The state’s Distressed Cities program gives struggling communities millions of dollars in assistance at the price of strict administrative oversight. Monday, Mayor Glenn D. Cunningham’s fiscal policy took center stage when he announced the city’s removal from the program.
Standing next to state Department of Community Affairs [DCA] Commissioner Susan Bass-Levin, Cunningham lauded his administration’s successful partnership with Trenton in getting Jersey City back on track, saying Bass-Levin’s “open-door policy” helped his team craft sustainable spending practices that have pulled the city out of the $54 million financial quagmire in which it found itself.
Jersey City’s annual budget is $345 million.
“With [Bass-Levin’s] help, we have been able to develop a long-term financial plan for Jersey City that has helped us correct some of the mistakes of the prior administration and pave the way for good government,” Cunningham said Monday. “Even though in these tough economic times, we had to endure a reduction in state aid, [and] we have been able to keep taxes stable and provide the essential city services that our residents need.”
Cunningham outlined various ways Jersey City is currently demonstrating its fiscal solvency, pointing to $2.5 billion worth of new construction (which can contribute to the tax base) and the recent acquisition of new equipment and personnel for the police and fire departments.
After the mayor’s comments, Bass-Levin congratulated Cunningham on his administration’s success.
“Fiscal stability does not happen overnight,” Bass-Levin said. “It requires a partnership between the municipality and the state. In Jersey City, we see a city who understands what changes need to be made. We are here to recognize the end of an era and the beginning of a new one.”
Inheriting a deficit?
Cunningham said that when he took office in 2001, his administration was faced with a $54 million deficit left by former mayor Bret Schundler, who had left Jersey City to run for governor. Cunningham’s Monday address, which was laced with numerous barbs at his Republican predecessor, cited Schundler’s reluctance to negotiate with union officials and his facility in laying off of city workers as the reasons for Jersey City’s designation as a distressed city.
Schundler responded with a letter saying that Cunningham shouldn’t remove the city from the program, and charging that now Cunningham will have to raise taxes.
Cunningham took a shot at Schundler, saying, “While it was the boy who grew up in Westfield and made tons of money on Wall Street who put us in the Distressed Cities program, it was the kid from Orient Avenue who walked the beat as a cop and served his country as a Marine who took us out.”
The actual amount of the deficit Cunningham inherited was hotly contested by the Schundler camp when Cunningham took office in 2001. Cunningham first said the deficit was upwards to $23 million. Schundler representatives responded by saying he had actually left the city with a $19 million surplus.
The $54 million number, which has emerged as somewhat of a consensus between city and state officials, came up when a DCA director leaked a state report to Cunningham in 2001 stating that “creative accounting practices” in the Schundler administration had left the city with a $54 million gap in the city’s cash flow.
Despite the political wrangling over how much money or debt was left, most residents and administration watchers believe the recent numbers are the true measure of how the city has dealt with its financial crisis. Since Cunningham has been in office, city spending plans have increased while the amount of state aid the city received has fluctuated and gone down. There were no massive layoffs and property tax rates were even reduced by 74 cents.
Balancing a budget
According to Cunningham, he and his team proceeded in 2001 with a series of cost-cutting measures in government ranging from basic administrative concerns to specific policy issues. For example, the number of city departments was trimmed from 10 to eight and Cunningham reinstituted a department of finance. In addition, a grants management office was created to aggressively seek out alternative revenue streams for some of the city’s bills.
“It was shuffling money around and reorganizing city management,” Cunningham said Wednesday. “It was being responsible, being smarter and living within our means.”
The city’s finance department also set out to take advantage of low interest rates by refinancing $122 million of the city’s outstanding debt, which has resulted in a savings of $30 million.
Meanwhile, state aid has steadily diminished in the past four years, going from $16 million in 2000 and $14.5 million in 2001 to $10 million in 2002 and just $2 million in 2003.
Cunningham’s critics say they don’t trust his fiscal policy, alleging the city’s removal from the Distressed Cities program – which they described as being tantamount to shooting oneself in the foot – is a strategy for the mayor to hire and give promotions at will without being scrutinized by state personnel.
Arguing that the decision to preclude the city from receiving any future state aid is a foolish move, Ward D Councilman Bill Gaughan said it further mystifies an already cloudy fiscal policy.
“What it’s done is it has allowed him to give raises and promotions,” Gaughan said. “I’m critical of the state because they have absolutely no idea about our financial position. I’ve been screaming for five months about a budget and we still don’t have one.”
Former mayor Schundler also criticized the city’s removal from the Distressed Cities program, echoing Gaughan’s comments that the city’s financial position isn’t as rosy as Cunningham would have everybody believe.
“Cunningham has been spending more rapidly, and debt has gone through the roof, both city debt and agency debt,” Schundler said Thursday. “The DCA doesn’t understand that cities can never fund themselves on their ratable base alone.”
Predicting that water rates – and property taxes – will soon rise because of Cunningham’s usage of Municipal Utilities Authority money to balance his budget, Schundler pointed to the doubling of parking ticket rates in two years as a prognosticator for what’s to come.
“A lot of the lowest-income residents have trusted [Cunningham] and he should honor that trust,” Schundler added. “Otherwise folks are going to lose their homes. That’s the bottom line.”