Norwalk CFO talks dollars, sense and Rainy Days

A City’s Rainy Day Fund should only be used for unexpected one-time expenses, such as a disaster, according to Norwalk Chief Financial Officer Henry Dachowitz. COVID-19 expenses fit the category and if not for the pandemic, the RDF wouldn’t have been touched in 2019-20, he said.

Updated, 5:18 a.m. Wednesday: Pension Board info.

NORWALK, CONN. – Norwalk’s Rainy Day Fund, the municipal version of the stash some households set aside for unexpected events, is often a topic during budget season, prompting debate over how much to spend and how best to spend it.

This year, with the city changing auditing firms, brings an added wrinkle: Blum Shapiro, the new auditor, calculates the RDF differently from former auditor, RSM. It’s a weighty change for municipal leaders charged with protecting the city’s credit rating.

Under the guidelines used by Blum, when a city obligates some of its RDF to cover part of its operating budget, the money is subtracted from the Rainy Day calculation. It’s “assigned,” not “unrestricted.”

Under the formula used by the previous auditor, which didn’t exclude money the Common Council agreed to draw down over the course of the year, as of June 30, Norwalk’s RDF totaled $66.4 million, or 18.2 percent of its expenditures. Under Blum’s, the corresponding numbers fall to $58.4 million, or 16 percent.

Norwalk’s policy, according to Chief Financial Officer Henry Dachowitz, is “to maintain reserves, unrestricted and unassigned, of between 7.5 percent and 15 percent. When we went up to 20 percent or 18 percent, there were real questions about that. As the Mayor has said, and I repeat, we got hit by COVID, the unanticipated expense, and it was very beneficial to the city that we had the state’s largest Rainy Day Fund.

“It insulated us a great deal…It’s our buffer. It covers us for contingencies and unexpected events.”

Dachowitz said the City planned an $8 million drawdown in the current fiscal year “because we did this budget right after COVID hit. And we said we have so much uncertainty, we don’t know, but at the same time, we knew that our citizens and taxpayers were under financial duress. This is when we had the illness raging. And we had lockdowns. So we said let’s use $8 million of our surplus to diminish the amount of increase in the mill rate.”

Dachowitz said he is hopeful the City won’t need to use the entire amount. That would be in line with recent history: in 2018-19, the City planned a $6 million drawdown and instead added $2 million to its coffers, Dachowitz said. Last year, the City again planned a $6 million drawdown but expenses only exceeded revenues by $850,000.

“That was almost dollar for dollar, what our COVID expenditures were,” Dachowitz said. “So in essence, our managers came in on budget, revenues equal expenditures, except for that 850,000. So therefore, out of the $6 million drawdown, we needed less than 1 million.”

However, the City “voluntarily and consciously” rolled over $4 million to the Board of Education, in a non-expiring account so it doesn’t have to be used in 2020-21, he said. “We also took about $1 million and gave it to certain departments on the City-side because some of those expenditures they planned were delayed because of COVID, and they got pushed into fiscal year 21, into the fall and winter.”

So, again, “we planned on needing a $6 million drawdown if there was no COVID, we wouldn’t have needed a penny,” he said.

And the $8 million that was planned for this fiscal year, 2020-21, may not be used in its entirety. So the coming budget may start with a bigger RDF than is conservatively projected. But even with worst case scenario for 2021-22, if the entire $8 million is used two years in a row, Norwalk would still be left with a reserve fund equal to 10.6 percent of its expenditures, within the City’s guidelines, Dachowitz said.

Dachowitz added, “As a CFO, I will never say that we have too much unassigned, unrestricted fund balance.”

Not everyone sees it that way.

Bryan Meek, an accountant and former Board of Education member, is among those who clashed with the City over its management of the RDF when it swelled to 18 to 20% of expenditures, arguing that the conservative budgeting had diverted money from the schools and that it should be drawn down to fund education. Mayor Harry Rilling and the Common Council rejected that as not being fiscally prudent, saying that the RDF is for one-time expenses.

More recently, Meek has mined the annual audit, officially the CAFR (Comprehensive Annual Finance Report), to criticize the City’s financial management.

“Then there are lots of goodies to unpack in the annual report,” Meek wrote in a Jan. 15 comment on NancyOnNorwalk.

He listed:

  • How about Chief of Staff overtime (?) of 18k on pdf page 51.
  • “$38 million for the aquarium on page 65.
  • “Rainy day fund down $8 million to pay for this years increased spending Page 66.
  • “Most alarming…..Our pension funds only grew by 2% during the same period the S&P grew 10% with 2/3s of it allocated to equities page 70 and 73. It only grew $9 million when it should have grown about $30 million. Given we’re paying over half a million to manage these funds do you think we can do a little better?”


