Officials reduce budget but mill rate expected to rise
NAUGATUCK — Borough officials have crafted a budget that reduces spending slightly, but revenue questions mean the mill rate will likely increase.
The Joint Boards of Finance and Mayor and Burgesses on Monday approved a $120.46 million budget for the 2017-18 fiscal year. The proposal decreases overall spending, which includes funds for capital projects, by about $200,000 from this fiscal year’s budget.
The budget will go to a public hearing on May 4 at 6:30 p.m. at the Board of Education office at 497 Rubber Ave. Final adoption of the budget is scheduled for May 8.
The Board of Education budget makes up a little more than half of the overall spending plan at $61.6 million, which is the same school spending as this fiscal year.
The proposed municipal budget is $58.7 million, which is about $377,000, or 0.64 percent, less than the current budget.
Although overall spending is going down, the budget proposal would increase the mill rate by 0.89 mills to 48.56. One mill equals $1 for every $1,000 of assessed value. Under a 48.56 mill rate, a home assessed at $150,000 will pay $7,284 in taxes, an increase of $133.50.
Uncertainty with state revenues is the driving factor behind the proposed mill rate increase.
Under Gov. Dannel Malloy’s proposed two-year state budget, the borough is one of a few municipalities that would receive more state funding. However, the state legislature is continuing to deliberate the budget, and local officials don’t believe Malloy’s proposal will make it through intact.
Borough officials used “conservative” assumptions with revenues and anticipate receiving less state aid in the coming fiscal year.
Among the issues local leaders are keeping an eye on is how revenue from motor vehicles taxes will be impacted by the state.
The state capped the tax rate on cars at 37 mills. The state is supposed to make up the revenue municipalities with a higher mill rate than 37 lost because of the cap. However, it is unclear if the state will have the money to make that payment.
Mayor N. Warren “Pete” Hess said the original plan was to lower the cap to 32 mills in this upcoming fiscal year, but Malloy still has it listed at 37 mills in his proposed state budget.
The borough’s budget proposal assumes that the rate will go down to 32 mills and the state won’t make up the lost revenue.
“We don’t know if there is going to be a reduction from 37 to 32. We don’t know about anything else the state is going to do and where we are going to wind up. We felt that, to be conservative, we would make this assumption,” Hess said.
The borough is also preparing to receive less funds from Local Capital Improvement Program (LOCIP) grant.
Under Malloy’s proposed budget, the borough would get about $200,000 more from the grant, while most other municipalities would see a significant reduction. However, Hess wasn’t convinced that increase would remain part of the state’s budget. Under the borough’s proposal, the LOCIP money is reduced by half to $128,440.
“We are assuming now, just to be conservative, that we are not going to get the extra money and we are going to lose half of our LOCIP funds. That’s another relatively conservative assumption,” Hess said.
Hess added the borough didn’t receive as much of an increase in revenue from the grand list as officials had originally thought it would.
“Over the past 18 months we have added $30 million to the grand list but we have lost almost the exact same amount in items that were improperly classified in the past as taxable when they were in fact exempt, charitable, or things of that nature. So our revenue is not going up as much as anticipated,” Hess said.
The borough’s budget and mill rate are likely to be set before the state adopts its budget. If the borough adopts its budget and subsequently receives more state funding than planned, it would likely create a budget surplus. This surplus would going into the general fund at the end of the fiscal year.
The conservative approach comes after the borough ran a deficit of approximately $900,000 in the 2015-16 fiscal year. The deficit was due to anticipated revenue from property sales not coming through.
The spending plan includes increases of roughly $260,000 for incinerator improvements at the wastewater treatment plant, $50,000 for maintenance at the Naugatuck Event Center, and $40,000 for a new non-union position in the information technology department.
The budget proposal also includes $300,000 more for road repaving and $150,000 more for sewer repair.
The increases in the proposal are offset by decreases in other areas.
The largest decrease in spending comes in the fire department’s budget, which is going down about $275,000, or 6 percent, in the proposal. The reduction comes primarily in regular payroll and overtime due to the department being fully staffed with mostly younger firefighters who don’t make as much as their older peers.
Other smaller decreases were spread across the proposed budget. Some of these decreases were to bring certain line items closer to what the actual expenditures have been over the years, Deputy Mayor Robert Neth said.
“I used the Bible, which is the expense report for the borough of Naugatuck. That’s what I use all the time when I am making my decisions and I back it up with the facts of history,” Neth said.
Despite spending money on long-needed projects and upgrades, Hess said, the borough was still able to reduce spending.
“Even though we are spending more money on the roads, sidewalks, purchasing equipment that should have been purchased a long time ago, and doing a better job maintaining our infrastructure, we are still decreasing spending. … I think that is commendable,” Hess said.
“It was a lot of hard work over the course of many months,” added Board of Finance Chairwoman Diane Scinto.