NORWALK, Conn. — Questions about the grand list, the coming revaluation and the Rainy Day Fund marked freshman Common Council members’ conversations Thursday as they moved toward voting on a recommended budget cap.
Nora Niedzielski-Eichner (D-At Large) suggested that an additional increase in the budget would fund the SoNo neighborhood school incubator; Jenn McMurrer (D-District C) asked about the tax abatement awarded to The SoNo Collection through the Enterprise Zone. Heidi Alterman (D-District D) wanted to know if the City had ever been penalized for tapping the Rainy Day Fund and mused that additional drawdowns might be appropriate given that the mall’s property tax bill will increase once the abatement expires.
All three abstained on the budget cap vote. Alterman mentioned that she didn’t have a hard copy of Norwalk Chief Financial Officer Henry Dachowitz’ spreadsheet detailing the adjustments made in the proposed budget.
There’s also no budget information available for citizens on the City website, although this is usually posted on the Finance Department page. Chief of Staff Laoise King said Friday that this is likely because new Director of Management and Budgets Tom Ellis, who began work on Jan. 1, wasn’t aware of that responsibility. It being a holiday weekend, she didn’t expect to get the error corrected until Tuesday.
Last year, Council members didn’t have a budget book as they began their deliberations. Dachowitz said this was because then-Director of Management and Budgets Angela Fogel was out on a medical emergency.
The Council Finance Committee’s vote on the adjusted recommended budget, featuring a 4.5% increase for Norwalk Public Schools, was 4-0-3. The full Council will vote on it Tuesday.
The Board of Estimate and Taxation will then get to work ironing out the nitty gritty details of the budget.
The SoNo Collection
McMurrer said she’d gotten emails asking about the mall’s contributions to the City’s coffers.
Funny thing about that: Brookfield Properties paid more property taxes on The SoNo Collection last year than it will pay this year and for the next six.
That’s because it was built in an Enterprise Zone and rather than allow a standard gradual increase in taxes, the Common Council, in negotiating changes to the Land Disposition Agreement (LDA) for the parcels, changed the rules so that Brookfield will pay half what is owed in each of its first seven years. But the Enterprise Zone rules didn’t kick in until the Oct. 1 after the mall got a certificate of occupancy (CO) and that first CO came in mid-October 2019. Therefore, the Enterprise Zone abatement didn’t begin until the 2020 grand list.
In addition, that first, full-load tax bill, was based on an assessment made when the mall was 80% complete. So if you look at Brookfield’s tax bill, the 2020 payments aren’t half what the 2019 bill because the assessment is higher.
Tracking down what Brookfield is paying is a bit complicated as the mall is billed as three separate parcels. The 2020 grand list payments add up to a little more than $4.5 million. The 2019 grand list payments add up to $7.3 million.
It was predicted during the approval process that the mall would contribute $5 million a year to the City budget during the Enterprise Zone abatement period.
The mall was said to be assessed at $344.5 million when it opened. Dachowitz said Thursday that it’s assessed at $500 million now. Adding up the information available online, it’s $485,855,489.
Mayor Harry Rilling said that under usual Enterprise Zone abatements, a property owner wouldn’t pay any taxes in the first two years. Then it gradually increases.
“In order to have a win-win, a good thing for the city and a good thing for the mall, or for Brookfield in this, they’re paying 50% all the way across,” Rilling said.
The Rainy Day Fund, or unassigned fund balance, was estimated to be $72 million at the end of the last fiscal year, about 17.3% of total revenues. It was reportedly $58.4 million at the end of 2019-20, about 14.8% of total revenues.
The proposed budget factors in a $4 million drawdown.
Alterman said it seems like a pandemic would be a suitable time to use the Rainy Day Fund and asked, “Is it worth considering tapping into that temporarily while we wait for things like (the mall) to come back into place?”
“These are complex questions,” Dachowitz said, explaining that rating agencies view a “healthy” Rainy Day Fund very favorably. He credits the high fund balance for Norwalk being able to weather COVID without layoffs. People who buy bonds see a healthy fund balance and figure the City will be able to pay its bills, including the principal and interest payments on those bonds.
