Citing Councilwoman’s ‘Misleading’ Email—

Officials, PTA Reps Mobilize To Clarify Budget Issues

By John Voket

Town finance officials and the leaders of all the Newtown PTAs are working to correct or complete several key points of “misleading” information being circulated in the community related to the proposed 2009 budget.

Many of the points of contention, according to several among that contingent, are rooted in an eight-page email that was circulated by Legislative Council member Po Murray on March 22, to an undetermined number of constituents. (See the text of that email at newtownbee.com.)

After receiving a copy of the email for review, The Newtown Bee requested the council member provide the number of recipients on her distribution list in an attempt to determine the potential reach of that correspondence. More than a week after that request, Ms Murray said she was still thinking about the request and declined to provide the information to the newspaper.

Mary Ann Jacob, Middle School PTA president, said this week that a letter she and eight other PTA presidents signed should be viewed as “preemptive, not retaliatory,” while admitting that “the content of Po’s email has been a major issue.” (See the text of that letter at newtownbee.com.)

High school PTA President Sara Beier agreed, saying it was doubtful the PTA letter would have been as detailed had it not been for the email the council representative circulated, which Ms Beier branded as “misleading.”

“We also felt it was important to educate people that a No vote on the budget will likely result in further reductions,” Ms Beier added.

School board member Katherine Fetchick, who reviewed the PTA letter, said it goes a long way towards “addressing the facts based on the half-truths and misinformation out there.”

“If [Ms Murray] puts information out there, she should do the legwork to put out the whole story,” she said.

Ms Fetchick said she personally feels the councilwoman “failed to do the research because she doesn’t agree” with the actions taken to produce a responsible budget, and that Ms Murray’s email does a “disservice to the town.”

Town Finance Director Robert Tait and finance board Chair John Kortze both reviewed Ms Murray’s email, in an attempt to identify some of what they believe are the most significant points of misinformation woven through the voluminous document. Mr Kortze said repetitive suggestions that the town either has a surplus of money, insinuations that town finances are being mishandled, or that town officials, staff, and volunteers are trying to hide information from the public are most disturbing to him.

“The truth is, we don’t have a lot of money lying around, as this email might have taxpayers believing,” Mr Kortze said. A significant point of contention was Ms Murray’s description of the town’s general fund balance as a “rainy day fund,” and that the fund balance contained significantly more than is actually available.

Ms Murray writes: “Newtown’s financial standing is not as dire as it has been portrayed. [An] attached analysis of the general fund balance will show that the town has saved $12.78 million in our surplus fund (rainy day fund) in an effort to receive an upgrade from Moody’s.”

In reality, Mr Kortze said the fund contains $7.8 million after encumbrances and $2 million already allocated to reduce the burden on taxpayers. This point is illustrated in-depth in the PTA letter as well.

Moody’s Influence        Overstated

The finance chair said it was ironic to suggest a charter revision related to managing the town’s fund balance is being confused with maintaining a fund balance. And, Mr Kortze reminded, drawing from the fund balance to reduce taxes is a practice the town’s bond rating agency advises Newtown to wean itself from to protect its existing rating.

“Moody’s says we have to be very careful about drawing from the general fund,” Mr Kortze said, reiterating that neighboring Monroe’s bond rating was downgraded twice, in part, after using its fund balance to lessen local tax burdens in recent years.

Mr Kortze also cites written reports contradicting Ms Murray’s assertion that Moody’s rejected Newtown’s “recent request for an upgrade despite Newtown having a historically high surplus fund.”

“Clearly, Moody’s has stated that the failure to grant an upgrade is a result of the economy,” Mr Kortze said, adding that Newtown’s lack of a substantial commercial tax base similar to every other higher rated town in Connecticut will make it challenging, if not impossible, to get a further upgrade in this economy.

“We have to stop these half-truths,” Mr Kortze said.

