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Mayor Introduces Resolutions to Authorize Downtown North Development

On Thursday, September 4, 2014, the Court of Common Council of the City of Hartford will hold a special session to receive and refer three related resolutions regarding the proposed redevelopment of Downtown North. Here are the proposed resolutions.

1. The first resolution allows 19 properties to be transferred to the developer “free and clear of any encumbrances and environmental conditions, if any.” The developer is to pay $1 for each of the 19 lots. Once the developer owns the properties, they are expected to “design, develop, and build” a ballpark and a mixed use community.

2. The second resolution allows the ballpark to be leased from the developer. There are two “material” lease terms disclosed; that the initial term of the lease is 25 years, and that the City will pay the “property taxes, insurance, utilities, maintenance, repair & replacement, including roof, mechanical and structural items.” There is no mention of a monthly rent in addition to the listed expenses among the material terms of the lease.

3. The third resolution allows the ballpark to be subleased to a specific Baseball Team. The initial length of the lease is 25 years. The team will pay annual rent of $500,000 for the first 15 years and $600,000 for the final 10 years. The lease is structured to allow extensions in five year terms, up to three times (15 years total). The annual rent amount is not specified beyond the initial 25 year term.

All three resolutions note that the Mayor, with Corporation Counsel’s approval, has the authority to negotiate the specifics with each party. They also note that nothing is official until the Mayor signs off with the Developer and the Baseball Team.

Finally, all three resolutions empower the Mayor to make future decisions related to the development, with Corporation Counsel’s approval without coming back to the Court of Common Council.

Hartford Creates Committee on Restructuring City Government

In response to projections of increasing General Fund budget deficits for the foreseeable future, the Court of Common Council authorized a Committee to research ways to restructure the municipal government.

The Committee’s formal name is the “Hartford Committee on the Restructuring of City Government,” and it was created on May 20, 2014 via a non-financial resolution associated with the adopted budget.

The Committee will be comprised of a total of twelve members; three Council members, three members of the Administration, three representatives of City employee unions, and three experts in government reorganization. The resolution stated that all the members would be confirmed by City Council by July 1, 2014.

The resolution empowers the Mayor to appoint the three members of the administration and the three government reorganization experts. Mayor Segarra submitted five names to the Court of Common Council for confirmation in advance of the July 14, 2014 Council meeting. He appointed three members of the Administration and two reorganization experts.

  • Darrell Hill, Chief Operating Officer
  • Jose Colon Rivas, Director of Families, Children, Youth and Recreation
  • Albert Ilg, Acting Finance Director
  • William Cibes
  • Thea Montanez

Allan Taylor, Legislative and Legal Advisor to the City Council, confirmed that the City Council’s three seats on the Committee were filled at the August 11, 2014 meeting.

  • Kenneth Kennedy
  • David MacDonald
  • Larry Deutsch

Mr. Taylor also noted that the union representative positions were filled at the same time.

  • Nazario Figureoa, representing the police union
  • Vince Fusco, representing the fire union
  • Marc Nelson, representing all other unions

The resolution identifies seven specific ideas that the Commission may consider, and leaves the door open to other ideas that are brought to the Commission’s attention by essentially anyone.

An interim report is requested by October 30, 2014, and the final report is to be issued with recommendations by December 30, 2014.

Every Analysis Needs a Base Case

Every financial analysis needs a base case to serve as the point of comparison.

Sometimes the base case isn’t the status quo. In the Downtown North situation there seems to be broad consensus that the area in question should be developed. Therefore, it’s important to compare Hartford’s costs for the current stadium-centric proposals to Hartford’s costs in a generic project. The cost to the City of doing nothing on the site shouldn’t factor into the conversation.

Hopefully when the project’s financial details are presented to City Council, and released to the public, the City will break out the costs it would expect to incur in every Downtown North proposal. This will allow the focus to be on the costs that are unique to the specific proposal(s) under consideration.

Hartford’s Spending by Category

Unlike Hartford’s revenue profile, the City’s spending priorities tend to be in line with other cities and towns in the state.

Data for this analysis comes from the Comprehensive Annual Financial Report (CAFR) for the fiscal year ending in June 2013, which is the most recent audited financials available. Figure IV on page 15 of the CAFR breaks down City expenditures by category.

