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Opinion: For Norwalk, recession is in the rear-view mirror

By Mark Chapman

By Fred Wilms, chairman

Board of Estimate & Taxation

NORWALK – The city of Norwalk has turned the corner. Increasingly we see signs of financial progress – indicating we have left the recession behind.

The recession hit Norwalk in 2008 and caused city revenues to drop. While the property tax collection rate thankfully held steady around 98 percent, annual revenues from the conveyance tax, building permit fees, recording fees and investment income plummeted from $15 million to $5 million. Cumulative lost revenue through 2012 was a staggering $40 million.

On top of that, the stock market tanked. All city pension plans experienced significant losses because of their defined benefit nature. Since the city charter requires all pension plans to be kept actuarially sound, pension contributions increased from $2 million in 2008 to $10 million this year. That was a cumulative $18 million spending increase.

On top of everything were double-digit increases in employee health care costs and post retirement liabilities (OPEB).

Given the lost revenues and higher costs, keeping the average annual tax increases for the past three years at 2.53 percent and for the past five at 2.26 percent was a significant challenge. However we still managed to do so while retaining our blue chip AAA debt ratings plus preserving all key services and programs.

Under the mayor’s direction, and with strong support from city officials, the Common Council, BET and Board of Education, the city has now made significant progress restraining employee benefit costs, plus finding better ways to provide services.

Here are recent positive developments:

• Increasing revenues. Total conveyance tax, investment income, recording and building permit fees grew from $5.3 million on 2012 to $6.7 million in 2013. This year we are forecasting $8 million. Behind these numbers is the improved real estate activity.

• Pension reform. The city just concluded with all non-public safety unions to put new employees hired after July 1, 2012 into 401K style defined contribution plans. Current employees will contribute more towards their traditional plans. Projected savings over the next ten years are $10.4 million. Furthermore the city settled with the Fire Fighters union which increases contributions and establishes a more sustainable plan for new hires. Projected savings are $3.5 million.

• Health care cost reform. In the same union negotiations, high deductible health saving plans (HSA) have been introduced, plus employees will contribute more. Expected savings are $1.2 million over the next three years.

• OPEB reform. These liabilities should drop by $30 million, as all new hires after July 1, 2013 will receive modified retirement health insurance plans. Also current employees will contribute more to their plans.

• Accountability. The city holds all grant recipients accountable for the tax payer dollars they receive. With the well known problems at NEON, the BET eliminated $1.3 million annual funding to them.

• Better ways of providing services. By outsourcing garbage collection, savings over the next ten years could be $17 million. The subsequent move to single stream recycling enhances the environment. Also the closing of the moribund Norwalk Museum is expected to save taxpayers $1.8 million over ten years. New life has been breathed into Norwalk history by the Norwalk Historical Society and the Norwalk Library.

• The Board of Ed $4 million budget overrun. The BOE has now fully retired the deficit. The recommendations of independent accounting firm, Blum Shapiro, have been implemented. We will not have this problem again.

• Water Pollution Control Authority (WPCA). While the WPCA is rarely in the news, taxpayers may have noticed no increase in their sewer fees this year.

In conclusion, Norwalk has emerged from the recession strong. As a result we can look to the future with confidence. Norwalk has turned the corner.

Comments

13 responses to “Opinion: For Norwalk, recession is in the rear-view mirror”

  1. Oldtimer

    Fred talks about 40 million less revenue and 18 million more expense. That adds up to a 58 million shortfall, Was that all made up by tax increases ?

