Gov. Malloy Proposes Financial Oversight Board to Monitor Troubled Municipalities

Gov. Malloy Proposes Financial Oversight Board to Monitor Troubled Municipalities

Hartford Courant, February 2, 2017

By Greg Hladky

Gov. Dannel P. Malloy called Thursday for creation of a statewide board to monitor the financial health of troubled cities and towns that could intervene before a municipality "is on the brink of fiscal crisis."

Malloy labeled his proposal "a new system for intervention and support" that would involve four tiers of supervision for cities in fiscal difficulty. The governor said he believes 20 to 25 communities — those with the most struggling school districts — would probably get the most intense attention under his proposed system.

"There have been mistakes," Malloy said in reference to the financial plight of various communities, "and we need to avoid that."

Cities and towns facing "the severest circumstances" should be allowed to consider renegotiation of union labor contracts, Malloy said. Asked if he expected major union opposition to such a provision, the governor said his plan "is not anti-union or anti-employee."

In his State of the State address last month, Malloy said he planned to propose a new funding formula for municipalities to provide more financial aid to the state's most distressed cities.

At Thursday's news conference at Waterbury City Hall, Malloy said the need for a new way for the state to monitor and assist cities in financial trouble has been "highlighted by the plight of Hartford."

Hartford Mayor Luke Bronin said his city would welcome working with the state on ways to ease Hartford's financial difficulties. "Hartford is tackling its budget challenges head on, and we're not afraid of rigorous accountability or full transparency," Bronin said in response to Malloy's proposal. "We look forward to working in partnership with the state to get our capital city onto a stable, sustainable path to growth."

The proposed oversight board will be part of Malloy's budget and he said he is open to working with lawmakers and municipal leaders on the plan. "The vast majority of our cities and towns are financially healthy and will not be impacted," Malloy said. "However, we have an obligation to all of our taxpayers to ensure that their tax dollars are being properly spent."

The governor is scheduled to present his budget to the General Assembly on Wednesday, focusing on a strategy solving a projected $1.4 billion deficit for the fiscal year that begins July 1. Many municipal leaders are worried that part of Malloy's plan will include cuts in state aid to cities and towns.

Malloy acknowledged Thursday that state financial oversight boards have been used in the past to help cities and towns that ended up in dire financial difficulties. Those included Waterbury, West Haven and Jewett City.

Municipalities react back to top

Waterbury Mayor Neil O'Leary said he knew some communities would be nervous about a new state oversight board with powers to intervene in a municipality's fiscal affairs, but he said he could assure them that his city "is a survivor ... We lived through those years of oversight."

Joe DeLong, executive director of the Connecticut Conference of Municipalities, said his organization "has absolutely no issue with appropriate measures of accountability and oversight being put into effect in order to ensure the long-term stability and viability of all our communities. However, this accountability must be accompanied with the appropriate structural changes necessary in order for our urban centers to succeed."

The overreliance on property taxes, especially in urban areas where most of the property is tax exempt continues to be a recipe for disaster," DeLong said in a statement. "Oversight without the necessary structural changes only ensures that we will recognize an impending train wreck more quickly. It does not prevent the wreck."

Malloy's plan would create four tiers of cities and towns, with most qualifying for the first three tiers that would involve only "low to moderate levels of accountability." Those communities with serious fiscal problems could request to be placed in the fourth tier, or those cities and towns could be designated for special accountability by a two-thirds vote of the state oversight board.

The governor's budget office and the new oversight board would review annual audits for all cities and towns, and also look at budget fund balances, tax rates, local bond ratings, and the amount of state aid a municipality was receiving.

Malloy said some communities are already getting as much as 30 percent of their local budgets in state aid. The governor said communities with serious fiscal woes are often the same municipalities that have financially troubled school districts.