The public’s only chance to weigh-in on the budget is 6 p.m. (Thursday JUNE 20), at which time a public hearing will be held.
The $44.5 million budget could be adopted at a meeting immediately following the public hearing.
The agenda for the public hearing is displayed below.
If the budget is approved as-is, a single-family house assessed at $130,000 would pay an additional $325 in taxes next year.
A single-family house assessed at $112,000 would pay an additional $280 in taxes next year.
The budget up for approval Thursday flat-funds Derby Public Schools — the second year in a row the tax board has opted to flat-fund education.
Superintendent Matthew Conway said during the meeting the district would have to consider layoffs if the budget is adopted in its current form.
Click play on the video on the top of this article to watch Conway and the tax board discuss the school budget.
Scroll down toward the bottom of this story for more on how this budget could impact education in Derby.
It’s Complicated
This has been a bad budget year for the City of Derby.
An audit released in April revealed a series of problems with the city and school district’s budgeting habits.
For example, the city accidentally counted “alliance district” grant money (or technically, money equivalent to the grant money) twice as revenue in previous Derby budgets, according to a statement from Mayor Richard Dziekan issued May 31.
Over-estimating revenue — and then not having that money arrive to cover expenses — ruins a budget.
In addition, the audit pointed out problems with the way Derby public schools was keeping the books, too.
From Dziekan’s May 31 letter: in the 2016 – 2017 budget year, the city closed its books with about $1.2 million in fund balance (or reserves).
But those numbers were not correct.
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, according to the mayor.
The correction turned erased the 2016 – 2017 fund balance, transforming it into a $1.4 million deficit.
The mistakes went uncorrected for two more budget cycles, compounding the problem and creating a projected $4.5 million deficit in the fund balance for June 30 of this year as the city revised previous budget into.
SHOVELS TO FILL THE MONEY HOLE
City officials — the paid finance director, the elected treasurer, the mayor’s office, lawyers, and the elected tax board chair — have been working on a plan to correct the mistakes and get Derby back on solid financial ground.
Derby City Treasurer Keith McLiverty walked the tax board through the “ eight point recovery plan” at Monday’s tax board meeting.
The discussion can be viewed by clicking the play button below.
1. Debt restructuring
McLiverty said the city is starting a debt restructuring plan that will free up about $3.5 million over the next few years.
Under the budget that could be approved Thursday, about $1.8 million of that will go toward lessening the mill rate impact. If the city didn’t do that, taxpayers could have been looking at a 4 or 5 mill increase on July 1.
The rest will go toward the effort to restore the fund balance in the next two budgets.
2. Sell Assets
“This is VARCA,” McLiverty said, referring to a vacant building on Coon Hollow Road Derby is selling to a private company. “This is looking at assets that are on our books that we do not need that can generate revenue. That revenue can be directed to the fund balance.” McLiverty said it is critical not to use revenue such as asset sales for operational costs.
3. Mill Rate Increases
Zero-percent budget increases, always popular during election years, are not sustainable unless the city significantly grows the nonresidential side of the grand list, McLiverty said.
He pointed out the city’s mill rate has been the same for three years. But there have been wage increases, cost-of-living increases, plus inflation. The cost of doing business goes up every year.
“We have to have mill rate increases every year. That is the reality of where we are,” McLiverty said.
4. Adjust Long-Term Costs
Under the budget up for final adoption Thursday, the city is considering deferring the 2018 – 2019 contribution to the city’s pension plan, and using some $550,000 instead for fund balance restoration.
McLiverty said Derby has one of the healthiest pension plans in the U.S.
“Our pension is 86 percent funded. We have the ability at this point in time to reduce our annual contribution and still stay funded above 83 percent,” he said.
5. Tax Sales
In Derby, selling off tax-delinquent properties has generated revenue for the city.
The city should continue the effort, and use an estimated $1.1 million from the sales to go toward the fund balance, McLiverty said.
“People tend to pay when their feet are held to the fire,” he said.
6. Structural Organizational Changes
“This is taking the management letter from the auditor and implementing corrective actions,” McLiverty said.
This will be a way for Derby to prevent these mistakes from happening again.
7. Grand List Growth
“This is key. Each and every year we need grand list growth,” he said.
Otherwise, the costs to run government services falls entirely on the backs of homeowners.
8. Fund Balance Policy
Right now Derby policy calls for the fund balance to be 5 to 7 percent of the city’s revenue. That must change, McLiverty said.
“We are going to be looking toward 10 to 12 percent, and we’ll have a road map on how we’ll get there,” he said.
Going forward every budget should have a line item dedicating money to fund balance replenishment, the treasurer said.
Is Anyone Getting Fired?
A combination of small city staff and elected officials (such as McLiverty) put together a spending plan for the city each year.
During this budget crisis, the city has been careful not to point a finger at any one person.
Click here to read an earlier statement from Mayor Dziekan.
The lack of finger-pointing continued during McLiverty’s presentation Monday at the tax board.
“Human nature is to blame. I get it. Let’s all do each other a favor and blame tomorrow or blame in November, because blame doesn’t get us anywhere,” he said.
THE SCHOOLS
Derby schools initially asked the tax board in mid-April for a $555,000 increase for education.
That request included roughly:
$264,000 for special education students who must attend other facilities or programs because of their needs
$179,000 for contractual obligations, including staff raises
$94,000 for supplies and building maintenance
$13,000 for transportation
But Superintendent Matthew Conway announced Monday that three more students had just enrolled in special education programs. Two of those students have needs that cannot be met in Derby schools, including one young child with medical issues.
The cost for the three new students alone is about $414,000, Conway said, bringing the school district’s request for next year up to about $970,000.
If the tax board Thursday fully funds the school district’s request, and adopts the rest of the preliminary budget discussed Monday, the tax rate will increase by 3.5 mills, officials said.
Derby schools are getting an increase of $414,000 in state “alliance district” money, but those dollars must be used for state-approved school-reform programs and efforts.
The preliminary budget adopted Monday provides no new local dollars to the school district. Conway said it would be the second year in a row with no increase from the city.
If the adopted budget Monday becomes the actual city budget Thursday, the school district will have to layoff employees, Conway said.
“It’s bodies, period.The only way you get to $1 million is by cutting positions. When you cut positions, you’re cutting learning. There’s no other way around it,” Conway said.
“When you keep doing a zero-percent increase, you are digging a hole, and the only way out of that hole is to cut bodies that have provided this city with significant benefit,” Conway said. “You’ve seen a 20 percent-increase in your graduation rate in the last five years; year-over-year increases in your SBAC scores with your math and your ELA.”
Conway said the community is about “two big things:”
“It’s about your housing and it’s about your education. That’s what’s going to bring business here,” the superintendent said.
Click the play button on the top video in this story to watch the tax board and Conway discuss the school budget.