Focusing first on the $521 million in General Fund expenses, Education received the largest allocation, about 60%, while Public Safety and Benefits & Insurance were the only other two categories that received more than $20 million for the year.

General Fund Expenses by Category

Hartford had a meaningful amount of revenue and expenses outside of the General Fund. Performing the same analysis on the Total Governmental Funds column, which shows $941 million in expenses, changed the distribution of spending.

Total Expenses by Category

Education continued to be the largest allocation, though it fell to about 47.5%. Capital Outlay, which was mostly spending by the Capital Improvement Fund was the second largest allocation at $125 million. Public Safety spending was augmented by spending outside the General Fund, while Benefits & Insurance received no additional contributions.

Hartford’s Funding Sources

The City of Hartford has a revenue structure that is different from most other municipalities.

Like most towns and cities, funding for City activities comes from three primary sources; residents, businesses and other levels of government. Audited financial statements, and assessor data, allow a more detailed look at Hartford’s revenue base. Consider the fiscal year ending in June 2013, the most recent year for which audited financials are available.

Most of the data in this analysis comes from Exhibit IV on page 15 of the 2013 Hartford Comprehensive Annual Financial Report (CAFR).

That year’s General Fund expenses were finalized at about $521 million. The corresponding revenue from Hartford taxpayers was about $256 million. Therefore, Hartford taxpayers funded about 49% of the City’s (General Fund) expenses. Most of the remaining revenue came from the State and Federal governments, accounting for $281 million and nearly 54% of General Fund expenses.

Looking deeper into the numbers, the revenue can be allocated to the different types of tax payers. Revenue from the State and Federal governments come from State and Federal Taxpayers. Revenue from the property tax comes from the residents and businesses within Hartford.

Data from the City Assessor’s office shows that Residential real estate owners made up 21.1% of the net assessments, Commercial real estate owners about 51.8%, Personal Property (business equipment) owners about 18.7% and Motor Vehicle owners about 8.5%. These figures take into account the City’s split assessment ratio.

Grand List 2011 Tax info from Assessor

It seems logical to combine Residential Property owners and Motor Vehicle owners into a group called “Hartford Residents” that was responsible for 29.6% of the property taxes. It also seems logical to combine Commercial Property owners and Personal Property owners into a group called “Hartford Businesses” that was responsible for 70.4% of the property taxes.

During the fiscal year that ended in June 2013, the three taxpayer groups contributed to the City’s General Fund expenses as follows.

2014-07-18 Contributions Towards General Fund Expenses - Chart

Exhibit IV on page 15 of the CAFR also shows that the City received an additional $290 million from the State and Federal governments outside of the General Fund. Repeating the calculation using the “Total Governmental Funds” instead of the “General Fund” changes the contribution percentages of each of the three groups.

2014-07-18 Contributions Towards Total Expenses - Chart

In summary, the majority of Hartford’s revenue comes from State and Federal taxpayers. Hartford Businesses are the second largest funding contributor, followed by Hartford Residents. The breakdown of revenue sources is important to understand when evaluating the persistent budget deficit and working to restructure City government.

Note: The total in the “General Fund” calculation adds up to more than 100% of expenses because the General Fund showed a surplus during the fiscal year. The total in the “Total Governmental Funds” calculation is less than 100% both because there was a deficit and because of other smaller revenue sources.

City Projects Increasing Budget Deficits

The City of Hartford’s General Fund is projected to experience increasing annual budget deficits. The following chart is a reproduction of data on page 4-3 of the Five Year Forecast Section of the Adopted Budget for the fiscal year ending in June of 2015, which is the fiscal year that began last month (July 2014).

General Fund Deficit Projections

The chart shows that the adopted budget balances expenditure and revenue in the current year, Fiscal Year 2014-2015. Other sections of the Adopted Budget go into more detail about how the budget was balanced. The complete document can be found on the City of Hartford website.

The above chart also shows a projected budget deficit for all future years. The gap jumps up to $40 million for the next fiscal year, and to about $45 million in the year after that, before stabilizing at about $55 million in each of the final two years shown.

As a point of reference, Mayor Segarra’s Budget Message letter, which is included as part of the Adopted Budget, noted that the administration and Court of Common Council closed an estimated $44 million deficit in the current fiscal year.