“I think the City was wise over the last six, seven years in building up a Rainy Day Fund to protect the City’s finances. However, I understand the argument on the other side, and it’s a balancing act. And that’s what the elected officials, the Mayor and the Council people have to decide,” Dachowitz said.
A pandemic is a rainy day and so was Superstorm Sandy but in both cases, the federal government provided funding, Alterman said. She understands the pressure tax bills bring and agrees the City shouldn’t force people out but the City has been through disasters and not touched the fund balance.
Dachowitz asked what would happen if the federal government didn’t come in with money. “There would there are cities and counties across the country that suffered much worse than we did,” he said, mentioning places that depend on tourism or sales taxes.
“We’re based on real estate taxes in an area where the value of the homes is solid,” Dachowitz said. “And the way we budget, the homes would have to go down by 98% in value for us not to get the value in a tax sale. It’s not like in 2008, when the banks lent 95% of the value of a home and when the homes dropped 20%, they’re suffering severe losses.”
“I am wondering if having such a hefty Rainy Day Fund is an inappropriate use of taxes that have already been paid,” Alterman said.
Niedzielski-Eichner asked for an explanation about the coming revaluation, given questions from the public. Dachowitz said a reval should be complete in October 2023 and it’s likely the tax burden will shift more toward residential homeowners.
Commercial real estate has decreased in value, given work from home trends, and there’s been a migration “primarily from New York, but also, I guess, from Boston or other cities, where individual families are coming into the city, and they bid up the price of homes, generally a good deal,” Dachowitz said.
So residential values are likely to be higher and commercial values to be lower, and “residential homeowners will have to pick up a bigger share” of coming budget expenses.
Niedzielski-Eichner spoke of the SoNo school incubator, not currently included for funding. She asked Dachowitz for a spreadsheet spelling out that expense.
Veteran Council members comment
David Heuvelman (D-District A) congratulated Dachowitz for a PowerPoint slide showing recent budget history:
- 2015-16: $4.4 million increase for Norwalk Public Schools
- 2016-17: $6.3 million increase for Norwalk Public Schools
- 2017-18: $7.7 million increase for Norwalk Public Schools
- 2018-19: $7.5 million increase for Norwalk Public Schools
- 2019-20: $9.2 million increase for Norwalk Public Schools
- 2020-21: $10.5 million increase for Norwalk Public Schools
- 2021-22: $.7 million increase for Norwalk Public Schools
“I think that the fact that we’ve gotten to that place is good,” Heuvelman said. “…I was one of the parents years ago who would stand and talk to this body and say, you know, ‘we need to we need to spend this money.’ And I still believe that we do need to spend this money. But I’m concerned about spending the money right now here and now. We are living on found money in federal grants because of the pandemic.”
While he’s glad the budget is currently expected to provide NPS with the funds needed to cover contractual obligations, even a $5 increase can be hard for some families, he said. Given the uncertainties, “my feeling is a feeling of caution.”
Diana Révolus (D-District B) said the conversation has been “equal is not equitable,” and renters also struggle. “We have to think about what’s equitable for our community. Everyone equally, taking on a slice of the pie in a sense, doesn’t necessarily mean that would be sustainable.”
Thomas Keegan (R-District D) said he’d done arithmetic and felt the original 3.75% increase for the schools would cover NPS’s contractual obligations to staff, even factoring in the “bloated” estimate for increased health benefits.
Dachowitz said that wasn’t his department. Norwalk Public Schools Chief Financial Officer Lunda Asmani said last week that the district needs the 4.5% increase to cover costs.
Darlene Young (D-District B) agreed with Heuvelman. “We don’t know where we’re headed, we kind of have an idea. And we really need to be mindful of that,” she said.
She’s glad the cap has come up but, “I don’t think that we really need to go much higher than that.”
Dominique Johnson (D-At Large) said, “This really does weigh heavy on the heart, to make sure we’re doing right by everybody in the city and making sure we don’t lose working families in the city, while balancing what we need, so that we can meet contractual obligations in the Board of Education budget.”