It sounded like a magic solution to New Haven’ long-term fiscal mess: Surrender control to the state in return for one of those big bailouts.
In real life, that option may not be on the table.
The suggestion has arisen since the city raised taxes 11 percent this year, engaged in a notorious buy-now-pay-later re-refinancing of its debt, and still ended up with a $30 million structural deficit. A budget oversight panel floated the idea; a Board of Alders committee debated it last week.
The state has agreed to bail out two other local governments, and insisted on structural changes like new labor contracts, the argument went. So why not have New Haven do the same?
For starters: The state’s existing $27.3 million annual bailout pot is bascially empty; Hartford and West Haven got there first.
With control of state government changing hands in January, future bailouts may be off the table.
And … it may not even make sense for New Haven anyway. Not if the people calling for a takeover learn it might mean even higher taxes.
Those risks and potential rewards of engaging with Connecticut’s Municipal Accountability Review Board (MARB) emerged from the debate last Monday at a hearing of the Board of Alders Finance Committee as well as from interviews with people knowledgeable about the program, including the state official in charge of it. Whether or not to seek a state bailout is one of many tough choices facing New Haven as it confronts a long-term structural deficit estimated at $30 million.
MARB is an 11-person board that was created by the state legislature in 2017. It’s charged with providing fiscal oversight, advice, requirements, and aid to eligible distressed municipalities.
In the current fiscal year’s state budget, MARB has $27.3 million in “Municipal Restructuring” funds to give out in state aid in exchange for municipalities submitting their budgets and their union contracts to a various degrees of state scrutiny, depending on the severity of the municipalities’ current fiscal distress.
New Haven’s fiscal situation came to the attention of state budget chief Ben Barnes, who summoned Harp administration officials for a chat about whether to join the program. The danger signs: a $30 million structural deficit, two credit rating agency downgrades, and a recent $160 million bond refunding that lightens current debt service payments but increases the city’s debt burden as much as $80 million down the road. The mayor and city legislators are now faced with the question of whether or not MARB holds the key to a sounder fiscal future at a cost that city taxpayers can and should bear. (If matters worsen enough, MARB will have the statutory authority to step in with or without city permission.)