New London freezes spending, contemplates job cuts
New London — Amid a hiring freeze, overtime cuts and warnings of possible municipal layoffs, the City Council on Monday approved funneling $2 million in surplus funds into a new tax-rate stabilization account designed to offset state funding losses.
The money — $1 million more than initially planned — will come from a series of sources, including $1.5 million worth of additional revenues from a state municipal revenue sharing program; the Connecticut Port Authority; and Eversource incentive payments. Another $500,000 will be withdrawn from various city payroll, overtime, consulting and other accounts, Finance Director David McBride said on Tuesday.
The council's 5-2 vote to shift the excess funds came after Mayor Michael Passero painted a grim picture of the 2025-26 budget process.
He said Gov. Ned Lamont's proposed biennial budget shorts the city $2.5 million in state funds, mainly through a drop in Payment in Lieu of Taxes and motor vehicle tax subsidies that can be traced to the city's 2023 property revaluation results. The General Assembly has yet to unveil its budget, which may differ significantly from Lamont's proposal.
Passero, who previously said he will not increase education spending for next year, has ordered a hiring freeze for all departments except the police and fire departments to build a surplus.
Passero earlier this month proposed moving $1 million into the tax-rate stabilization fund as a way to offset those state losses. But the plan to double that deposit took aback several councilors — many of whom learned of the increase less than two hours before the meeting began.
Councilor Jefferey Hart, who in past months has become the most prominent and vocal critic of several of Passero's proposals, decried the suddenness of the ask and pushed, unsuccessfully, for the issue to be tabled 'indefinitely.'
Hart, who along with Councilor John Satti voted against the $2 million funding shift, argued it was unfair to ask the school district to drain its reserves to craft a balanced budget while Passero was 'stuffing' surplus money into what he called a rainy-day account.
'It is raining now. We're having issues now,' Hart said, adding the plan 'stinks to high heaven.'
Passero countered it would require cutting 20 to 25 positions to make up for the anticipated state funding loss.
'That's what we've been struggling with: gutting the government just to be able to produce a budget,' he said.
Cutting overtime, freezing spending
After the current budget resulted in the first widespread tax increase in years for property owners, Passero vowed Monday to chop and divert his way out of a similar scenario and plug the anticipated revenue hole in the 2025-26 budget.
'I will not raise taxes. I've said that,' he said. 'We cannot raise property taxes in a city where 60% of our families are living paycheck to paycheck and already paying well more than 30% of their income in housing costs. We don't need any more foreclosures. We don't any more evictions.'
In addition to the hiring freeze in place through the remainder of the fiscal year, which ends June 30, Passero said all city departments are instructed to scour their books to halt any unnecessary spending in hopes of finding more surplus revenue.
'We're just trying to limit the amount of damage we have to do and the number of positions we have to cut,' he said, adding he's hoping any employee cuts will be offset by not filling vacancies. 'We'll cut anywhere else we can before we cut personnel. We're especially concentrating on overtime costs.'
The city last week opted not to spend up to $225,000 in police, fire and public works overtime costs for the city's annual Sailfest event. In response, organizers first canceled the summertime festival before announcing a 'scaled-back' event.
McBride said Passero was if anything understating the severity of the budget problem facing the city, especially without the $2 million funding shift.
'I can honestly say it's in dire straits,' he said.
Hart said all the mayor's explanations fell flat" for him, noting millions of dollars in unexpected revenue had been found to be placed in the stabilization account.
"I don't know whether to interpret that generously or not, but it happens too often," he said. "I have a hard time trusting you and the administration.
Passero is required to present his budget proposal to the council by April 1.
j.penney@theday.com
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