In a meeting that included some controversy, the City Council on Wednesday changed their budget’s fiscal year from July-June to a January-December, and reworked their Law Department to provide for a contracted attorney and his contracted firm.
The calendar change that the city approved will put the city’s budget on the same schedule as the county budget. The city says the change will garner a one-time injection of millions of dollars in extra state aid. This year, after the current budget ends on June 30, the city will pass a transitional budget for half of the calendar year, from June 30 to Dec. 31. Then they will start passing calendar-year budgets.
Russo said the city paid Kates in excess of his former contract.
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Budget timing
Officials say that during the six-month budget year, the state will likely inject $11.3 million in aid – a full year’s amount – for half a year, creating over $5 million in excess funding. Lisa Ryan, a spokeswoman for the state Department of Community Affairs, said on Friday that the city was shorted a six-month period of state aid when in made this opposite switch – from calendar year to fiscal year – in the early 1990s. She said that the DCA already approved the switch back.
Finance Committee Chairman Michael Lenz said Wednesday that the city will use the one-shot cash flow in a few areas.
“We’re matching one-shot revenues with one-shot expenses.” Lenz said.
First, he said, the city will pay off a $4 million pension bill they owe the state instead of paying the amount over 10 years with interest. The bill dates back two years to a state rearranging of funding that pushed back a pension payment, but allowed municipalities to pay the amount over a decade with interest. The bill is not related to the $4.2 million pension bill for an unapproved early retirement incentive plan that was botched during a previous administration. (As a side note, the city paid that bill last week after professionals examined the data to make sure the bill was correct. The city did find two employees who received payouts but should not have, Zimmer said. The city may try to recoup those funds.)
Second, Lenz said, the city will set aside a large sum of money to deal with upcoming tax appeals. The city has already experienced an increase in appeals from taxpayers who feel their taxes are too high compared to others, as the result of recent budget hikes and the need for a citywide property revaluation. A citywide revaluation is underway that could lead to more appeals, hence the reserve fund.
Third, Lenz said, the added revenue could eliminate accelerating the sale of tax liens, a policy that he said was used to fill budget gaps in the short-term but only hurts residents and benefits the third parties who purchase the liens. Funding the city’s reserve for uncollected taxes will eliminate the need to sell the liens merely weeks after tax bills are due.
Council President Peter Cunningham said Wednesday that he will advocate a city reserve fund, a 5 to 15 percent annual set-aside for emergencies. He said that the fund will impress the professionals who rate the city’s financial condition in the bond market.
At Wednesday’s meeting, Councilman Michael Russo wanted the city to wait for a year so they could prepare for the shortened budget season, but the majority of his council colleagues voted in favor of doing it sooner.
Russo also said that once the city moves into a calendar fiscal year in 2011, the city will receive state aid at the end of every year, but the DCA said on Friday that the state aid is always paid in the last six months of the year anyway.
The city funds roughly 10 percent of its budget with state aid, although the percentage varies.
The measure passed 5-3, with Russo and councilwomen Theresa Castellano and Beth Mason opposing it. Councilman Nino Giacchi was absent from the meeting.
Lane Bajardi, a frequent critic of the administration, called the move an “incumbent protection plan,” meant to secure reelection bids for some councilpersons, including 4th Ward Councilman Michael Lenz, who is up for reelection this November. Six other council people are up a year from now.
The Law Department
For the last six months, the city has had a law firm operating as its corporation counsel, rather than paying a salary to one person as the city’s lead attorney. Since last year, the firm Kates Nussman Rapone Ellis & Farhi of Hackensack has been representing the city, with Michael Kates as the foremost representative.
Kates was rehired last week, but this time as an individual, with his firm receiving a separate contract. Kates will receive a contracted payment, not a salary, and he will not receive benefits.
In order to handle the multitude of legal issues the city faces, Kates said they needed not only his services, but the services of his firm as well.
But as the administration attempted to reorganize the Law Department, one council member pointed out a potentially unlawful situation.
Russo said the city had paid Kates in excess of his former contract, days before actually approving his new contract. He said this showed a “disregard for contract law.”
And the fact that Kates will be distributing some work to his former firm – which charges by the hour – was unsettling for some council members. Kates assured the council that the business administrator and the mayor will approve any work passed along to his firm.
Still, costs were a concern. Councilman David Mello said the maximum amount the city will pay for the services of Kates and his firm combined is approximately $220,000 annually, although it may be less. Mello said that last year, the two top city attorneys made roughly $225,000 combined.
“Your city requires more than a full-time corporation counsel,” Kates said. “I cannot believe how litigious this society here has become.”
Code of ethics
Also at Wednesday’s meeting, 2nd Ward Councilwoman Beth Mason proposed a code of ethics to be included in the council’s bylaws, but the measure was never voted on. Kates said the process to establish a code isn’t in the council’s purview. According to Kates, the city has two options for ethical regulation.
Either a municipality can rely on the state Board of Ethics to hear ethical complaints – and in doing would submit to the state’s ethical guidelines – or it can establish its own Ethics Board.
If a town creates an Ethics Board, the board either establishes the city code of ethics or uses the state guidelines.
The council, Kates said, cannot establish the code of ethics themselves.
Hoboken already has an ordinance on the books that has established an Ethics Board to be appointed by the mayor, but the board seats have never been filled. The ordinance was established in 1985 and amended in 2004, according to documents provided by the City Clerk’s office.
Mason complained at the meeting that her proposal, along with some other legislation she has brought forth, has been stalled by the council. Mason is a sometime critic of the five members of the board who are allied with Mayor Dawn Zimmer.
Other measures proposed by Mason recently that did not get a vote include a resolution accusing two council members of violating Pay-to-Play regulations and an ordinance amendment requiring political contributions to be disclosed by residents seeking appointments to municipal boards. Those measures were sent to a committee or for review by the Law Department.
Mason said her proposed changes to the city’s Rent Control Ordinance have also been in the law office for review for a month.
Timothy J. Carroll may be reached at tcarroll@hudsonreporter.com.