sustainable and hurts our town. The State has proposed major reductions to Municipal Aid. The answer is not cutting essential maintenance that will cost more in the long run.

My final budget recommendation provided for full Education funding, essential infrastructure maintenance and full Library support. The Republicans on the Board of Selectmen did not support these recommendations. The Board of Finance in bi-partisan fashion agreed with my recommendations and restored this funding. I want to thank the BOF for their leadership. It takes real leaders to make the tough decisions. However, the RTM Republicans ignored the advice and wisdom of the BOF.

The RTM Republicans voted to cut this funding – leaving the town without essential maintenance or a well-funded Library. They voted to leave the town totally exposed to future State cuts in municipal aid. The RTM budget is not sustainable. It leads to a less well maintained Fairfield, a less safe Fairfield, and a less desirable Fairfield. These cuts literally lead to a future paved with pot holes. While these cuts saved the Median taxpayer $31 this year, they will cost each taxpayer much more in the long run. This budget gives us less value for our tax dollars.

It is not over yet. When the State finalizes their cuts to our town, we will see and feel the real price of this ill-advised budget vote.

New Budget Update from Hartford

Finally some good news! The Speaker of the House was quoted in the Hartford Courant as stating that the Teachers’ Pension Cost transfer to the towns will not happen. This definitely counts as good news. It also means that we do not have to account for that $9 million expense in our budget.  My recommendation is that we use the reduction to restore some cuts and reduce the mill rate increase.

Based on this new information I recommend:

  1. Restoring the earlier $2 million reduction to the BOE budget
  2. Restoring the $300,000 reduction to the Fairfield Public Library budget
  3. Restoring $1,000,000 to Public Works for Paving
  4. Restoring $750,000 to Public Works for Major Equipment Purchase
  5. Reducing the budget by approximately $360,000 in expense reductions – adjustments that will come up during the BOS/BOF meetings
  6. Reducing the Supplemental Contribution to Surplus by $600,000
  7. Using the balance to reduce the Mill Rate increase to 2.2 percent

In this economic climate and with the negative State cuts, this is a very solid accomplishment.

I will keep working to see what other adjustments we can make. There is still a lot more discussion to take place with the Board of Selectmen, the Board of Finance and the RTM. These are my recommendations that I will propose to the Board of Selectmen next week.

We still have a long way to go. We will not have final budget numbers from the State until June or later, and we still have to keep an eye on next year. The State is struggling this year. Next year doesn’t look to be any better.

We have to keep Fairfield on a solid financial foundation. We have worked hard to fund our reserves and fund our long term liabilities (pension costs). We have maintained our infrastructure and we funded our Senior Tax Relief.  We are in better shape than most towns to weather this financial storm caused by the State.

Thank you for your time,

Mike

Teachers’ Pension Costs – The Worst Part of the Governor’s Budget Proposal

The transfer of Teachers’ Pension costs from the State to the towns is the worst part of the Governor’s Budget proposal. This hurts every town and city especially seniors, low income property owners and small business owners. Let’s take a look at Fairfield.

This is a State program to pay for Teacher Pensions. It was developed by the State. It was promised by the State. It was designed by the State. As towns, we had no input.  We didn’t cause the problem. The State is solely responsible for the designing of a program that isn’t sustainable and then compounding the problem by not funding it.  The State doesn’t want to make any changes to the program. It just wants to pass the costs on to the towns. This is just plain wrong and fiscally irresponsible.

Let’s look at the facts. Let’s look at all the ways this is bad for the towns and the State.

First, the Teachers’ Pension Program is primarily funded by state income tax, a progressive tax system. Those taxpayers with the most income pay the largest share. By moving this expense to the towns, it would be funded by property tax or a regressive system. Every taxpayer pays at the same rate regardless of income.  This moves the expense to towns unfairly burdening our seniors, our lower income property owners and small businesses.  Connecticut towns already have the highest property taxes in the nation.  This cost alone will increase Fairfield taxes by 3% this year and more every year in the future. A program that makes our property taxes higher hurts everyone in the State. This is not a solution.