  2. irishgirl

    “Pension reform. The city just concluded with all non-public safety unions to put new employees hired after July 1, 2012 into 401K style defined contribution plans. Current employees will contribute more towards their traditional plans.”
    *
    What are the exact numbers that the taxpayers are paying into old and new accounts? 50%??
    And as with corporate America who have put their 401k on the shelf – how about the city doing the same.
    *
    “Health care cost reform & OPEB reform. . high deductible health saving plans (HSA) have been introduced, plus employees will contribute more.”
    *
    Again, any hard numbers and besides – do away with this 100% and go the new socialized health care program shoved down our throats by america’s ultimate self aggrandizing ego maniac who took down america healthcare system and leaving its citizens buried under more taxes. Have ALL CITY EMPLOYEES ENROLL IN THE OFLUBAMA UNCARE SOCIALIST EXCHANGE. Savings = 100%
    *
    Accountability. The city holds all grant recipients accountable for the tax payer dollars they receive. With the well known problems at NEON, the BET eliminated $1.3 million annual funding to them.”
    *
    How about holding OAK HILLS PARK ACCOUNTABLE FOR THE HUNDREDS OF THOUSANDS OF DOLLARS STILL OWED TO THE CITY AND by holding the management board accountable by getting rid of Virgulak and DEMANDING MONTHLY financial reports???
    *
    *Water Pollution Control Authority (WPCA). While the WPCA is rarely in the news, taxpayers may have noticed no increase in their sewer fees this year.*
    That is because since THIS NEW TAX was forced upon us 11 years ago, it has already increased by 63%.

  3. rburnett

    I would love to have access to the same “Happy Pill” that Wilms has. Obviously, being a Republican puppet, he sees things through Moccia colored glasses.

    Maybe instead of bloviating and spewing hyperbole, he should get out of his office and speak to the taxpayers of this city who see things quite differently. Of course, this is an election year, you can bet your bottom dollar (the one that isn’t going to taxes) that there will be many letters written by the out-of-touch republicans.

  4. M Allen

    Yes, fiscally responsible Democrats will make the situation so much better. Do you really believe the DTC’s slate of candidates will make the tax situation better? Can’t say they look like a group who has “holding the line” on taxes as a top priority.
    .
    Speak to the taxpayers? The actual taxpayers of this city may in fact see things differently. They always do. But I would venture to guess that a significant number of them in Norwalk are beginning to view it more and more through the prism of how much they pay versus how much they get in return. TaxPAYERS may not like every last thing going on in the city, but I highly doubt they will jump for joy if a change in November results in taxes rising at an even higher rate.

  5. Suzanne

    Mr. Wilms always seems to be propagating propaganda for this administration while not really addressing the greatest concerns of, as M Allen points out, taxPAYERS of this town. While this guy repeatedly writes about how well Norwalk is doing fiscally, I would say this is because the town is charging more and providing less. It may be a great way for the government to save with their pensions, 401K plans, healthcare costs and the like, but it doesn’t really address the reality as most of us are living it: for us, the financial downturn still means significantly less income, the town provides plowing services (which are already provided by the adjacent community of New Canaan) and police/fire departments. That’s it – our sewer fees did not go up because we pay for our own, our garbage collection is a tad easier for recycling but we have to pay for our own garbage collection. Water is from our well. Street cleaning is, for the most part, collectively performed by our neighborhood. We do not have children so schooling, while we pay for it, does not benefit us either (although we would not mind paying for education if the results were better and the taxpayer money went to teaching children.) So, all of the categories of great savings leaving the recession behind mentioned in Mr. Wilms’ article means diddly squat to us (and that would include the highly touted AAA rating.) We are stuck in the middle of it and hanging on. A wider perspective would be appreciated but is not expected: this, after all, is an election year.

  6. Don’t Panic

    The pension plans did not tank because of their “defined benefit nature”.
    .
    If you want to blame something other than the stock market, how about your pension plan investment manager(s)? Are they the same stellar minds charged with maintaining our lauded AAA bond rating?
    .
    Was the plan invested in AAA investments? How did that work out?

