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October 5, 2022

New Haven reports $16.9M budget surplus and upgraded bond rating

PHOTO | Liese Klein New Haven Budget Director Michael Gormany and Mayor Justin Elicker speak at City Hall on the city's 2021-22 financial results on Oct. 5, 2022. 
By Liese Klein

The city of New Haven projected a $16.9 million budget surplus for fiscal year 2021-22 and celebrated an upgrade in its bond rating Wednesday. 

Mayor Justin Elicker and Budget Director Michael Gormany outlined the city’s financial outlook at an event at City Hall Wednesday afternoon.

After a dire start to the year with projected deficits due to the pandemic, Yale and the state stepped in with more than $60 million to help close the gap. Economic development also picked up significantly as the fiscal year went on, Gormany said.

“The city has rarely seen a strong second half as during the fiscal year 2021-22,” Gormany said. “We really saw strong tax collections, building permits – which again is a testament to the economic development going on in New Haven.”

The city’s annual revenue for the fiscal year ending June 30 totaled approximately $760 million, with expenditures of about $743.1 million, according to a pre-audit budget report. The resulting surplus totaled $16,880,240, bringing the city's ending fund balance to $36,918,587.

“Overall, it's really good news for the city and underscores that we're going in the right direction,” Elicker said of the results. All of the surplus will go into the city’s rainy day fund to prepare for future economic downturns, he added. The city will also continue to tap into pandemic aid funding to provide programs and services to reduce future expenditures.

The improving financial picture prompted Fitch Ratings to upgrade New Haven’s bond rating from BBB to BBB+, citing the city’s “stable” outlook due to better operating results, growing reserves, growth in the tax base and Yale’s pledge to give more to the city in lieu of taxes.

The biggest boost in revenue came from property taxes, which grew from about $289 million in 2020-21 to $296 million in 2021-22, exceeding the budgeted total by about $7 million. Revenue from licenses, permits and fees also grew beyond budgeted estimates, even as rents and fines and investment income dropped.

Yale gave the city $19.7 million in a voluntary payment in lieu of taxes (PILOT) contribution, an increase of 205% from the prior fiscal year. Yale New Haven Hospital's PILOT contribution was $3.2 million, an increase of 114%.

Yale pledged late last year to increase its PILOT contribution by $10 million for each of the next five years, starting in the 2021-22 fiscal year. The university is expected to give the city a total of $135 million over six years to help compensate for its non-taxable property.

In March 2021, Elicker warned of potential deficits in the city’s upcoming budgets due to the impact of the COVID-19 pandemic on New Haven's revenues. 

In the final analysis, the pandemic actually helped the city's bottom line in some areas, Elicker said. More than 200 jobs are open at City Hall, keeping salary costs low as the government struggles to find staff, he said. Postponed care due to the pandemic, however, blew up health care costs for existing employees. 

Other positive factors for the city’s budget included the Board of Education keeping to its budget and a rise in parking-meter fees, although tag fees for longer-term parkers are down.  

"A lot of moving parts here," Elicker said. "Some that actually ended up being slightly revenue positive and some others that were increasing some expenses in the last few years."

Contact Liese Klein at lklein@newhavenbiz.com.

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