New London - Whether the mayor has the authority to make a monetary settlement with Police Chief Margaret Ackley will be the first significant test of the city's new form of government.

Mayor Daryl Justin Finizio announced Friday that he had agreed to a $25,000 settlement with the chief over allegations of harassment and meddling in the department by a former city councilor. But Monday, some councilors were questioning the mayor's authority to take such steps without council approval.

"We have the power to appropriate funds and approve contracts,'' City Council President Michael Passero said. "I don't know how he can run a government with no money.''

Councilor Adam Sprecace agreed.

"My reading of the charter is he needs approval from the council to make allocations outside the budget,'' he said.

Finizio said Monday he asked for an opinion from the law director and was told he can unilaterally sign contracts and offer settlements as long as there is money in the budget. He made the decision to settle Ackley's complaint, in consultation with the law director and Ackley's attorney. He said the $25,000 "was within the recommendations of the independent report'' into Ackley's allegations by former Superior Court Judge Beverly J. Hodgson.

Finizio said he was going to consult with the council during a closed-door session Wednesday night. But the meeting was called off by the council after Finizio publicly announced the settlement late Friday afternoon.

Finizio said he will review the budget to see if funds exist for the payment to Ackley. If not, he said, he will make a proposal to the council for a special appropriation.

Passero, Sprecace and Councilor Marie Friess-McSparran do not believe the city should pay the $25,000 to make the threat of a lawsuit go away.

"Looking at the documents we have so far, it doesn't look like we had to settle,'' Friess-McSparran said.

Hodgson, whom the city hired, found that in her opinion the city would not find itself liable in court either for actions or negligence in connection with complaints Ackley made against former City Councilor Michael Buscetto III.

"Most of the conduct … constitutes political animosity but is not actionable at law," Hodgson wrote. She also wrote that the "settlement value" of Ackley's claims would be under $30,000, "though the expense of defending against a lawsuit, if it were brought, would be much higher."

On Friday, Finizio released the settlement agreement, along with a letter that outlined Ackley's specific complaints and several pages of supporting documents. Ackley said that Buscetto had tried to undermine her authority as chief.

On Saturday, Passero released Hodgson's report, saying it was unfair for Finizio to release the documents that outlined allegations but not to release the independent report on those allegations.

Voters in 2010 approved a new form of government with an elected mayor and a City Council, with charter changes outlining the roles of both. Finizio was chosen as the city's first elected mayor in 90 years in November.

"This is a feeling-out period, by my observation,'' Sprecace said. "The mayor's office is going to, based on what we've seen so far, push their limit. But the council also has significant authority. There's going to be push and pull on both sides until we settle into our roles."

Finizio agreed that the switch from a city manager to mayor form of government is going to take time to get used to. And, he acknowledged, there are sections of the City Charter that need to be discussed and interpreted, which he intends to do no matter what kind of political pressure he feels.

"Public perception is what it is. I have to deal with reality for me to do my job, and do it well,'' Finizio said. "We have to navigate these difficult challenges. We have to operate under advice received and look at the totality of circumstances and do what is right for the city of New London.

"Sometimes that may mean a bad day in the newspaper. I'm going to follow the law and do what I believe is right."

Last week, Finizio announced the city did not renew Deputy Chief Marshall Segar's one-year contract and said captains William Dittman and Michael Lacey had retired.

He also announced that one officer had been fired and another placed on leave, and that New London State's Attorney Michael Regan and the Connecticut State Police Central Division are investigating the police department.

On Monday, the mayor met with the leadership of the police union, who wanted to discuss general morale in the department and what they perceive as a lack of leadership.

"Finizio promised to look into the complaints, including the problems with the chief,'' Richard Gudis, the union's lawyer, said following the hourlong meeting. "We could only hope the mayor is going to take the necessary actions to restore leadership in the police department."

k.edgecomb@theday.com

Find full coverage of the allegations of corruption in the New London Police Department and the harassment claims by Police Chief Margaret Ackley at www.theday.com/nlpd.