Mayor Martin’s stealth tax and spend increase (how conservative revenue estimates and spending annua
How did this happen? Two primary reasons.
First, the Board of Representatives raised the fee for building permits for large developments. So, it appears developers sped up their applications for permitting before the increase became effective, as development fee revenue was more than double the city’s projection.
Second, and more generally, the city takes a conservative approach to estimates for fee revenue and other grants, so that the numbers listed in the Mayor’s proposed budget are lower than the city actually expects.
How do we know this? Jay Fountain, director of the Office of Policy and Management, told us so. Specifically, during this year’s Board of Finance discussion on setting fee and revenue estimates, Fountain argued for higher fee and revenue estimates than the Board of Finance was contemplating, noting in one instance that the estimate in the Mayor’s original proposed budget was lower (i.e., more conservative) than what the city actually expected.
Consistent with conservative budget estimates, the city appears to have run a surplus every year since Mayor Martin took office.
Conservative budgeting, knowing nothing else, is a good thing. Better to end the year in the black with a surplus than in the red.
The problem is what the city does with the surplus.
Set forth below is a chart showing, for FY 18–19, (1) actual property taxes received and the increase in the property tax rate over the previous year, (2) what property taxes would have been with no change in the tax rate over the previous year, and (3) what property tax rate would have produced a balanced budget for the fiscal year, with neither a surplus or deficit.
As you can see (and assuming my math is right), had the city set property taxes to produce a perfectly balanced budget, taxes would have decreased by 0.9% last fiscal year.
Of course, no one could blame the Mayor for lacking a crystal ball when making tax and spending estimates for the fiscal year. However, as you may have noticed, the city did not reduce your taxes with the realized surplus.
Instead, at the Mayor’s request, and with unanimity from the Board of Finance, and unanimity without a debate from the Board of Representatives, the city has planned to spend the vast majority of the surplus on paving the city’s roads. This all took place before the coronavirus’s impact on city finances began to be understood.
The Mayor, along with our elected boards, plan to use our surplus as if it’s found money which must be spent. That paradigm is not right. A dollar in surplus is a dollar that need not be taken from the taxpayers in the first place. The surplus is not the Mayor’s piggy bank.
If the city thinks the surplus should be spent, let’s have that discussion. No one disputes the usefulness of paving the roads. But funds should not be appropriated in an ad hoc fashion at fiscal year-end without going through the standard budgetary process.
Fast forward to today, and the Board of Finance is considering authorizing taking out a bank line of credit of at least $30 million, or issuing Tax Anticipation Notes (TANs) to deal with timing mismatches in cash inflows and outflows driven in part by the property tax deferment program adopted by the Board of Representatives to satisfy a mandate from Governor Lamont.
Meanwhile, those surplus funds allocated to pave roads have not yet been spent. However, to date, the Mayor has refused to state that they will be reallocated to deal with the budget crisis caused by the coronavirus.
This is an outrage. The city should not be borrowing money while using cash on hand to pave roads that can be paved at a later date.
But this problem has been self-inflicted by our elected Boards in the first place. The Board of Finance should not have to beg the Mayor to use common sense.
To avoid this issue moving forward, I propose the following standard operating procedure: our elected Boards should allocate 100% of each year’s annual surplus into the rainy-day fund.
That way, each level of elected government—and the people of the city of Stamford—can have a fulsome discussion about whether to spend that surplus on paving roads, save it to lower taxes, or use it for anything else.