West Haven could lose grants, credit rating amid financial scandal

West Haven could lose grants, credit rating amid financial scandal

The financial scandal that has engulfed West Haven over the past year has cost the city access to state grant funding and now threatens the township’s ability to borrow money for future capital projects.

West Haven, a coastal city of about 55,000, had hoped earlier this year to receive state aid for a local flood and stormwater project that would have been financed through the State Bond Commission.

But before that proposal could be considered, Gov. Ned Lamont’s administration informed West Haven’s legislative delegation that it was reluctant to commit money to the city in the wake of an ongoing criminal investigation and other serious steps in error on the part of the city management.

The state’s unwillingness to borrow money on West Haven’s behalf is one of the most prominent examples yet of how the city’s mismanagement of finances has affected local residents.

Other similarly sized municipalities received significant funding from the state as part of this year’s scheduled bond commission meetings.

East Hartford got $1 million for the city’s parks, pools and other recreational facilities. Milford got $750,000 to help build a footbridge along the Wepawaug River. And Middletown got $2 million redevelop a downtown structure into affordable housing and office space for business creation.

But West Haven city government has been shut out of that largesse since last December, when the bond commission approved more than $4 million for West Haven.

State Rep. Dorinda Borer, D-West Haven, said members of the state bond commission told her earlier this spring that they could not, in good conscience, approve additional grants to 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 indicted by federal prosecutors for allegedly stealing a combined $1.2 million from city coffers. A state-commissioned audit showed city leadership misspent three-quarters of the $1.1 billion in federal pandemic relief funding they received at the end of 2020.

Meanwhile, the state’s Municipal Accountability Review Board, which has been tasked with overseeing West Haven’s budget, has continued to warn the city about its inadequate financial controls and the perceived culture in city hall that allows these problems persist.

Those circumstances, Borer said, have made it difficult for her to argue for funding for city government, even though she serves as chairwoman of the legislature’s bonding subcommittee.

Borer said he agreed with the bond commission’s decision to temporarily halt 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,” he said. “It’s been a challenge to balance supporting the city that I represent, and that I care deeply about, and also recognizing that there are concerns and that you need to take a break.”

In recent months, Borer said, he has tried to find a solution that would still allow his constituents to benefit from state loans. He has encouraged the state to allocate grants to local nonprofits and social service providers in West Haven, rather than the city.

The bond commission is set to approve $680,992 Friday for the West Haven Community House, which runs after-school programs for children and provides housing for adults with mental disabilities.

“A whole different ball game”

The state bond commission isn’t the only entity right now deliberating whether it’s safe to invest money in West Haven.

At the beginning of this month, the Moodys also put the city on watchone of the three major credit rating agencies in the country.

The agency notified West Haven management on July 20 that it could withdraw the city’s bond rating if the municipality cannot provide it with more up-to-date financial information within the next month.

If that were to happen, it could make it much more difficult or expensive for West Haven to ask for 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.

West Haven CFO Scott Jackson testifies before the Municipal Accountability Review Board on July 14, 2022.

The city, Jackson added, will likely need to access the municipal bond market in the coming years to pay for regular 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 emailed questions for this story. Neither did West Haven Mayor Nancy Rossi, a Democrat who was re-elected to her third term last year.

The main issue is that the city has yet to complete its annual audit for the fiscal year ending June 30, 2021. West Haven was supposed to complete that audit earlier this year, but with so much excitement and volume of business. in the town hall, this work was never finished.

The city suffered an even more serious setback this spring when CliftonLarsenAllen, its auditing firm, abruptly dropped West Haven as a client. The city has since hired a new firm, but that firm’s accountants don’t expect the city’s fiscal year 2021 audit to be completed until later this fall. The fiscal year 2022 audit would not be expected until early 2023.

Without the audit, the credit rating agencies and the MARB are struggling to determine where the city’s financial situation really is and whether they can trust the information the city’s finance department is working with.

The 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 management this week that the state may have to go even further if West Haven has its bond rating revoked or downgraded.

Thomas Hamilton, one of MARB’s 10 current members, said if the city lost its ability to borrow money, it would be “a whole different ball game.”

Hamilton reminded everyone that West Haven’s inability to borrow money at affordable rates helped land it the city under strict state control in the early 1990s.

“This becomes, potentially, a whole different financial crisis that needs to be dealt with,” Hamilton said. “Let’s hope we don’t get there. Hopefully you’ll keep your rating, but if not, it would definitely be a matter of urgency.”

“Severe legislative action”

Even without the credit watchdog, MARB members have openly debated in recent weeks whether the state should take over decision-making in West Haven, effectively eliminating the city council and mayor of the powers that currently remain.

In May, Rossi promised that his administration would cooperate fully with the MARB as it inserted itself even more into the city’s finances. However, many members of the board of supervisors 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 West Haven’s city employees and elected leaders must file annually.

Mark Waxenberg, one of the MARB members appointed by the governor, asked to review those records to understand potential conflicts of interest that exist between West Haven officials and city contractors. But he said he has yet to receive that information.

Mark WaxenbergMark Waxenberg, a member of the Municipal Accountability Review Board, discusses state oversight of West Haven during a meeting on July 14, 2022. State of Connecticut.

If those kinds of obstacles persist, Waxenberg suggested the MARB may have to ask state lawmakers to pass special legislation and appoint a board or person to run the city for the state.

“I think at some point there may be severe legislative action,” Waxenberg said.

Similar legislation, he noted, has been used in the past by correct financial problems in Waterbury, Bridgeport and Jewett Citywhich is a Griswold township.

Other MARB members agreed with Waxenberg’s comments, even if they aren’t ready to pull the trigger just yet.

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 finance manager to act as the state’s eyes and ears in West Haven.

But he also warned West Haven leaders that the city is on a short leash.

“They’re on that board until we let them go,” Beckham said. “If they don’t move forward under this board, we can talk to the general assembly about something more severe.”



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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!