CT officials vote to increase state control over West Haven’s finances

A state oversight board voted on Thursday to increase its control over West Haven’s finances following an audit that determined the city misspent federal relief funds and failed to protect taxpayer money from potential fraud.

The 10 members of Connecticut’s Municipal Accountability Review Board, or MARB, chose to tighten their grip over West Haven’s spending even as the city’s elected leaders objected to the move.

West Haven, a city of roughly 55,000 residents, has been subject to MARB review for more than four years, but Thursday’s vote will substantially increase the board’s powers moving forward.

Under what is known as a Tier IV designation, MARB will now have the ability to approve or reject West Haven’s annual budget. It will have more power to review city contracts and spending. And it will have authority over the collective bargaining agreements with the city’s public employee unions.

West Haven is the first municipality to be subject to that level of scrutiny since the MARB was formed by the legislature in 2017. Several MARB members recognized the historic nature of the vote, calling it an “extraordinary intervention.”

The concerns over West Haven’s finances are not new. The issue is coming to a head, however, because of a growing financial scandal and a number of serious missteps by city officials.

Over the past six months, federal prosecutors have charged four people, including former state Democratic Rep. Michael DiMassa, with fraud for allegedly embezzling more than $1.2 million from the city.

The MARB forced West Haven to cancel its only credit card after city officials inadvertently shared an email that suggested employees were “abusing” that system.

And less than two weeks ago, forensic auditors unveiled a report that showed West Haven’s leaders misappropriated more than $893,000 in federal CARES Act funding, which will likely need to be repaid by city residents.

Those events may have served as the breaking point for state officials, but several MARB members argued Thursday that the city’s failures could be traced back much further.

Patrick Egan, who has been a MARB member since West Haven was first placed under state oversight in 2017, said the forensic audit was just the final “crescendo.”

“There’s an old adage that says ‘Fool me once, shame on you. Fool me twice, shame on me,'” Sal Luciano, another MARB member, said. “We’ve been fooled many, many times.”

West Haven’s elected leaders were warned for years about the city’s inadequate policies and procedures. West Haven’s annual audits, for instance, showed the city didn’t have the proper controls in place to protect taxpayer money or to catch fraudulent contractors.

Those red flags largely went unheeded, however, as the city failed to enact better purchasing rules and delayed plans to increase staffing levels in the city’s finance department.

MARB members attributed that inaction to the “culture” in West Haven city hall. That culture didn’t start with current West Haven Mayor Nancy Rossi, several MARB members argued. But the problems have not been corrected during her three terms in office either, they said.

“I think that providing MARB with additional tools and additional means to provide the oversight necessary to really help make that cultural change in West Haven’s practices is really what’s needed,” said Thomas Hamilton, one of the MARB members who is appointed by the governor.

‘The public trust’

Despite all of the recent problems with the city’s financial management, West Haven officials continued to resist the state’s intervention.

Both Rossi and West Haven city councilman Mitchell Gallignano were allowed to vote as part of the MARB on Thursday, and both cast a vote against the additional state oversight.

During the meeting, they both argued that the city made significant strides in balancing its annual budget, while ignoring the $16 million in state assistance that MARB provided West Haven in recent years. They also blamed the city’s current circumstances on DiMassa, who worked as an assistant to the city council until his arrest last year.

Gallignano went out of his way to praise Rossi, even though he and the other members of the West Haven city council admonished the mayor earlier this week by unanimously passing a vote of no confidence. He was the first to recommend that vote.

“I believe that the mayor has worked truly hard over the last five years to get this city back on its feet,” Gallignano told the MARB. “Maybe we haven’t done everything we needed to do yet. It just takes time for us to get to that level.”

West Haven Treasurer Mike Last, who was personally faulted in the recent audit for not reviewing checks that were issued by the city, also spoke during the MARB meeting, and complained that the city was not given enough “due process.”

Jeff Beckham, the secretary of the state Office of Policy and Management, dismissed that argument out of hand, and he pointed out that West Haven would not be in the position it is if Last and the city’s other leaders could properly manage their own affairs.

“Municipalities do not have due process rights under the constitution,” said Beckham, who is also the chairman of MARB. “They are creatures of the state — political subdivisions of the state — and we expect them to manage their affairs in a way that honors the public trust.”

Christine Shaw, who represents the Connecticut Treasurer’s Office on the oversight board, voiced disappointment in the city’s decision to resist the additional oversight and assistance that MARB is offering.

“This is an expression of MARB being on the side of the city,” she said. “We earnestly want the city to stand on its own two feet, to be independent, to manage its own affairs. … MARB is not in the business of perpetual oversight. We want to work with the city to get to a place where there can be assurances that its resources are being handled appropriately.”

The problem, Shaw said, is that West Haven and its leaders have not cooperated with the state or followed through on the advice and directives the board has provided in the past.

The meeting Thursday was an example of that. City officials shared several city contracts with MARB members, and they admitted the money for those contracts was already paid out, even though the oversight board is supposed to review every business deal worth more than $50,000 before it is approved.

“MARB has to take more action, because the actions we’ve taken have not been heeded,” Shaw said. “We have an obligation to the residents of the city of West Haven to step in and exercise as much authority as the law gives us.”

‘Swift and bold’

All of the MARB members are in agreement that West Haven is in immediate need of additional oversight, but the board’s powers won’t be expanded until Gov. Ned Lamont, a Democrat, signs off on the move.

That is unlikely to be a problem in the current political environment. There are few people left defending the actions of West Haven’s leaders.

The city’s entire legislative delegation issued statements in recent weeks calling on MARB to exert more influence over the city’s finances.

“We expect that increased oversight by the state’s Municipal Accountability Review Board will significantly limit local spending discretion and provide much needed change and accountability,” Sen. James Maroney and Sen. Gary Winfield said.

“The city needs to embrace the MARB’s scrutiny and guidance for remedial action, which at this point needs to be swift and bold,” Rep. Dorinda Borer, Rep. Charles Ferraro and Rep. Trenee McGee added.

Lamont has already signaled his support for the board’s plans.

“What really worries me is the management and lack thereof in the finance department,” Lamont told reporters earlier this week. “I want to do everything I can to make sure that gets right.”

Lamont, who is up for reelection this year, argued that West Haven — a Democratic stronghold — needed a “fresh start.” But he stopped short of explicitly calling for Rossi to step down as mayor.

“She’s independently elected by the people of West Haven,” Lamont said.

Others have been less forgiving. Members of the public, Republican legislators and Bob Stefanowski, the Republican challenger for governor, have all demanded Rossi’s resignation in recent weeks.

“The mayor should have resigned, and it’s time for others to stand up and say so,” Stefanowski said earlier this week. “The people of West Haven deserve better!”

The state may be ready to step in, but Rossi said she is not going anywhere.