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October 23, 2017

Amid uncertainty, municipalities weigh mergers, other cost-saving options

HBJ Photo | Matt Pilon John Szewczyk is the president of the Hartford police union and a longtime selectman of Durham. In his latter role, he has called for a municipal merger with neighboring Middlefield — an idea that might take on more weight as towns feel the pinch from the state's budget crisis.
Photo | Contributed Rep. Jonathan Steinberg (D-Westport) is a regionalism proponent.
Betsy Gara, President, Connecticut Council of Small Towns
Kevin Maloney, Communications Director, Connecticut Conference of Municipalities
Stephen Eide, Senior Fellow, The Manhattan Institute

In Durham, a longtime selectman is urging officials and residents to consider taking an exceedingly rare step in Connecticut: merge with a neighboring town.

Even for Durham and Middlefield — sister Middlesex County communities whose finances are closely linked through a shared school district and transfer station — there are myriad hurdles (mostly political, some legal) to a merger, but the goal would be to find savings by eliminating duplicative staff and tightening oversight of the education budget, according to 11-year Durham Selectman John Szewczyk.

A municipal merger could also be in the works in the tiny Windham County community of Scotland, where matters are more urgent. Local officials, who recently warned that the town of approximately 1,700 is facing insolvency, have asked the legislature about the possibility of being absorbed by a neighboring community, if one will allow it. It could also file for Chapter 9 bankruptcy — the same option being explored by the city of Hartford.

Municipal mergers have rarely been considered throughout Connecticut's history, and while a consolidation wave isn't expected, or even practical in many cases, the state's prolonged budget crisis — and the potential for reduced municipal aid this year and in the future — is spurring cities and towns to take a more pressing look at their limited options.

The stress brought on by the state budget was further amplified last week when Moody's Investors Service assigned negative outlooks to the credit ratings of 25 Connecticut municipalities and placed another 26 under review for possible downgrades.

Municipal aid is a major piece of the state's cash-strapped budget. Including formula-based education grants, capital programs and state payments for local retiree benefits, it amounts to approximately $5 billion a year — or a quarter of the entire state budget.

For communities worried about how the legislature might close the deficit this year and in the future, merger discussions could be a reality, experts say. But most others might discuss greater levels of shared services or “regionalization” strategies, which have had mixed success so far in Connecticut.

“We're going to see tough fiscal years for the next decade,” predicted Betsy Gara, president of the Connecticut Council of Small Towns (COST) and a Durham resident. “Most are looking at how they can consolidate services with neighboring communities.”

“Towns are exploring all kinds of options to look for ways to save property taxpayers any additional burden,” she added.

Kevin Maloney, communications director of the Connecticut Conference of Municipalities (CCM), said nearly half of the towns the local government lobbying organization surveyed recently imposed some kind of spending freeze due to funding uncertainty.

“The stress faced by towns this far into the new fiscal year is widespread because they have to see how they can best cope with the lack of state support three or four months into the new fiscal year,” Maloney said. “It's been an unprecedented year.”

A tale of two municipalities

Szewczyk has a unique lens on two very different communities. By day, he's a Hartford Police sergeant, who's been on the force since 2003 and was recently elected to a three-year term as the police union's president.

Hartford has threatened to file for bankruptcy if the state doesn't provide it tens of millions of dollars in additional funding.

Lawmakers last week said they had a tentative bipartisan deal that would help the city avoid insolvency, but the details weren't available at press time.

Hartford has a $557 million annual budget, nearly half of which is underwritten by the state. It started the current fiscal year with a $50 million deficit.

Mayor Luke Bronin, a Democrat, has been trying to squeeze significant savings from unions, but has largely failed to hit previously stated targets, including with Szewczyk's union, the largest in Hartford, which has been working without a contract for over a year. Szewczyk's members are hoping the state comes through with additional aid for the city.

A Durham native, Szewczyk has been a selectman in town since 2007. It's a small community of 7,400 people with higher-than-average household income, an annual budget of approximately $31 million (much of it education-related), a volunteer fire department, no local police force and no bonded debt.

A Durham-Middlefield merger might be cleaner because of the two towns' relatively small union workforces. Szewczyk said he wouldn't even propose cutting any union personnel.

