The Hoboken City Council has a budget. In many communities, that would be the end of the story, but not in Hoboken’s turbulent political waters.
Budget talk will likely continue at least until the May 10 mayoral and City Council election.
On Monday, the council approved its $72 million 2004-2005 fiscal year budget by a vote of 5-4.
Mayor David Roberts praised the budget Tuesday and said he looks forward to moving forward with the business of the city.
“This is a fully-funded, balanced budget that provides for the same level of services that our residents have come to expect,” Roberts said. “Also, this budget, for the 11th year in a row, maintains a stable tax rate.”
But Roberts’ opposition noted that the passage was highly unusual, because the final vote to sell the municipal garage, a key revenue source, is still two weeks away. The state gave the council special permission to pass the budget – but the story is not over.
Nuts and bolts
The $72 million budget is significantly up from last year’s $60 million budget. City Business Administrator Richard England also said that the police salary line item will probably end up being overspent by $1.6 million, which will be made up next year.
The present budget, however, has to make up about $5 million in deferred charges from last year’s budget. The increase this year led to a nearly $20 million structural deficit, and a reliance on one-time, non-recurring revenues. The administration has claimed that the increase is due largely to an increase in health insurance costs and contractual police and fire salary increases.
Roberts happy with passage
Roberts said that passing the budget is a good thing for Hoboken, because now it can move past an ugly political chapter. Three weeks ago, all city non-essential services were shut down because the anti-Roberts council members did not pass the garage revenue item, which is meant to fill a $6.9 million hole.
Roberts said that his opposition tried to “sabotage” the city in order to win the coming election. Two of the council people, Michael Russo and Carol Marsh, are running for mayor.
“They had this budget for seven months and never made any substantive suggestions,” Roberts said. But the council minority claims they have come up with many ideas to save or raise money, but have been shut out of the discussion by Roberts and the administration.
Last week, Councilman Michael Russo suggested a plan to acquire the federally owned EPA site at 722 Grand St., formerly the site of a mercury-contaminated building, and sell the property instead. Councilman Tony Soares has suggested selling the automated parking garage at 916 Garden St.
Roberts gave several reasons why he believed those ideas were worse than selling the municipal garage to a county agency (and leasing it back). He said that Soares and Russo responded only at the 11th hour to save face.
A tale of two plans
The discussion at Monday night City Council meeting mostly centered on the proposed sale of the city’s municipal garage on Observer Highway. Roberts’ spending plan, which he first introduced last September, depended on the sale of the garage for at least $7.9 million.
The mayor’s first plan was to sell the garage to the Hudson County Improvement Authority, a quasi-governmental agency. The city would the lease back the garage to payment equal to the interest on the bonds. Under this plan, the lease payment would be about $200,000 a year.
Eventually, the HCIA could sell the garage, with the city reaping the profits. They would also build a new municipal garage in a less-used part of town.
Because of the way the deal was financed, the proposal required a two-thirds vote. The council minority, who have been against the deal from the beginning, said that the city should not be selling assets to fill a city’s budget gap. They also said that it’s against state budget statutes to take out loans to fund operational expenses.
Second (but more expensive) plan
Then Monday, a brand new plan to sell the garage was presented by the administration. It was the first time the council minority was told the full details of the plan.
The HCIA would still be used as a conduit to sell the garage, but the financing would be slightly different. This plan would work a lot like a “mortgage transaction.”
Under this plan, the City Council would have to make annual appropriation, which according to the HCIA’s bond counsel Glenn Scotland, would mean that the transaction would not technically be debt in the traditional sense. Because debt would not be involved, said Scotland, only a simple majority would be needed to past this option. But for several reasons, this is a more expensive option. First, because there is more risk for the bondholders, the interest rate is going to be much higher. According to Roberts, it would cost the city about an extra $150,000 a year in interest payments. This would be on top of the $200,000 of Roberts’ other plan.
Secondly, according to Roberts, the private bank used to take out the “mortgage” will be able to foreclose and take possession of the property if the City Council fails to make an annual appropriation to pay the loan. Roberts presented the council minority with an either/or proposal.
“My original plan protects taxpayers through lower cost financing and also makes it impossible for the city to lose control of the property,” Roberts said. “It’s clearly a better deal for Hoboken. It’s time for the four council members who have been blocking my plan to do the right thing for Hoboken and give it their support. Either way, we will have a budget in place after tonight’s meeting.”
Roberts’ new plan was only approved by HCIA and the New Jersey Local Finance Board at emergency meetings on Monday. Roberts said those votes were the result of two weeks of planning, meetings, phone calls and lobbying by Roberts and his administration.
Even with the knowledge that the garage sale will go through one way or the other, the council minority again voted down Roberts’ first plan to sell the garage to the HCIA. Council members Marsh, Russo, Soares, and Theresa Castellano voted in the negative.
After that was voted down, a second resolution for the alterative method of sale was introduced. Ordinances have to be introduced at a meeting and then voted on twice at a subsequent meeting. The introduction was approved 5-4. A public hearing and final vote could take place as early as the April 20 City Council meeting.
Councilman Michael Russo complained on Monday that the administration should have introduced the alternative plan months ago if it was such a good plan. But Scotland said it was deemed much less attractive.
A budget but no sale
But there is still more.
Normally, a city is not allowed to approve a budget that still has unresolved revenue items, in this case the sale of the municipal garage.
Even though it was introduced, the public hearing and possible final approval of the garage is not for another couple weeks.
According to city Business Administrator Richard England, the state Department of Community Affairs has made an exception and has allowed the City Council to approve the budget with the assumption that it will be approved at that next council meeting. The state has a large amount of latitude in directing the budgeting process. Councilwoman Marsh said Monday that passing a budget without a public hearing or a final vote on the garage went against the principles of open government.
“This is not how things should be done,” Marsh said.