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Norwalk ‘Rainy Day’ fund grows to $57.7 million

Norwalk Chief Financial Officer Bob Barron talks “budget” during a joint Board of Education and Common Council finance committees meeting in City Hall.

Correction, 4:22 p.m.: Rainy Day Fund is $57.7 million, according to Bob Barron. Updated, 10:07 a.m.: Bob Barron confirmed the correct figure for Norwalk debt outstanding at year-end is $272.828 million, compared to the $260.898 million the prior year.

NORWALK, Conn. – Norwalk’s “Rainy Day Fund” swelled to $57.7 million in 2017-18, up from the $51.2 million reported in 2016-17.  The reserve fund’s size was a bone of contention during last year’s school budget battle, when school board members argued that more of the fund should be spent in support of education.

The $6.5 million increase in what is officially referred to as the “unassigned fund balance” is revealed in the Comprehensive Annual Financial Report (CAFR) covering 2017-18.  The report contains a boatload of information provided by Norwalk Chief Financial Officer Bob Barron to Mayor Harry Rilling, the Common Council and the Board of Estimate and Taxation on Dec. 31. It states that the total fund balance is $61.2 million with $57.7 million of that unassigned, meaning it’s available for a “rainy day.” 

During last year’s contentious school budget debate, BoE Finance Committee Chairman Bryan Meek charged that there had been “meteoric growth” in the “Rainy Day Fund” and argued that City officials should spend more of the funds than they had planned.

“Hold onto this cash, don’t use it, {and} the state is going to take it from us,” Meek said in February. “…They will cut our grants, we will have to use this to step up the funding in the areas that we need.”

Meek did not respond to weekend emails asking about the fund’s increase.

“We are all happy to see the city in such excellent financial strength, with by far the largest reserve in the State,” Board Chairman Mike Barbis wrote in an email. “Astonishingly, our $61 million reserve dwarfs Stamford’s $38 million reserve (60% larger than Stamford’s) despite Stamford having a much larger population (131,000 to Norwalk’s 88,000, almost 50% larger).”

Barron on Saturday wrote to NancyOnNorwalk:

“The City of Norwalk’s fund balance is a critical component of its Aaa/AAA ratings with the top three rating agencies and allows the city to issue bonds at the lowest possible costs to its taxpayers.  This is particularly important during this time of significant investment the city is making in its schools. With regard to the Stamford comparison, I’ve addressed this issue before… Stamford is not Aaa rated by Moody’s, as a matter of fact, Moody’s downgraded Stamford in 2010 because of its low fund balance that was “inconsistent with the Aaa rating category and significantly below state and national local government medians. “

“The Mayor has instructed me to apply any fund balance in excess of the city’s policy for reserves to reduce the taxes for the upcoming fiscal year which is also consistent with the city’s fund balance policy.”

 

The Norwalk audit mentions the City’s issuance of $35 million in debt in 2017-18 for capital projects, including new schools and school renovations.

The Board of Education is set to discuss its 2018-19 operating budget during its Tuesday workshop meeting. The BoE working draft budget calls for a $12.1 million increase, Norwalk Public Schools Chief Financial Officer Thomas Hamilton said in December.

Last year, the Board requested a $9.9 million increase for its 2018-19 operating budget.  The Common Council eventually authorized a $6.4 million increase, a 3.5 percent increase over 2017-18, in a budget which included a nearly $3 million drawdown from the Rainy Day Fund. The Board cut 22 positions while adding more than 24 full-time positions in other areas and investing in Strategic Operating Plan improvements that included a longer school day at half of Norwalk’s elementary schools and the elimination of high school study halls.

During last year’s budget battle, some who wanted more spending on schools accused City leaders of keeping the Rainy Day Fund at a high level so they could use it to achieve a low tax increase during 2019, which is a municipal election year.

Rilling, in a Saturday email to NancyOnNorwalk, wrote:

“{A}nyone who would say or suggest that the rainy day fund was being held to lower taxes during an election year must little or no understanding of the budget process in the city of Norwalk and other municipalities.

“For each year that I have been Mayor, we have used the rainy day fund to offset the increase in taxes regardless of whether it was an election year or not.

