Hoboken approved their 2006 municipal budget 10 months late.
Jersey City was nine months late.
Bayonne was 11 months late, and Union City was also 11 months late.
Since the year 2000, late budgets in these four towns have cost local politicians their jobs, forced tax hikes, and in one case, shut down city government completely.
The fiscal year starts in these towns on July 1, but for years, all four towns have been exceptionally late passing their budgets, meaning that by the time the full City Council gets to see them, it’s too late to offer further budget-cutting measures.
And most of the money for the year has already been spent.
In 2005, Hoboken’s city government had to shut down completely because the City Council refused to approve a late budget with a controversial revenue deal to plug a gap.
And in 2000, then-Union City Mayor Rudy Garcia lost his job because a budget gimmick that didn’t come through in time forced a last-minute tax hike in his 11-months-late budget.
A Hudson Reporter probe has found that often, the only people involved in putting a city budget together are the mayor and the city’s finance department. The City Council’s budget committees, when they exist, do not hold public budget workshops or offer cuts until quite late in the game.
“The one glaring advantage of introducing any budget early is that if the City Council opts to reduce spending by eliminating services or abolishing positions, it allows the administration to formally [lay off] fewer staff members,” said Richard England, Hoboken’s business administrator. “The longer decisions are delayed, the more people are put at risk to meet the financial obligations.”
It’s different from your calendar
The state and most local cities run on a fiscal year from July 1 to June 30. In Hudson County, only Secaucus runs on a regular calendar year.
According to New Jersey statute, towns must introduce their budgets at a City Council meeting by Aug. 10 and approve them by Sept. 20 – a far cry from what is seen in most local towns.
Late revenue deals
Budgets are often delayed while city officials negotiate complex one-time deals to fill gaps, rather than making new cuts or raising taxes. But sometimes, those deals fall apart at the last minute, or are scuttled by council opponents when they finally see the late budget. The delays can result in a greater tax hike down the road.
Take for example Bayonne, where the city was expecting to balance their budget in the past fiscal year with a $25 million advance payment by a pair of development companies, J.R. Horton and Trammell Crowe, who were to purchase land in the Bayonne Bay section of the former Military Ocean Terminal at Bayonne (MOTBY). The Bayonne City Council approved the municipal budget in anticipation of the $25 million in May, already quite late, only to see part of the deal with the development groups fall through when J.R. Horton backed out. The city got a little over half the amount from Trammell Crowe to build luxury rentals.
Bayonne’s $105 million municipal budget came in $12 million short and 11 months into the fiscal year. City Business Administrator Terrence Malloy said Bayonne will be operating at a deficit until the $12 million is recouped during the following year, or residents will have to make up the difference in property taxes before the 2007 fiscal year ends next June 30.
Bayonne City Councilman Anthony Chiappone, a known opponent of Mayor Joseph Doria, said the pullout by J.R. Horton was something he saw coming, and had registered his opposition when the deal was first proposed. “You don’t include revenues in the budget that don’t yet exist,” said Chiappone. “Deals break down, just like in the business world.”
Chiappone said Bayonne does not, unfortunately, have a council Finance Committee that looks at the budget at an early stage. However, there was a committee in the summer of 2004 to look at the 2005 fiscal year budget, with 11 members including Chiappone.
But Chiappone said the committee was short-lived and their recommendations went unheeded by the Doria administration.
“We put out a report; unfortunately a lot of recommendations were not implemented,” said Chiappone. “This is where politics gets in the way of streamlining government.”
Chiappone went on to say, “I am advocate of early budgets. Budgets really should be adopted in the first quarter of the fiscal year, because you are spending without approving a budget.”
The day City Hall shut down
In Hoboken, city government was forced to shut down completely for two days in 2005 when a budget was received seven months late, and a council faction voted against a controversial revenue deal to fill a gap. With no available funds to pay city employees, City Hall was closed for two days and municipal workers were sent home.
The opposing council faction, which was politically at odds with Mayor David Roberts, didn’t want to depend on revenues from the sale of the municipal garage property on Observer Highway, arguing that the city’s administration was shoving through a budget that didn’t make substantial cuts in salaries or freeze contracts.
Waiting so long to offer up the budget was really tempting the political fates, since it was the final stretch of municipal election season, and two of the council members were running against Roberts for mayor in May. After several emergency meetings, the opposing council faction reluctantly compromised and passed a $70.9 million municipal budget in April 2005, including the garage deal.
Some blamed the crisis on the council members who voted against the late budget, saying they should have made their own suggestions for cuts earlier in the year, but others said that historically, the council and public are rarely included in Hoboken’s early budget process.