Second, this approach changes nothing! The Pension funding problem remains unchanged. The State is abdicating its responsibility to find a solution. This hurts our towns and cities alike. Although Fairfield may be viewed as a wealthy town, all of our residents are not wealthy. This approach unfairly burdens seniors, lower income property owners and small businesses hurting our local economy.

Third, this cost would become our fastest growing expense in the future. The current Pension plan assumes an 8% discount rate or expected rate of return on investments. This is one of the highest assumptions in the nation. The plan is also underfunded. The combination of these two conditions means this expense will grow faster than any other line item in our budget. This guarantees higher property taxes in the future for all towns.

Fourth, it was suggested by someone in the State Administration that the wealthier towns, such as Fairfield, need to have some “skin in the game” and that these towns have been receiving a “hidden subsidy” from the State. This comment is either incredibly naive or a complete misrepresentation. How can someone suggest that a town like Fairfield has no “skin in the game” when we contribute over $200 million through income tax alone to the State budget? Where does that person think the State gets its money? It is equally incredulous to suggest that Fairfield is getting a hidden subsidy when we give the State $200 million in income tax and our teachers’ pension costs are $27 million.  How does one call it a subsidy when it is our money the State is using?  Fairfield is subsidizing the State not the other way around. Simply put, this is 100% a State problem and the State needs to take responsibility to fix the problem.

If Fairfield doesn’t have to pay $9 million in Teachers’ Pension costs to the State, we can do the following: restore the proposed budget cuts to our schools, our library, and Public Works, and lower our projected mill rate increase. We have to come together to help fight this proposal. We need to demand a better solution from the State. We need to keep these dollars in Fairfield.

I am working with our State Delegation, joining with other Mayors and First Selectmen, supporting the efforts by CCM and personally meeting with Assembly leadership to stop this pension cost transfer. I am asking all Fairfield residents to join together in contacting our State Delegation and State Assembly leadership to demand a better solution for our town and all of Connecticut. The Governor has made his proposal. The final budget recommendation is now in the hands of the State Assembly.

Here are the key people to contact:

Thank you for your help and support, Mike.

 

Some Facts on Fairfield’s Budget

I have been receiving many letters on this year’s budget proposal. I am attempting to read all the emails (close to 800 at last count). Since I will not be able to answer them all individually, I will do my best to respond to all concerns in a series of updates.

Here is the first:

Since our last budget a lot has changed. We managed over $3 million in cuts to municipal aid from the State including a midyear cut of $570,000. We were able to make adjustments in the budget to minimize the impact on services and our citizens.

This year the Governor is proposing $5 million in municipal aid cuts along with an additional $9 million in shared expense for the State Teachers’ Pension fund. The State is also transferring another $1 million in Special Education housing costs previously paid directly by the state. As most are aware, with the GE property purchase by Sacred Heart University, we are losing another $1 million in tax revenue. When you add all this up, we have a $16 million negative impact on our $308 million dollar budget.

The Governor’s proposal is now in the hands of the State Assembly. It is the State Assembly that crafts the final budget. In another one of the absurd state budget practices, they will not let the towns know their final budget till after we have all set our mill rates.

I have prepared my budget recommendation including the Governor’s adjustments. We have a guideline, in place since my time on the Board of Finance, to use the best available information. The word from the State Assembly is that the Governor’s budget will not pass. However, no one is ready to say just what will pass. Only that it will be different. It is clear that the State does not have enough revenue to meet all its expenses. We can expect significant cuts to our state aid and state programs.

The budget I prepared shows the impact of the State Aid cuts. It gives a clear picture of the impact on our town. It makes it clear for everyone the impact of the State’s fiscal woes on our town. Once the State Assembly makes up their minds it will be too late. We all need to know what we are fighting for now.

I am committed to fighting this unfair tax burden being transferred to Fairfield. I am working with our State Delegation. I am meeting with State Assembly leaders. I am joining with other Mayors and First Selectmen. I am working with the Connecticut Conference of Municipalities (CCM). We are all demanding a better solution from the State.

Every resident can help by contacting our State Delegation and State Assembly leadership. Let them know we need a better solution for Fairfield and Connecticut.

Thank you for listening.