The CAFR shows the Chief of Staff’s office went over budget by $18,591. That’s officially called “expenditures exceeding appropriations.”

NancyOnNorwalk asked Norwalk Communications Manager Josh Morgan about that. Morgan wrote:

“I know where the question on the Chief of Staff budget is coming from. It’s painfully clear that Mr. Meek is no fan of this administration. His cherry-picking a $19,000 line item in a $363 million budget is such a transparent and failed political jab it would be laughable if it were not so sad.

“First- over the course of a Fiscal Year there will be variances. The real story here is the CAFR shows the City as a whole had a favorable variance of $10.29 million. That is indicative of strong financial planning and management from Mayor Rilling and his team across City and School Departments.

“Second- the Chief of Staff budget (which includes the Departments of Chief of Staff, Communications/Grants, City Clerk, and Customer Service – several different employees) is a small fraction of the overall City budget. Most likely some items were budgeted in one line item and the actual amounts were posted to different line items. These amounts are insignificant in the context of more than $363MM in total expenditures.

“Third- Mr. Meek should know better than to make guesses. Senior staff are salaried and not eligible for overtime.

“Again, the real story here is the City remains in a strong financial position, despite what Mr. Meek or other detractors in your comment section wish to believe.”


Meek’s comment about the aquarium refers to the CAFR’s summary of capital projects uncompleted as of June 30, the end of the fiscal year. The Department of Public Works is listed twice, first for Water Pollution Control Authority (WPCA) projects that are paid for by WPCA user fees, and then for “other.” This is explained as being “primarily for the Aquarium.”

DPW’s “other” column is listed as:

  • $38,426,485 total bonded, assuming the construction budgets are equal to the gross authorizations for bonding
  • $13,208,287 project expenditures in fiscal year 2020
  • $15,113,637 cumulative project expenditures to date
  • $23,312,848 expected future project expenditures


And at the bottom, there’s a footnote: “The Norwalk Aquarium project is being funded 100% by reimbursements from the State of Connecticut.”

That’s because the Department of Transportation needs to demolish the Aquarium’s IMAX Theater to make room for construction during the rebuilding of the aged railroad bridge over the adjacent Norwalk River.

NancyOnNorwalk asked Morgan about the pensions Monday, President’s Day. He promised an answer Tuesday but it has not arrived.

Norwalk Pension Board Chairman Francis Nash, in a comment on this story, called Meek’s criticism a “distortion of performance” of the Board. He wrote:

“In the first six months of the current fiscal year the return on investments in the fund was 16.9% vs a benchmark return of 14.33% this was an exceptional time, however, over the past seven years the net return in the pension plan is 7.19% vs a benchmark return of 6.9%. The Annual Discount Rate for the plan is 6.875%. Clearly we have performed at an above average level and at the same time maintained liquidity and reasonable volatility in the fund. The Pension Board also invests $100 million in the Norwalk OPEB (other post employment benefits) plan lowering our expense ratio.”


“I hope next year COVID is addressed with the vaccinations, businesses can reopen, and some of that financial pressure will be alleviated,” Dachowitz said. “But we budget for the worst and hope for the best, and manage for the best. So that’s what we’re doing with our fund balances.”

The Common Council has until Feb. 23 to sort all of this out. That’s the date when it sets a budget cap. It has the opportunity to revisit the budget cap on April 13, when a two-thirds majority could raise the cap that’s set next week.


Bryan Meek February 16, 2021 at 9:21 am

Talk about cherry picking. Why no response on the gross mismanagement of the $500 million in pension assets, while making mention of my cherry picking minutiae? Good to see the city has no issue with frittering away $19k here and there. That would never add up to anything meaningful and could never possibly be a sign of larger issues, certainly. Who needs the broken windows approach to management when it can be solved by scapegoating and finger pointing? An aside, who’s job is it to update the electronic billboard that still says “happy holiday season”? Was that an early retirement? Will we be replacing that position with two new headcount to replace one like we did on Parking? How much have we spent on consulting fees for the IT director who was let go with a package and then brought back?

Bryan Meek February 16, 2021 at 9:22 am

And why didn’t the state bond for the aquarium? Who gets to pay the interest on the debt while we wait for years for reimbursement?

DryAsABone February 16, 2021 at 9:39 am

All the games aside,remember…the RDF repreents tax dollars. Unlike the small reserves I set up for myself with my own hard-earned money the RDF is nothing but over taxation.
Spend as you go. That will never happen! Especially in Corrupticut.

