After months of revisions and internal audits, the City Council will vote Wednesday on the city’s 2003 municipal budget, which proposes $61.25 million in spending, up from $54.4 million the previous year. The spending plan covers city services, supplies, and salaries from July 1, 2002 to June 30, 2003.
According to City Administrator Robert Drasheff, the budget will maintain a stable tax rate of $7.84 per $1,000 of property owned. If approved, the city intends to collect $17.48 million in property taxes, which is about $72,000 less that what was scheduled to be collected last year. There are two reasons that a spending increase doesn’t necessarily mean a tax increase: with development increasing, more people are sharing the tax burden, and the city may increase its grants and other revenue sources to pay for spending. The new budget also includes revenue from the recently taken-over Parking Authority.
There will be a public comment period at this Wednesday’s City Council meeting at 7 p.m. in City Hall. After that, the council can either plan to revise the budget or vote to adopt it.
The 2003 proposed budget calls for $61.25 million in spending, of which the bulk goes toward municipal salaries and benefits. This is significantly up from last year’s budget of $54.4 million, an increase of $6.3 million.
Drasheff said Tuesday that there are three main reasons for the increase. One, he said, was a more than 20 percent increase in the cost of group health insurance for municipal employees, which increased from $7.1 million to approximately $8.5 million, according to the introduced budget.
A second, albeit smaller reason, according to Drasheff, was an increase in liability insurance for the city from $635,000 to $880,000. Drasheff said the increase in the insurance costs was caused by a “ripple effect” from the attacks of Sept. 11.
Finally, and most controversially, Drasheff blamed the administration of former Mayor Anthony Russo for deferred charges and overexpenditures, which he said total $3.524 million in the budget. When asked why Drasheff, who was one of Russo’s three directors for six years, didn’t do anything to stop the “overexpenditures,” Drasheff said he only had authority over the Department of Human Services budget, not the others. “We ran a very tight ship in my department,” he said. “There were no overexpenditures in my department.”
For the past couple of months, city Chief Financial Officer Michael Lenz, and Lou Roberts, a senior manager for Ernst and Young and the head of the city’s audit team, went through the city’s books to address past overexpenditures.
Drasheff said that after this year, all overexpenditures and deferments will be paid, setting up next year’s budget nicely. “You will see a significant decrease in next year’s budget,” he said.
This is an important year for the administration to not get the blame for a spending increase, as six seats on the City Council are up for election in May.
Lenz said that he considers the former administration’s failure to budget for possible increases in health care insurance an “overexpenditure.” “They we hoping that they wouldn’t see an increase in the health insurance rates, which is unrealistic,” said Lenz.
The second type of overexpenditure, according to Lenz, is what he said was improper categorizing of appropriations. An example of this, said Lenz, is paying for accounting services with money that was appropriated for police salaries. That type of accounting procedure is strictly forbidden by state law.
The city’s former CFO, George DeStefano, was suspended last year for various overexpenditures and “failure to adequately monitor the budget,” according to Department of Community Affairs spokesperson E. J. Miranda. In the summer of 2002, the New Jersey Division of Local Government Services, under the auspice of the Department of Community Affairs, initiated an investigation into DeStefano. According to the charges leveled by the DCA, this mismanagement allegedly led to overexpenditures of $8 million in the three-year period.
The investigation is still ongoing, and DeStefano is still waiting for a DCA hearing on the matter.
DeStefano has responded by saying that he has been harassed ever since the new administration took office in July of 2001. DeStefano is former Mayor Russo’s brother-in-law.
DeStefano added shortly after being suspended that the administration was looking for a scapegoat and that he was an easy target. He has hired a lawyer and is currently going through the legal process.
Russo, who is reportedly considering running for the 3rd Ward Council seat in May, has consistently said that Roberts is to blame for an inflated budget. He pointed out Wednesday that the new budget is $8 million more than the last budget of his administration. He blamed Roberts’ “out-of-control spending.”
“We left them in good shape,” said Russo Wednesday. “It’s a fact that we left them with a $2 million surplus that goes well beyond whatever deferments there might have been.”
He estimated that his administration only deferred about $1.7 million in total, nowhere near the $8 million figure that the current administration is reporting. “I’m getting really tired of their political rhetoric,” he said. “It’s ridiculous that three years later they are still blaming me for their own problems that were created by their own spending habits.”