“When I was the president of the City Council, we had workshops for three City Council members at a time, during the process, in the summertime,” said Councilman Ruben Ramos, a current member of Hoboken’s council budget committee who served as council president in 2003 and 2004. “But not everyone showed up, or offered substantial solutions.”
And those meetings aren’t held every year. Some towns don’t involve council members in the process at all until they are asked to vote on a budget they’ve barely seen, constructed mainly by the town’s finance department. Michael Lenz served as Hoboken’s chief financial officer from 2002 to 2003, until he was terminated after political differences with Mayor David Roberts. Lenz argued last week that the Hoboken City Council does not conduct any budget workshops for council members. Rather, the council approves temporary budget appropriations every three months until an actual final budget is presented to them near the end of the fiscal year.
“Every year, they need to raid the piggy bank by cashing out a fund, selling a garage,” said Lenz.
So after the last-minute crisis in 2005, did things improve in Hoboken?
Not much.
This past year, Hoboken got an early start by introducing their $73.2 million budget in September of 2005. But the steady pace was not to last.
The budget was not passed until this past April, 10 months into the fiscal year.
Ramos said that the second phase of the garage deal had to await bids from developers, as well as approval from the state. The city was counting on more garage funds, as the garage property had been leased back to the city by the county agency that purchased it. The city planned to sell it to a private developer and keep the profit, but two bids were rejected by the City Council in a 5-4 vote because the amounts weren’t high enough to make a good profit.
The city found itself having to bond to make up over $5 million in the city’s budget deficit.
Ramos said that the situation will improve when Hoboken stops depending on “one-shot” revenues.
“The next fiscal year could be the first time in over 30 years that our budget does not have to depend upon one-shot revenues,” Ramos vowed, although other Hoboken officials have vowed that in previous administrations. Ramos said he is optimistic that the upcoming budget will be approved before January, which would be the earliest he has seen in his eight years on the council.
One late budget stymied a political career
One local mayor was booted from office because his revenue deal did not come through in time for his budget, resulting in a major tax hike.
In 2000, Union City Mayor Rudy Garcia, a rising star in the Democratic party, hoped to fill his $67.5 million budget with two land deals – the sale of a bus depot property at 27th Street and Bergenline Avenue to a private developer, and the sale of Roosevelt Stadium to the Union City Board of Education. He kept waiting. By the end of the fiscal year, the bus depot deal went through, but the Roosevelt Stadium deal did not, and he was forced to raise taxes.
Immediately, Garcia’s political rival, then-Hudson County Freeholder Brian Stack, seized the opportunity to begin a recall movement. Stack held a rally in late June and proclaimed, “Union City can no longer wait. We cannot go any further without a recall election.”
Garcia resigned in October, 2000, and Stack took over. Stack remains mayor to this day, while Garcia, a former assemblyman, is a private citizen.
Garcia was a Union Hill High School All-American football player who graduated from Columbia University and New York University School of Law. Currently he is a lawyer and still is mentioned in political conversations, but he has not run for office again.
But Mayor Stack’s budgets have not been early either.
Union City introduced its last budget in September 2005, and it was eight months before it was adopted this past May.
The budget came to $80.2 million, an increase of about $2 million from the previous fiscal year.
The city’s treasurer, Doug Gutch, blamed the increase on a number of issues, including the usual rise in costs in gasoline and health insurance, and high police and fire salaries.
Gutch said last month that they will introduce and possibly adopt a new budget in August or September, as city officials have been meeting with Mayor Stack every two weeks on the plan.
Jersey City – A $423 million headache
Of the towns in Hudson County with budget problems, perhaps the most troubling is Jersey City, since it is the second largest city in the state and has a whopping $423 million budget.
Jersey City has, for the past 10 years, not passed a budget before Jan. 1. This past fiscal year, the budget was passed in March.
As the state’s second largest city in terms of population, with over 240,000 people, Jersey City has not seen any state penalty for its lateness. Just as with Hoboken, much of the delay in the recent years comes from working on “one shot” revenue deals to avoid raising taxes.
But that came to an end this past year.
This past March, Jersey City did the unthinkable – passed an 18 percent tax increase on to property owners. The budget had increased from $391 million in the previous fiscal year to $423 million this past fiscal year. The public barraged City Hall with criticism over the move, but Mayor Jerramiah Healy pointed to what he called a “perfect storm” of circumstances that made residents’ overall tax burden even more painful: a cut of $7.5 million in state aid for the schools, and a $10 million tax increase for Hudson County.
A plan to restructure the city’s debt took some time to put together and saved the city $19.5 million in debt service payments now, but will cost more down the road.