Bruce Kimmel February 16, 2021 at 11:15 am

Interesting article. I agree with Dachowitz’s, but only up to a point, when it comes to the absolute size of the rainy day fund. I’ve always believed there is an ethical dimension to budgeting since the money we are reserving is from taxpayers. Any amount above our official policy should raise a red flag because the money we are “sitting on” belongs to Norwalk residents and should be put to good use in a timely fashion. I’m glad we are moving to ensure our reserve funds stay within policy limits.

William February 16, 2021 at 2:44 pm

He said Mr. Meek should know better than to make guesses, then instead of answering the question the spokesperson made his own guess. “Most likely some items were budgeted in one line item and the actual amounts were posted to different line items.” That explanation would never fly in the private sector without mentioning specifics.

Curious, is it common for a city of Norwalk’s size to have a chief of staff and communications manager?

Since the city is in a strong financial position, those of us who have only been lucky enough to get 1% raises, or worse could use a tax break.

Francis Nash February 16, 2021 at 3:20 pm

Unlike Mr. meek most disturbing to me is the distortion of performance by the Pension Board and the lack of investigation by NonN regarding the matter. As Chairman of the Pension Board NonN has never contacted me,or to my knowledge, any other member of the Board regarding this or any other matter relevant to the performance by the Board. Our meetings are posted and open to the public and it is asked at meetings if any member of the public would like to comment.
There is a statement regarding performance. In the first six months of the current fiscal year the return on investments in the fund was 16.9% vs a benchmark return of 14.33% this was an exceptional time, however, over the past seven years the net return in the pension plan is 7.19% vs a benchmark return of 6.9%. The Annual Discount Rate for the plan is 6.875%. Clearly we have performed at an above average level and at the same time maintained liquidity and reasonable volatility in the fund. The Pension Board also invests $100 million in the Norwalk OPEB (other post employment benefits) plan lowering our expense ratio. I would be happy to meet with NonN to review the plan, its investments, and policies. Thank you, Francis Nash, Chairman Norwalk Pension Board

John ONeill February 16, 2021 at 7:27 pm

@Francis: Thank you for your comments. Pension returns are something that needs more light shed upon it. I’m super happy to hear how well we’ve done
Can you direct us to how well the State has done ? In the spring Wooden was taking bows for being defensive before covid hit and patted himself on the back. He hasn’t been bragging lately so I’m concerned state pensions may not have fared as well as Norwalk’s. Any help you or anyone else can give on the subject would be appreciated
I’d ask Bob Duff but he doesn’t respond to any of my inquiries.

Mike O'Reilly February 16, 2021 at 9:02 pm

Josh Morgan, to Bryan Meek “His cherry picking a $19,000 line item in a $363 million budget is such a transparent and failed political jab. It would be laughable if not so sad.”

Wow so we are not allowed to lift up the hood and shine a light on truly wasteful spending?
Thank you Bryan for lifting up the hood and shining a light on the mice eating away on our wiring.

Josh goes on to say The Chief of staff budget is a small fraction of the overall city budget…These amounts are insignificant in the context of more than $363 million in expenditures”

So what was our budget 10 years ago? Before we had a Chief of Staff? How much better off are we for the increased spending?

Josh, what is really sad is you insulting the taxpayer’s of Norwalk with your $19000.00 wasted is just trivial. $19000.00 here $19000.00 there it’s only tax payer money.

Bryan Meek February 17, 2021 at 8:32 am

@Francis, respectfully I was asking about the 2% return in FY19/20. I know the assets have achieved the discount rate historically. I just questioned why only 2% in the same period the S&P was up 10%. Thanks for your service.

John Miller February 18, 2021 at 5:50 pm

@Bryan Meek: In your considered opinion, in the private sector would the argument that being $19K overbudget is insignificant pass the smell test in a Sarbanes-Oxley audit?

Bryan Meek February 19, 2021 at 9:26 am

@JM. SOX only applies to private sector companies under the purview of the PCAOB. There is no similar mechanism for government that holds them to account. Amongst other things, willfully misleading financial statements are punishable up to 20 years in prison without any pure definition of what makes the matter material. It’s subjective. That said, what concerns auditors the most is a nonchalant attitude about transparency and is typically indicative of a much, much larger problem.

John Miller February 19, 2021 at 2:39 pm

@BM: That was exactly my point. Our fearless government leaders are very adept at writing rules and regulations to hold we folks in the private sector accountable but they don’t do a very good job holding themselves accountable. In the time that I spent in corporate finance, nothing was more enjoyable (tongue in cheek) than having the auditors show up for an unannounced SOX audit but, that being said, nothing was more satisfying than acing an audit with no discrepancies found.

Leave a Reply

Your email address will not be published. Required fields are marked *



You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>