New job titles with salaries in the Department of Administration include a director of “treasury and debt management” who will earn $63,000, and a new director of “information technology” who will earn $33,000.
Former City Business Administrator George Crimmins said Wednesday that the city is playing a shell game with the budget. One item he referenced was a $2.7 million one-time payment to the city from United Water that was negotiated by the Russo administration in 2001. According to Crimmins and a city invoice obtained by The Reporter, that payment was credited to the city’s account on June 28, 2001 – two days before the end of the last Russo budget. Crimmins claimed documents were filed showing the payment as receivable in the Fiscal Year 2002 budget, which meant that the money filled the budget hole in 2002, but created a deficit in 2001that Russo is now being blamed for.
Crimmins added that Hoboken residents need to look no further than the bottom line to see that the city is spending more.
“Now matter how you slice it, they are spending $8 million more than our last budget,” said Crimmins.
Where does the money go?
As it is every year, city workers, police, and firefighters’ salaries take up the largest slice of the budget pie. At the last City Council meeting, Drasheff presented the governing body with a wage and salary analysis.
According to that analysis, the 2003 budget projects $29.1 million in wages and salaries, which is only a minor increase of $247,775 over the $28.8 million the city shelled out to its employees in 2002.
“This administration has been very responsible in maintaining its work force,” said Drasheff at Wednesday’s City Council meeting.
Earning the most in 2003 will be the city’s police force. Hoboken officers will take $11.78 million, and the firefighters come in second with a combined salary of $9.5 million. Workers in the city’s Department of Administration are slated to make $2.45 million, Department of Human Services employees will make $1.33 million, and Department of Environmental Services city employees are projected to make $2.94 million. The salary and wages for the mayor’s office are $255,819, and the salary for the combined City Council is $180,833. The workers of the city clerk’s office earn $284,534.
The rest of the budget funds trash collection, a reserve for uncollected taxes, settlements, capital improvements, insurance, utilities, and equipment.
Opposition
The mayor’s opposition is not convinced that the city’s hiring practices are under control. Councilwoman Theresa Castellano, one of the most vocal critics of Roberts, said Wednesday that she has done her own analysis of city hiring. According to her analysis, the city has hired 127 new employees since the mayor took office over 18 months ago.
“This is a spend, spend, spend administration,” said Castellano. “How can they tell me that taxes are stable when spending goes up this much? It’s just a numbers game and they are fudging the numbers.”
Drasheff firmly refuted Castellano’s charges. He said that the majority of new hires are seasonal or part-time employees who are on the lower end of the pay scale. He also said that employees who leave or retire have to be replaced.
Where does it come from?
For the revenue, an assortment of moneymaking line items complement the $17.48 million that will come from property taxes.
This year, the city anticipates getting $15.9 million in state aid, which is slightly up from last year’s figure of $15.44 million. The state only approved $500,000 in “extraordinary” state aid, whereas the city originally asked for $4 million. “Extraordinary” state aid goes to municipalities that demonstrate that, despite their efforts to provide property tax savings for current and future budget years, they have experienced circumstances that are beyond their control and warrant aid.
When the city made the request in the fall, officials blamed the need for state aid on the increase in health costs and overexpenditures from the past.
Another major, but controversial, source of revenue is Payment in Lieu of Taxes (PILOT) agreements. These are paid by developers each year in lieu of regular fluctuating property taxes. Many of the city’s older affordable housing projects pay them, as do projects that have been built on formerly blighted areas. Some of the agreements were made more than a decade ago.
The south waterfront development projects also are making PILOT payments. The city is anticipating a one-time $2.8 million PILOT prepayment from SJP Properties and Applied Housing for the site on the Southern Waterfront Redevelopment area, commonly known as “Block B,” that will eventually be the location of the city’s first hotel. The Southern Waterfront alone will generate over $5.5 million in PILOT payments in the 2002-2003 fiscal year budget.
Also in this year’s budget, six months of operations of the new Parking Utility are included, with an anticipated revenue of $5.98 million and expenditures of $2.2 million, creating a surplus of $3.78 million.
The public can view the budget at the city clerk’s office in City Hall between 9 a.m. and 4 p.m. To confirm, call (201) 420-2170.