  7. Piberman

    Mr Wilms omitted that City spending and taxes increased through the Recession and that City employees maintained employment, benefits and salary raises for the most part. But residential properties, stagnant for the past 3 years, remain below pre-Recession values. As do City real incomes in common with America generally. For most City residents the Recession is not yet behind us. But for City workers it’s another story. In good times and bad Norwalk is the City that takes care of its workers. And for taxpayers the City makes certain that property taxes rise too in good years and bad years. Who could possibly complain about Norwalk’s financial management ? No matter what happens in the real economy Norwalk’s taxes and municipal salaries always rise. That certainly merits a AAA rating in anyone’s book. Save those having taken a finance course. The marvel of such superb financial management is that no one ever complains. That’s why we keep returning Council members back to their posts year after year sometimes for decades and decades. Who would want to change such a superb system ? Norwalk really shouldn’t have to pay the ratings agencies. Norwalk will be AAA forever and ever. It’s a shame that other CT cities aren’t as well managed as Norwalk, then every city in CT and CT itself would be rated AAA. CT would then be America’s AAA state.

    We should be proud that our City employees are the highest paid of any city in CT. That makes us no. 1. Paying higher taxes every year is a small price to pay for being no. 1. Let’s all encourage our elected and appointed officials to keep raising City salaries so we keep our no. 1 position. Norwalk should always be no. 1. Our fiscal management is the very best. Glory be. AAA forever and ever.

  8. Piberman

    Mr Wilms mentions that City pension plans took a beating when markets soared so City residents had to make up the difference. One wonders why the City didn’t then hire different pension fund managers. There are pension fund managers who do specialize in maintaining portfolio values both in good times and bad. They are commonly hired by union trust fund managers. The fund managers themselves are called the Taft Hartley folks. I used to be a listed officer of one of these firms that managed union pension funds. Maybe some day Norwalk with its AAA badge of financial approval will seek out pension management firms that have a track record of preserving capital even when markets are declining. Under its current arrangements when markets decline City taxpayers pay up the difference. That’s a funny way to run a pension fund. But it really does highlight that Norwalk does have financial management problems along with the AAA rating it paid the rating agencies to provide. At day’s end Norwalk taxpayers make up the revenues lost during Recessions and during declining markets. And with stagnant property values they forgo billions in foregone property appreciation. It’s surprising anyone would ever move from Norwalk. We have our financial management down to a real science.

  9. Fred Wilms

    I want to thank everyone for their comments. Forums like this help to develop important community dicsussions. In reaction to some of the points raised:

    1. Yes the recession caused a cumulative $58mm + operating budget shortfall. The City reacted through a combination of one year wage freezes from all unions, layoffs, furlough days, benefit cost adjustments, operating savings discussed in my letter, 2.26% average annual tax increases and select use of excess rainy day funds.We attempted to keep all key programs/services in place as much as possible. Details can be found in the operating budgets posted on the city website at http://www.norwalkct.org – Departments/Finance.
    2. Our pension funds, like most, have been invested in a mix of equities, debt and alternative investments. So when the stock market tanked, plan assets dropped below plan liabilities. Hence the need to increase annual pension contributions. When the plans are tradtional defined benefit, the taxpayers take the hit for shortfalls. However we have switched to defined contribution plans going forward so the taxpayers will no longer be on the hook. If anyone knows of unusually high performing asset managers please let the Pension Board and Tom Hamilton know. I am sure they will welcome the input.
    3. I serve the citizens of Norwalk the best that I can. The only one I am a puppet to is my conscience and my duty to serve the community. For those who make personal attacks, I wonder if they would have to courage to do so if they used their real names, instead of hiding out behind false ones.
    4. The AAA ratings seem to be misunderstood a bit. They reflect more the health of the City rather than its wealth. In that sense they are more like a personal credit score. Someone may have a higher credit score than Donald Trump but not necessarily have his wealth. For Norwalk, it is true that we are blessed by being located within the NYC economic zone. However within that reality we have employed superior financial management skills and made the most of our present curcumstances.
    5. I am happy to be accused of making happy statements. Personally I could not imagine walking through life being miserable. The points in my letter stand as-is and have actually happened. If some are not happy about that, so be it. I choose to see them as positives.
    6. I acknowldege that there is plenty of work yet to be done in the City. My two personal areas of concern are improving our schools and getting the City redeveloped (in particular 95/7 and Wall Street).