While Durham is feeling a pinch from a nearly $4 million cut in education funding under Gov. Dannel P. Malloy's executive order that's acting in the place of a budget for now, the town is in relatively good fiscal shape, Szewczyk said. However, Durham recently had to raise its mill rate from 35.3 mills to 39.5, which he thinks is too high.

Szewczyk, a Republican who describes himself as a fiscal conservative, has floated the municipal merger idea for years. He said Durham and Middlefield are already connected in many ways and estimates a merger would trim $2 million in personnel costs and add a layer of oversight over the education budget, which is roughly 80 percent of Durham's spending.

With the state's budget future looking bleak, he thinks more people in town might take his idea seriously.

Several municipal mergers have been considered over the years, but few, if any, have actually occurred, according to a recent report by the state Office of Legislative Research (OLR). There were merger talks between New London and Waterford in the 1960s and Ansonia, Derby, Shelton, and Seymour in the 1970s, but they never materialized, OLR found.

More common is when boroughs or villages within a municipality have been consolidated with the town government.

A recent example took place in the 1980s, when Willimantic merged back into Windham after 90 years of independence.

Municipal mergers require the approval of both town governments as well as a special act from the legislature, OLR said.

Assuming two dance partners got that far, could municipal mergers be a broader strategy for Connecticut, with its long-term structural budget issues, to operate leaner?

The potential may be limited, said Stephen Eide, senior fellow at free-market think tank The Manhattan Institute, who has researched Connecticut.

“It's a very rare situation to find a healthy community that wants to merge with a healthy community,” or a financially ailing one, Eide said.

If that situation arises and both sides agree, it might be worth a shot, he said.

But one of the biggest hurdles is that perceived savings are typically from job cuts.

“In the corporate world when you hear 'merger,' people immediately start thinking 'Am I going to lose my job?' ” he said.

Even if Connecticut had a practical way to redesign its local-rule government structure, Eide said it may not be correct to assume a replacement like a county system would be any more efficient.

Regionalization opportunities

A municipal merger can be seen as the ultimate form of regionalization, and efforts to share services and costs are nothing new in Connecticut.

Regional school districts and wastewater plants are two long-standing examples. Some towns have teamed up to woo new developments and businesses or gain better leverage when purchasing equipment and goods.

The state has provided seed money for a number of shared-service programs, often coordinated through regional councils of government, via its Regional Performance Incentive Program (RPIP), which has doled out more than $18 million in grants since 2008.

Many of those programs have resulted in modest savings, according to RPIP's annual reports.

But some regionalization initiatives that could have saved bigger bucks have fallen flat.

Perhaps the largest was an attempt to consolidate the more than 100 emergency call centers in the state several years ago.

The Federal Reserve Bank of Boston in 2013 estimated that reducing the call centers down to one per county could shave as much as $66 million in annual operating costs, a 60 percent reduction.

But some local and police officials balked at the idea and it didn't gain traction.

Gara, the small towns lobbyist, sees the failure to follow through on the 911 consolidations as “the poster child of Connecticut's inefficiencies.”

Bronin has been an advocate for deeper regionalization since becoming Hartford mayor last year.

At a recent UConn Law School event on municipal distress, Bronin said 911 call centers would be the “most obvious example” of consolidation that should happen.

He even floated the idea of having a regional police and fire department.

“If New York City and the five boroughs can have one police department and one fire department you've got to think that Hartford and West Hartford and East Hartford and, you know, Newington and Windsor and Wethersfield could get away with doing it too,” he said. “Now that politically becomes difficult, but it's not difficult in any other way. It's only political.”

Rep. Jonathan Steinberg (D-Westport) said regionalism efforts get plenty of pushback, but more towns would be in better shape if they had worked together earlier.

Some towns, he said, didn't realize how big of an impact the state's fiscal crisis would have on their own local budgets.

“It was brought home to roost in last year's budget,” he said. “We cut everything that wasn't nailed down.”

Gara said towns need the legislature to step in.

“They need to address the collective-bargaining issues that end up hamstringing towns,” she said.

CCM continues to push the legislature to make it easier for municipalities to deal with their worker unions. One policy CCM has pushed for is not allowing municipalities to bargain away their right to sharing arrangements with other communities. It also wants to streamline local collective bargaining, perhaps by establishing a bargaining unit for multiple towns.

Such options may run into strong union opposition, but Maloney sees them as more practical solutions than municipal mergers.

“I think towns feel very strongly about individual characteristics of their own communities,” he said.

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