New London - In a State of the City address that focused largely on change, Mayor Daryl Justin Finizio on Tuesday laid out the current state of this city, where he hopes it will soon be, and presented his proposed budget as a first step in getting there.

The mayor also declared that he will not seek re-election next year.

Finizio presented his proposed budget of $87,128,467 in spending - an increase of 7.24 percent over the current year's budget - which he said "pulls us out of the hole, stabilizing our tax rate and our services."

"7.24 percent is a big increase for one year. It's a very big increase," Finizio said at City Council chambers. "I don't enjoy presenting you with this increase."

The $87.1 million budget for fiscal year 2014-15 represents $46 million for general government and $41.1 million for the Board of Education.

The general government proposal is 12.53 percent more than the current year's budget of $40.8 million, while the Board of Education's portion of the budget represents an increase of 1.9 percent over its current budget.

If Finizio's proposed budget is adopted, the city's tax rate would increase by 12.20 mills to 39.70 mills. The city's taxable grand list has decreased by 25 percent, Finizio said.

Despite the 7.24 percent increase, Finizio said, many city residents will see their tax bills go down and most downtown property owners will not see a large increase as a result of revaluation.

"This is one of the few times when a property tax increase will fall largely on those most able to pay," he said. "Many of the people with the least breathing room in their personal budgets will see their taxes rise only slightly, or even fall."

The budget he presented, Finizio said, will help put the Whaling City back on track to realizing its potential.

"As a city, we are on the brink of capitalizing on some of the most exciting opportunities our city has ever seen," Finizio said. "Although much of it isn't yet visible, New London is going through a period of significant economic development."

The mayor cited the expected groundbreaking of a grocery store and housing development at the corner on Bank and Howard streets, the City Flats project, New London Main Streets's CreateHereNow program, and the National Coast Guard Museum as major keys to the economic revitalization of the city's central business district.

"And yet, in order to realize the potential of these opportunities, we need to extricate ourselves from a very real, and a very grave, financial peril," he added.

Last week, The Day reported that the city's cash-flow problems could result in it running out of cash next month as a result of a withering fund balance, or savings account, chronic deficits in the city's capital projects fund and millions of dollars in state reimbursements that the city has never collected.

"It's hard for me to say, but I have to say it. It's hard for you to hear, but you have to hear it," he said. "We are out of money, and we are out of time."

Finance Director Jeff Smith has recommended that the City Council authorize roughly $10 million in bonding to help stabilize the balance sheet and nearly double the balance of the city's savings account.

Smith's recommended plan of action, along with the adoption of "a good budget," will ensure that the city "permanently turns the financial corner," Finizio said.

But even though the bonding proposal would nearly double the city's fund balance, it would still be just 25 percent of what it should be, the mayor said. So, at the behest of the city's financial advisers and bond rating agencies, Finizio included a $500,000 request for fund balance replacement in his budget.

Additionally, Finizio's proposed budget would balance the fire department's budget for the first time in a decade, include an increase of $1.4 million for the police department, fund 12 new positions in the Public Works Department, provide small increases for the library, Senior Center and Recreation Department, and add the city positions of industrial safety/risk manager and grants coordinator.

"This budget isn't frivolous. It doesn't contain luxuries. Neither does it put Band-Aids on gaping wounds. It rebuilds departments which have been decimated over the years, and it begins, in a small and reasonable way, to rebuild our fund balance," Finizio said. "The total price tag is not cheap, but I believe the alternative is even more expensive and unacceptable."

Many of the city councilors in attendance said that while they agree that many city departments need more funding, the mayor's budget will need some tweaking.

"He has crafted a budget that I believe is honest and is balanced," Council President Wade A. Hyslop Jr. said. "Now it is up to the council to take a look at that budget and see how we can work either within the confines of it, make cuts if necessary but not make deep cuts that will further destroy what is going on in our city."

The council's lone Republican, Councilor Martin T. Olsen, said the council will have to go through the mayor's budget "with a fine-tooth comb."

"I think that the public at large will find this proposed increase to be unacceptable," he said. "It will be incumbent upon the council to look at this thing rationally and reasonably and to try to come up with a spending plan that is responsible and also meets our needs."

Thursday, the City Council will hold its first of three budget review sessions during which it will go through the budget of each city department. The sessions, all of which begin at 5 p.m., will be held April 3, 10 and 14 in Council Chambers.

Ultimately, the mayor said, the fate of the city is up to its citizens. "We can have all this. We can be the city we have always known we could be," he said. "The signs of our renewal are as abundant as the roots growing under spring soil. Either they will wither and die, or else we will choose, in this New London spring, to nurture them and in so doing, give new life to our city."

c.young@theday.com