The administration handed a revised $123.5 million budget to the City Council last week for a public hearing, expecting taxpayers to swallow a bitter pill that they claim will ultimately improve the fiscal well-being of the city going forward.
Taxpayers will see a very small decrease in taxes for the final quarter of the fiscal year, according to state-appointed Fiscal Monitor Judy Tripodi. A home assessed at $250,000 can expect a reduction of roughly $125 in their 4th quarter bill, she said. This comes after a 47 percent overall tax increase in the last two quarters.
“While this is an exceedingly painful budget, the numbers are real,” Tripodi said in a memo to the City Council two weeks ago. “There are no one-shot revenues, no gimmicks, no smoke and mirrors.”
How did city spending go from approximately $52 million 10 years ago to the point it’s at now?
Many say the problem actually started in the early 1990s, when the Port Authority was proposing to infuse millions of dollars of cash into Hoboken in order to build giant towers on the south waterfront piers. After activists protested, the massive development deals died in two public referendum votes, but the city leadership already had included the money as revenue in its budgets. This left budget deficits that only served to increase throughout the years.
As city spending ballooned, each city budget contained larger and larger holes that were always temporarily filled with sales of city land to developers and other revenue sources that wouldn’t return the following year.
Last year, the city budget increased to $102 million, and the City Council refused to pass it, saying they were not getting the proper financial information from the administration of Mayor David Roberts.
The state finally appointed a monitor to come in and correct spending.
This past Tuesday’s emergency budget meeting was called by Tripodi to amend a budget that was originally introduced at the beginning of the fiscal year at $121 million. The budget covers spending from last July 1, 2008, through this coming June 30, 2009.
The City Council now must vote on the revised plan.
“This is a fully-funded budget,” Tripodi said in her memo. “The budgets of the past were significantly underfunded and the real cost of city operations was not transparent. Over many years, the tax levy remained artificially low while deficits grew exponentially, but were covered by budget gimmickry.”
While taxpayers and council members have submitted suggestions to cut the budget over the past few months, including layoffs, the budget has instead grown by $2 million since its introduction.
However, even the most critical members of the council are saying these numbers are very real.
“This is a no-nonsense kind of budget,” said Councilman and Finance Committee Chairman Michael Russo in an interview.
Hearing next week
“My immediate concern was short-term property tax relief,” Tripodi said in an interview last week, “so I was a little disappointed that I haven’t been able to tackle that.”
She stopped short of calling the budget “bare-boned,” but said, “All of the frills and duplicate services have been eliminated.”
The City Council has scheduled a budget hearing to coincide with their regular meeting this Wednesday, March 18. The hearing will allow the public to address the city spending document and ask questions of the council.
City Council President Nino Giacchi requested that the meeting be moved to a larger, more accommodating venue, possibly the Wallace School gymnasium. However, the city clerk said on Friday that this is unlikely.
The council is not planning to take a final vote on the budget that night, officials said.
Some suggestions taken; others can’t be
Tripodi said the city was able to reduce discretionary spending – spending that is not tied to contracts or other binding obligations – by $1.6 million.
Through unfilled retirements, the city will see a reduction of $3 million going forward, although not all of the savings will be seen this year. The only recent retiree replaced by the city was the tax collector, who is statutorily required to be replaced.
Tripodi said that any budget-cutting suggestions made by the council were implemented, if they were possible. Some revenue ideas were accepted, but won’t be realized this year, she said, like a hotel tax.
Many ideas were not possible, like cutting salaries across the board, she said.
“There are limitations on any municipality,” Tripodi said, noting that the city is dealing with six unions.
Layoffs have begun – the city let go of seven provisional employees early this year – and as soon as the state approves the second phase of the layoff plan, the city will trudge forward with the most unpleasant form of spending reduction.
Still feeling the pain of 2008
The state requires the city to keep a reserve in case taxes aren’t collected in time. The reserve is based on the average collection rate for the previous three years. The city had a collection rate close to 99 percent before last year, when tax bills were sent out late a result of the late budget; the collection rate has suffered severely as a result.
This year, the state asked Hoboken to keep roughly $8 million reserve in case they can’t raise it through taxes. But at the behest of council and in the best interest of the city, Tripodi has petitioned the state to allow a change in the calculation. The effect was a $2 million reduction to the reserve and a welcome reduction to the current tax levy.
Approximately $24 million in uncollected taxes from last year are also included in this budget. The money has since been collected – the shortfall has been filled and taxpayers will not be affected – but it does bloat the bottom line. Thus, next year’s budget will be closer to $90 million.
Nick Trasente, the new director of the newly-created Finance Department, said last week that the city wasn’t able to expand the tax base of ratables this fiscal year because properties added last year couldn’t be finalized before the final budget passage.
He said the missed assessments total $1.7 million in revenue for the city that cannot be collected until next year.
Not dealing with early retirement plan problem yet
Taxpayers have yet to feel the pain related to an early retirement incentive plan that was apparently bungled by the administration. Discussions with the state over a $4.2 million bill from the Division of Pensions won’t conclude until after the end of the fiscal year, June 30. The city is attempting to get the bill reduced or at least spread out over a number of years.
Last year’s deficit – over $11 million – has been spread over seven years by the state, not five years as officials originally reported.
‘Ground-up’ budgeting
Budgeting for the next fiscal year will begin as early as next month, Trasente and Tripodi both said. For 2010, Trasente said, the city will start a budget process from the bottom up, not top down like in years past.
Directors were asked to find 10 percent savings in this budget, based on previous spending, but next year they will be asked to explain every penny right from the start.
“Every department will have to justify these budget requirements in detail,” Trasente said.
“The taxpayers of the City must carry the heavy burden of paying for the sins of the past.” – Judy Tripodi
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For example, in both last year’s and this year’s budgets, the Parking Utility anticipated $2 million in revenue assuming that they might sell the automatic parking garage at 916 Garden St. But Tripodi removed that line item, as the garage has not been sold. The Utility also overspent its budget last year by $800,000, she said.
“Most certainly,” Tripodi said in her memo, “the taxpayers of the city must carry the heavy burden of paying for the sins of the past.”
Timothy J. Carroll may be reached at tcarroll@hudsonreporter.com.