  10. Suzanne

    “The points in my letter stand as-is and have actually happened. If some are not happy about that, so be it. I choose to see them as positives.” While I appreciate the delineation of what you consider positive steps in Norwalk’s financial health, I do not think you are listening, Mr. Wilms, to what is happening to the constituency while you are playing dialing for dollars with employee pension plans. People are unhappy because the value of what they put in in taxes is not being realized in what they receive in return. One recycling program does not a fiscally healthy neighborhood make. While I am happy we are responsibly complying with all of the requirements of pay and health benefits for our government employees, where does that leave us, the taxpayer? If you have been reading any reports at all on Nancy on Norwalk, you will see maybe mundane concerns to you about how money is spent but very important concerns to those of us who live here who have seen our housing values drop while property taxes get raised, services such as paving left to the last until I want to charge Public Works everytime my car hits a pothole and goes out of alignment and schools that are deplorably inadequate. Add to that, developments that continue to be promised but unrealized, especially your beloved Wall Street and 95/7. I am grateful, to tell you truthfully, for the constituents who have stood up against the wrongheadedness of the BJ’s development while the government, including you apparently, supported it with a one-sided vision of what Main Street would look like after that debacle was built. I think your perspective is skewed: while you seem to do the job you are assigned well, I cannot celebrate it. With the recession still very much at hand here in Norwalk from a homeowners/taxpayers/constituent perspective, I just don’t see why what you write is doing anything but maintaining the status quo on our dime, to the government we pay for. Where do we fit into this equation? I can’t find the taxpayer!

  11. Fred Wilms

    Dear Suzanne,

    Thanks for your thoughtful response. While my letter was written for a general audience, I appreciate your concerns for the taxpayer. The way to keep taxes down is to keep spending down. My letter highlights the many steps the City has taken to reduce spending, while at the same time either maintaining city services or actually enhancing them (such as garbage outsourcing and the museum). Many of these steps to reduce spending encountered significant resistance – however the City moved forward because we believed they were in the best interests of the taxpayers.

    Switching to BJ’s, I am not sure how you know my thoughts as my letter did not address that. But since you raised it, I share the concerns about traffic. I actually live at the adjacent Rolling Ridge condos and my deck view is of the proposed BJ’s site. So I am personally impacted by whatever happens there.

  12. M Allen

    I would caution against speaking to the management of the city’s pension plan unless you A) have an actual understanding regarding the details of the city’s plan and/or B) have an understanding of how these types of plans are managed. Simply tossing our terms like “Taft-Hartley” and saying the city should have selected different fund managers that would have led to better returns during one of the most severe financial crises in US history is not helpful to any sort of argument you may be attempting to make.
    .
    To have selected fund managers that could “weather any storm” will protect the plan from losses, but it will also retard upside gains. Pension plans, and other similar plans that invest over extremely long durations (endowments, foundations, etc.) do not attempt to time the market by making major swings in the construction of the overall portfolio. Rather, they generally take a balanced approach with a multitude of investment managers and then tilt the portfolio depending on the overall investment outlook. To simply guard against losses will not protect the plan from being forced to make contributions. If the plan, over time and in good markets and bad, does not grow at a sufficient rate the city will still be on the hook for making contributions to bring the plans assets in line with its liabilities.
    .
    To single out Norwalk’s pension plan for its performance during the financial crisis is wrong. Norwalk actually has a very sound pension plan back by solid external consultants. It is not simply managed by some city employee. But again, it helps to have some understanding of how plans of this kind are managed. It isn’t just a matter of “Taft-Hartley folks” waving their Taft-Hartley wands. Also, “Taft-Hartley folks” have nothing to do with any of this. So even tossing the term out was only to use a $5 word that had nothing to do with the argument. And if you would like to know why “Taft-Hartley” has nothing to do with the performance of the pension plan, I would be happy to offer more insight into pension plan structures, management and performance (for a fee).

  13. Suzanne

    Please see today’s article called: Opinion: Some Ground Breaking Cynicism which represents the FACTS of development in the City of Norwalk, first promised in 2011 and yet to make any progress. I would assume that other than the health and welfare of government employees, the information cited would play into whether the recession is really in the “rearview mirror” for Norwalk. Not.

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