New London - The City Council Tuesday night rejected two agreements that Mayor Daryl Justin Finizio had made with Police Chief Margaret Ackley, saying there is no money in the budget for them.

In a 4-3 vote, the council refused to fund a $25,000 settlement with Ackley over her allegations of harassment and interfering in the department by a former city councilor. In a 5-2 vote, the council rejected a four-year employment contract adjustment with Ackley, which would have cost the city about $63,000.

The latter vote does not mean Ackley is out of a job; under state statutes, police and fire chiefs have their jobs for life - or until they retire or are fired for just cause.

Earlier this month, Finizio announced that he had reached a settlement agreement with the chief over allegations she made against former City Councilor Michael Buscetto III. An independent report by former Superior Court Judge Beverly J. Hodgson found that the city was not liable for actions or negligence in connection with the complaints against Buscetto. Finizio agreed to pay the chief $25,000 to settle the complaint and avoid the potentially heavy legal costs the city could face if the case went forward in the courts.

"I'm speaking as strongly as I can against this agreement,'' Councilor Donald Macrino said Tuesday night. "There are no grounds for a settlement. ... It's a moral issue here. We must say no to spending money."

Council President Michael Passero said the city made a mistake in negotiating with Ackley when she first brought up her complaints against Buscetto last summer. "Any employee should be directed to pursue legal options,'' he said. "It's bad policy to negotiate with employees over potential legal issues. ... The report said the city virtually has no liability."

During the discussion, City Law Director Jeffrey Londregan said that Buscetto also was offered a settlement to cover his legal fees, but it was not accepted.

"We disagree on a particular issue of law,'' Londregan said of Buscetto's attorney.

Macrino, Passero and councilors Adam Sprecace and Marie Friess-McSparran voted against paying the Ackley settlement. Councilors Wade Hyslop, John Maynard and Anthony Nolan, who is also a police officer, voted in favor.

Shortly after the council vote, Finizio, who was not at the meeting, released the following statement:

"I negotiated a settlement on behalf of the City within the confines of the recommendations in Judge Hodgson's report. I believe this settlement would have saved City taxpayers by avoiding higher litigation costs. I acknowledge the Council's authority to deny funding for this settlement and no appropriation for the satisfaction of the settlement agreement will be made."

Finizio had no comment on the council's decision not to fund the chief's contract.

Ackley's employment terms, which had been negotiated with Finizio, would have boosted her annual salary by about $3,000, to $110,725. It also would have compensated the chief for 1,196 compensatory hours she had accrued since becoming chief in mid-2009.

Sprecace said the comp time added up to about $60,000. "This seems more like a retirement agreement,'' he said.

"I don't disapprove of having a contract,'' Passero said. "My problem is, we've already budgeted for this position and this is not in line with that appropriation."

Passero, Sprecace, Macrino , Maynard and Friess-McSparran voted against the contract, while Hyslop and Nolan voted in favor.

k.edgecomb@theday.com