Mayor Dziekan
DERBY — Mayor Rich Dziekan issued a prepared statement Friday publicly acknowledging more major errors in past Derby budgets.
The series of mistakes make it likely Derby residents will be hit with a tax rate increase next year, though a budget has not been set.
But city officials have said previously the tax hike could be in the neighborhood of 3.8 to 6 mills.
“My household is no different from most others. But we are at a pivotal moment in the story of our small city,” Dziekan said. “The decisions we make today will either move our city out of its distressed status or will forever stigmatize it with that distressed status.”
According to the mayor:
- An audit delivered in April revealed “many significant deficiencies on internal controls over financial reporting, as well as other deficiencies in our finance department.” Click this link to read the audit.
- In the 2016 – 2017 budget year, the city closed its books with about $1.2 million in fund balance (or reserves). The numbers turned out to be wrong. The audit discovered that some Board of Education expenses recorded in the 2017 – 2018 budget were actually related to expenses from 2016 – 2017. But the paperwork wasn’t revised until February 2019. The correction turned erased the 2016 – 2017 fund balance, transforming it into a $1.4 million deficit.
- The error was “compounded” during the next two fiscal years (2017 – 2018 and 2018 – 2019). That’s when the city mistakenly “overstated” the amount of school aid coming from Hartford.
- The results: the 2017 – 2018 budget ended with a deficit, and the city is expected to end with a deficit when this fiscal year ends June 30 “if we cannot correct these errors.”
“Notwithstanding, the City has met all of its financial obligations, but if we do not take immediate corrective measures, the City will not have enough money to meet its obligations by the end of the next fiscal year,” Dziekan said.
The mayor did not detail what corrective measures will be taken, but indicated it’s being worked on.
Andrew Baklik, the mayor’s chief of staff, said the city’s number one concern is “arriving at a budget that is based on reliable figures.”
Options were supposed to be discussed at a meeting of the Derby Board of Apportionment and Taxation Wednesday, but the meeting was postponed due to a lack of information, the chairwoman said.
On May 21 officials at a tax board meeting said the city had mistakenly “double booked” $1.2 million in “alliance district” school aid as revenue (this issue is mentioned in the mayor’s new statement).
The annual Derby budget process includes the Board of Apportionment and Taxation (an elected group), the city’s finance department (headed by Sal Coppola, a paid staffer), the city treasurer (Keith McLiverty, an elected official). School Superintendent Matthew Conway and business manager Mark Izzo are the key players in the Derby school budget, the bottom line of which must be approved by the Derby tax board. The Board of Education reviews and votes on the school budget before it is sent to the tax board.
The mayor’s office said no one has resigned or been terminated at this point.
“Unlike my critics, I will not use this moment to blame others. I am your Mayor and I will not rest until we solve this problem. We know how we got here, but what is most important now is how we are going to resolve this issue,” Dziekan said.
The state education department is also reviewing grant money it sent to Derby, according to Peter Yazbak, a spokesman for the department.
“We are scheduled over the next two weeks to meet with the City and the District to conduct a review of Derby’s 2017 – 18 and 2018 – 19 Alliance District grants,” he said in an email.
The complete statement from Mayor Dziekan is posted below:
In November of 2017, you elected me Mayor of our great city. I remain honored and humbled to serve you. As your Mayor, I believe it is my responsibility to keep you informed on matters affecting our city, as soon as complete and accurate information is available.
Unfortunately, some people in our community want to use the current budget issue for political gain. I will not respond in kind but rather will provide you the straightforward and honest leadership that you deserve.
Here’s the simple story: the financial audit report of the 2017 – 2018 budget received by my administration about 30 days ago revealed many significant deficiencies on internal controls over financial reporting, as well as other deficiencies in our finance department.
These deficiencies have been ignored by past administrations and have led to the present budget issues.
Our research reveals that the current budget issue began at least two fiscal years ago in the 2016 – 2017 budget year. The City closed it books that year with a positive fund balance of $1,210,300.
However, the auditor discovered expenses in the Board of Education budget that were spent in the 2017 – 2018 fiscal year but related to expenses from the prior-year.
As a result, those expenses had to be restated and applied to the 2016 – 2017 fiscal year. This action did not occur until February of 2019 and retroactively turned a positive fund balance for that fiscal year into a deficit of $1,424,303.
This error was compounded in the following two fiscal years (2017 – 2018 and 2018 – 2019). In these fiscal years, anticipated revenue from the Education Cost Sharing from the State was overstated in each budget year.
These errors resulted in a deficit in the 2017 – 2018 fiscal year and a projected deficit in the current year if we cannot correct these errors before June 30, 2019.
Notwithstanding, the City has met all of its financial obligations, but if we do not take immediate corrective measures, the City will not have enough money to meet its obligations by the end of the next fiscal year.
Unlike my critics, I will not use this moment to blame others. I am your Mayor and I will not rest until we solve this problem. We know how we got here, but what is most important now is how we are going to resolve this issue.
Over the past few weeks, my team and I have been working around the clock analyzing the budget, and developing a financial plan to move our city forward. We are examining all options and preparing for all possibilities.
We are developing short term solutions and long-term policies and plans to restore our general fund to a 10 percent balance over the next 5 to 7 years, maintain our strong pension fund, implement zero based budget principles, reduce operational expenses by doing more with less, and make immediate internal structural and organization changes to avoid similar issues in the future.
I recognize that there is a limit on how much we all can afford to pay in local taxes. My household is no different from most others. But we are at a pivotal moment in the story of our small city.
The decisions we make today will either move our city out of its distressed status or will forever stigmatize it with that distressed status.
Earlier this year, developers worked with our zoning commission to lay the foundation for the revitalization of our downtown. A site plan for the first phase of this mixed-use development is expected in early fall and is expected to generate more than two hundred (200) units of housing, generate local job opportunities and accelerate a downtown resurgence that has consistently stumbled rather than advance over the last few decades.
I believe that Derby’s best days are yet to come. Derby is poised to become a healthy, vibrant and financially stronger community. To seize that great future, we must act boldly, and cannot shy away from difficult decisions or from change.
This is not the time for us to play politics. This is our time to come together to shape the future of our city that we can all be proud of. This is our moment. What we do with this opportunity rests solely on our shoulders. Our city’s future should not be determined by past mistakes or petty politics, but by our resolve to leave a better city for our children.”
