West Haven could lose grants and credit rating amid financial scandal
The financial scandal that has engulfed West Haven over the past year has cost the city access to state grants and now threatens the municipality’s ability to borrow money on its own for future projects fixed assets.
West Haven, a coastal town of about 55,000, was hoping earlier this year to receive state assistance for a local flood and stormwater project that would have been funded by the State Bond Commission.
But before that proposal could even be considered, Governor Ned Lamont’s administration informed West Haven’s legislative delegation that it was reluctant to allocate money to the city following an ongoing criminal investigation. and several other serious missteps by city leaders.
The state’s reluctance to borrow money in West Haven’s name is one of the starkest examples to date of how the mismanagement of the city’s finances has affected local residents.
Other municipalities of similar size have received significant state funding through bond commission meetings scheduled for this year.
East Hartford got $1 million for city parks, pools and other recreational facilities. Milford got $750,000 to help build a footbridge along the Wepawaug River. And Middletown got $2 million to redevelop a downtown structure into affordable housing and office space for start-up businesses.
But the West Haven city government has been cut off from that largesse since last December, when the bond commission approved more than $4 million for West Haven.
State Representative Dorinda Borer, D-West Haven, said members of the State Bonds Committee told her in early spring that they could not, in good conscience, approve grants additional to the West Haven government at this time. The events of the past year, they explained, raise too many concerns about the City’s ability to manage its finances.
Four people, including former Democratic state lawmaker Michael DiMassa, have been charged by federal prosecutors with allegedly stealing $1.2 million from city coffers. A state-commissioned audit showed city leaders wrongly spent three-quarters of the $1.1 million in federal pandemic relief funding they received at the end of 2020.
Meanwhile, the state’s Municipal Accountability Review Board – charged with overseeing West Haven’s budget – continued to warn the city about its inadequate financial controls and perceived culture at City Hall. which allows these problems to persist.
Those circumstances, Borer said, made it difficult for her to advocate for funding for city government, even though she chairs the legislature’s liaison subcommittee.
Borer said she agrees with the bond commission’s decision to temporarily suspend funding while West Haven officials work to get the city’s finances in order.
“Yes, it’s frustrating. I would say the whole situation is frustrating,” she said. “It’s been a challenge to balance helping the city that I represent – and care deeply about – and acknowledging that there are worries and there is a need to take a break.”
Over the past few months, Borer said, she has been trying to find a workaround that will still allow her constituents to benefit from state borrowing. She encouraged the state to provide grants to local nonprofits and social service providers in West Haven, instead of the city.
The bond commission is set to approve $680,992 on Friday for the West Haven Community House, which operates after-school programs for children and provides housing for mentally disabled adults.
“A Whole Different Ball Game”
The State Bond Commission is not the only entity at present deliberating on the safety of investing money in West Haven.
Earlier this month, the city was also placed under scrutiny by Moodys, one of the country’s three major rating agencies.
The agency informed West Haven management on July 20 that it may withdraw the city’s bond rating if the municipality is unable to provide it with more up-to-date financial information within the next month.
If this were to happen, it could be much more difficult or expensive for West Haven to borrow money on its own.
Scott Jackson, West Haven’s chief financial officer, told MARB members this week that he and the rest of the city’s finance department were working to avoid that outcome.
The city, Jackson added, will likely need access to the municipal bond market in the coming years to pay for routine municipal projects, such as roads, sidewalk repairs and the new West Haven High School.
Jackson, who has led West Haven’s finance department since February, did not respond to email questions for this story. Neither did West Haven Mayor Nancy Rossi, a Democrat who won her third term last year.
The main issue is that the city has yet to complete its annual audit for the fiscal year that ended June 30, 2021. West Haven was supposed to have finalized that audit earlier this year, but with so much trepidation and turnover at the town hall, these works were never completed.
The city suffered an even bigger setback this spring when CliftonLarsenAllen, its auditing firm, abruptly dropped West Haven as a client. The city has since hired a new firm, but accountants at that firm don’t expect the city’s 2021 fiscal year audit to be completed until late this fall. The FY2022 audit would not be expected until early 2023.
Without the audit, credit rating agencies and MARB find it difficult to determine what the city’s financial situation really is and whether they can trust the information the city’s finance department is working on.
MARB voted earlier this year to place West Haven under the highest level of oversight available to the board. But MARB members warned West Haven executives this week that the state may have to go even further if West Haven sees its bond rating revoked or downgraded.
Thomas Hamilton, one of 10 current members of MARB, said if the city lost its ability to borrow money, it would be “a whole different ballgame”.
Hamilton reminded everyone that West Haven’s inability to borrow money at affordable rates helped bring the city under tight state control in the early 1990s.
“It really becomes a whole other financial crisis that needs to be dealt with,” Hamilton said. “I hope it doesn’t come to that. I hope you will maintain your rating, but if not, it would definitely be a matter of urgency.
“Strong legislative action”
Even without credit monitoring, MARB members have openly discussed in recent weeks the need for the state to take over decision-making in West Haven entirely, stripping the city council and mayor of their remaining powers. currently.
In May, Rossi promised that his administration would cooperate fully with MARB as he inserted himself more into city finances. Yet many members of the supervisory board have complained in recent weeks that the city continues to ignore their advice and routinely fails to provide them with the documents and information they request.
The most recent examples are the ethics forms that city employees and elected officials in West Haven are expected to complete each year.
Mark Waxenberg, one of the Governor’s appointed MARB members, asked to review these records to understand potential conflicts of interest that exist between West Haven officials and city contractors. But he said he had not yet received this information.
If this type of deadlock persists, Waxenberg suggested that MARB may need to ask state lawmakers to pass special legislation and appoint a council or person to run the city for the state.
“I think at some point tough legislative action might be in sight,” Waxenberg said.
Similar legislation, he pointed out, has been used in the past to correct financial problems in Waterbury, Bridgeport and Jewett City, which is a borough of Griswold.
Other MARB members agree with Waxenberg’s comments, although they are not yet ready to pull the trigger.
Christine Shaw, who represents the state treasurer’s office, said there was clearly an “appetite for more oversight if the city continues to frustrate progress.”
Jeffrey Beckham, the secretary of the Office of Policy and Management, reminded MARB members that his agency is still in the process of hiring a new chief financial officer to act as the eyes and ears of the state in West Haven. .
But he also warned West Haven leaders that the city was on a short leash.
“They’re in front of this council until we let them go,” Beckham said. “If they don’t make progress under this advice, we could talk to the general assembly about something tougher.”