“Moreover, each mayor prior to my administration has also used the rainy day fund to offset taxes. That is an accepted and prudent policy. …

“The reason that the rainy day fund has grown to the current level, is due to the fact we have been very judicious in our spending policies. At the end of each fiscal year we have had a surplus that is transferred into the fund balance. The department heads are instructed to use only the operating funds absolutely necessary and to return at the end of the fiscal year the funds that are unencumbered.

“I am very committed to keeping taxes as low as possible and I believe my record reflects that. Our tax levy in fiscal year 19/20 will reflect that commitment.”

 

 

Other audit information

The annual audit also reports savings in Other Post-Employment Benefits (OPEB) when the City and the Board of Education moved employees to a State health insurance program.

Revenues were “greater than budget by $5.3 million and total expenditures being less than budget by $4.2 million,” RSM US LLP states in its audit.

However, state aid was $2 million less than budgeted, auditors stated; the loss was offset by $6 million in “greater than budgeted property tax collections and $1.3 million greater than budgeted permits and fees.”

“The less than budgeted expenditures were made up of $2.0 million worth of unspent Board of Education appropriations, most of which are reserved for use in the following fiscal year; $1.3 million contingency that was unspent due to contract savings and departmental vacancies and other surpluses; $0.5 million of unspent tax revaluation appropriations; and $0.4 million of other miscellaneous unspent appropriations,” the audit states.

Other notable comments:

  • “As of the year-end, the Water Pollution Control, as presented on the Statement of Revenues, Expenses, and Changes in Net Position (page 21), reported fund net position of $97.3 million which is $4.7 million more than the beginning of the year ($92.6 million). There were no major impacts.”
  • “As of the year-end, the Parking Authority, as presented on the Statement of Revenues, Expenses, and Changes in Net Position (page 21), reported a fund net position of $20.1 million which is $0.1 million more than the beginning of the year ($20.0 million). There were no major impacts.”
  • “As of year-end, the City had $272.828 million in debt (bonds, notes, etc.) outstanding compared to the $260.898 million last year, a 4.6% net increase (considering new borrowing and debt retirement).”

 

Comprehensive Annual Financial Report (CAFR) on 2017-18 aka audit

9 comments

Alan January 7, 2019 at 8:23 am

A large surplus means cuts to your state aid. Cash is not King with the crew in Hartford.
New Haven. Hartford. Waterbury. New London…they get what they want at YOUR expense. Fairfield County is their piggy bank.

Jeff January 7, 2019 at 9:42 am

“As of year-end, the City had $272,828 million in debt (bonds, notes, etc.) outstanding compared to the $260,898 million last year, a 4.6% net increase (considering new borrowing and debt retirement).”

Either this is a typo or we are in deep trouble. I don’t think the city owes $272 billion. (I see that the chart in the report is in thousands but they wrote the figure as millions in the text)

Bryan Meek January 7, 2019 at 9:57 am

Fitch and S&P still maintain AAA for Stamford, which also has median incomes almost 10% higher than Norwalk (87k vs 81k).

Anyone can cherrypick data to support their position. Who cares? These same agencies had Enron at AAA a month before that collapse.

Greenwich’s fund is $60 million. We have more loot than Greenwich. Common sense needs to prevail. Time to invest it or refund it to taxpayers.

And Alan is right. We have already seen grant reductions in each of the last two years in the middle of the year, forcing hard decisions. OPM last year directed all municipalities to report on the exact details of their fund balances in the midst of their budget fiasco. When needs based assessment of state and city finances begins in earnest in the next few months, there will be a big fat bullseye on our cash reserves.

Bob Welsh January 7, 2019 at 10:11 am

Jeff,

Good catch, and thanks. Bob Barron confirmed this morning that there was a typo in the audit report. The correct debt figures are $272.828 million at year-end, compared to $260.898 million the year before. The story has been updated.

Another Opinion January 7, 2019 at 11:08 am

The reserve fund balance belongs to the taxpayer and SHOULD NOT be used by any department to camouflage budget requests. This would be going down a slippery slope, particularly for the BOE, given state mandate requires subsequent year spending to be higher than prior.

Piberman January 9, 2019 at 9:18 pm

Why is this legitimate news ? City Hall property taxes always increase reflecting a Citu Hall lacking professional management. That’s Norwalk’s fundamental reality. As is a long stagnant Grand List , declining property values, exit of homeowners and influx of renters.

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