Critics such as City Councilman Steven Fulop and local activist Mia Scanga, a private accountant, have cited Jersey City’s inability to pass a budget early enough, allowing for unchecked spending. By the time a budget is passed, it is too late to cut funds that have already been expended.
And the city has no Budget and Finance Committee to allow any of the nine City Council members to study it early, complained Councilman Steve Lipski.
Lipski said that he has requested that a City Council committee be formed to review and revise the preliminary budget.
“Jersey City is unique,” he said, “but it is not so unique to stand outside the area of good finance.”
City Councilman Michael Sottolano said last week that he would also like to see a city budget introduced early and adopted before the end of the year.
“I am not opposed to it being early,” said Sottolano. “Every year the budget has been passed so late that it’s historical.”
City Business Administrator Brian O’Reilly, when interviewed last week, said he expects to see the budget introduced in September and adopted before January.
State not happy but will live with it
The New Jersey Department of Community Affairs (DCA) is the agency that monitors city budgets and works with municipalities who are running late by meeting with city officials numerous times at the DCA office in Trenton.
Chris Donnelly, the DCA spokesperson, said, “In terms of municipalities not passing their budgets on time, town councils could face fines, but because the DCA works closely to make sure budgets are passed on time, that type of action is rarely needed.”
There have been local city councils, including Hoboken’s, whose members have been threatened with fines of $25 per day for every day they did not pass a budget.
Donnelly could not say if Hudson County municipalities were any worse than their counterparts in other counties.
“Each municipality’s budget is different, so any problems they might incur from late passage would be unique to that municipality,” said Donnelly.
The state also has a role to play in budgets being late, since municipalities have to wait for the announcement of state aid amounts. The state also must approve certain controversial revenue deals to plug holes, as well as increases in spending above a certain percentage. But some towns overspend and rely on unusual revenue deals more often than others.
What can be done
In Jersey City, the past years’ budget problems have spurred officials to make an effort to get this year’s budget done early.
The city’s chief finance officer, Donna Mauer, said the administration has been sitting down with department heads this summer to determine their departmental budgets for the upcoming fiscal year.
Mayor Jerramiah Healy has put together a committee of academic and financial experts to study how Jersey City can produce more revenues.
If the city does create a council subcommittee to study the budget, it will spread the responsibility among more council members, and avoid last-minute posturing before the spring elections.
Hoboken activists have suggested that towns conduct all-day budget workshops early in their fiscal years, where a council committee and members of the public can sit down with finance officials and better understand the budget. There was no evidence of that happening in most Hudson County towns, even the ones who file their budgets on time.
Some officials also said that the state has to get its own fiscal house in better order, so the state can release aid figures earlier and have more time to approve controversial deals for cities.
However, there is a state-mandated opportunity for the public to contribute to the budget process. By state law, every town is required to hold a public hearing before their budget may be passed.
But some towns hold public hearings at the same meeting as the final council vote, so it is unlikely that a resident who questions spending at a council meeting at 7:30 will change the council’s mind and coax them into postponing an 8 p.m. vote.
Ricardo Kaulessar can be reached at rkaulessar@hudsonreporter.com Sidebar How late is your budget?
The following are local towns, the size of their budgets for the past year, and how late they were introduced.
For this year, the town of North Bergen already has introduced their new $70.9 million budget for 2006-2007, setting the pace for other towns to follow. Bayonne
Size of budget: $105 million
Passed: May, 2006, 11 months into fiscal year
Notes: Development deal fell through at last minute, leaving $12M gap.
Hoboken
Size: $73.2 million
Passed: April, 2006, 10 months into fiscal year
Notes: Will borrow to fill $5M hole after bids for deal rejected.
Jersey City
Size: $423 million
Passed: March, 2006, 9 months into fiscal year
Notes: Increase from $391M led to 18 percent tax hike.
Union City
Size: $80.2 million
Passed: May, 2006, 11 months into fiscal year
Notes: City says will introduce next one in Aug. or Sept.
Guttenberg
Size: $12.83 million
Passed: October, 2005
Notes: Hopes to introduce next one in Sept., adopt by Nov.
North Bergen
Size: $71.2 million
Passed: September, 2005.
Notes: Already introduced 2006-2007 $70.9M budget Aug. 9.
Secaucus
Size: $38.7 million
Passed: June, 2006, six months into fiscal year
Notes: Runs on calendar year from Jan. to Dec.
Weehawken
Size: $26.6 million
Passed: November, 2006
Notes: Town usually starts working on budget in July.
West New York
Size: $52 million
Passed: September, 2005
Notes: Usually introduced and past in Sept. – RK