Mr Tait said in recent years, the town has enjoyed surplus income that was used to fortify a so-called fund for “nonrecurring expenses,” but while use of that fund was budgeted, it was never used. The finance director said it was inappropriate to suggest Newtown’s financial management policy is solely based on Moody’s actions.

“Po takes us to task, but Moody’s is far from our sole source of financial information,” Mr Tait said. “They are simply a rating agency; we follow a set of municipal management best practices.”

In her email, Ms Murray asserts that the application of $2 million from the fund balance to ease taxpayers’ burden was contrived as a means to force teacher layoffs, while officials insist the application of town funds in this manner has been a traditional practice over a period of years, is not new to the current budget process, and, by statute, cannot influence line item action over school personnel.

Ms Murray writes: “The Board of Finance applied only $2 [million] of this surplus fund to the revenue side thus artificially necessitating the need to make further cuts on the spending side of the budget [forcing teacher layoffs because they believe we have too many teachers].”

Mr Kortze countered: “The truth is, the Board of Finance did not suggest a wage freeze, it was the administration — who then tried to make a case for it because a freeze saved more jobs than financing teacher furloughs.”

A $2 Million Decision

Ultimately, Mr Kortze said his board relented to using just $2 million, against the bond rating agency’s advice, to offset further tax increases keeping in mind that taxpayers would have to make it all up in 2010, when the aftereffects of the economic fallout might actually be worse, even if the economy is in a general recovery mode.

That, on top of the approximately $2 million in debt service that will commence for underwriting the first phase of high school construction is already signaling a minimum one mill increase before the first extra dollar is factored for 2010 operating budgets.

“Doing it [Ms Murray’s] way, taxpayers would go into 2010 $4.5 million in the hole,” Mr Kortze said.

Even Democratic Selectman Herb Rosenthal got peripherally involved in clarifying another misstated point in the councilwoman’s email regarding revenue applied to the Fairfield Hills budget.

In an email forwarded to The Bee, Mr Rosenthal writes: “She falsely claims that the public never approved the use of the $1.5 million proceeds from the sale of five homes on Mile Hill South Road for Fairfield Hills. A town meeting on March 10, 2005, authorized the sale of the homes and also authorized that the proceeds would be used to help cover environmental cleanup costs at Fairfield Hills.”

Mr Rosenthal, who was first selectman at the time, said that is why the state gave Newtown the homes.

“When we learned that the environmental cost of remediation of subsurface pollution would be over $3.5 million, I went to Rich Nuculo at the State Office of Policy and Management to see if the state would help us, because the cost had escalated so much from their and our original 2001 estimates. He said that they could not give us money, but that they could give us the five houses to sell.”

The final point of clarification made in the PTA letter involves Ms Murray’s comparison of the 2007 net Grand List to the 2008 Grand List projection before appeals. “Before appeals, last year’s Grand List totaled $3,919,349,086,” the PTA letter states. “Last year after appeals, the Grand List was reduced by $6,294,474. The current Grand List before appeals stands at $3,916,028,146, which is $3,320,940 less than last year at the same point in the process. It is expected this shortfall as compared to last year will be similar after the appeals process is completed.”

As testimony to how quickly things can change for the worse, just hours after that letter was distributed, Assessor Chris Kelsey informed The Bee that final judgments on assessment appeals actually reduced the 2008 Grand List by just under $4.5 million, incurring a one percent-plus decline, which will also have to be made up with revenue from taxation or another source.

In the end, Mr Kortze said his board’s recommendations exemplified the “most responsible thing to do — reduce spending.”

“We recommended using every avenue we had to reduce taxpayers’ burden,” Mr Kortze said. “Going any further would put the town in a precarious financial position.”

Referring to Ms Murray’s email a final time, Mr Kortze said her inference that the net burden on taxpayers would represent a two-tenths increase in borrowing costs if a single step bond ratings downgrade occurs would cost $8 million more just for the borrowing on the high school project.

He concluded by saying, “And I remind you that Newtown is projecting $100 million in capital borrowing over the next five years.”