Four members of the Hoboken City Council have changed their vote on $1.94 million in emergency appropriations meant to cover overages on the city’s group health insurance. At a special meeting Wednesday, the council voted unanimously 8-0 not to approve the so-called emergency appropriations. Councilman Michael Cricco was not present at the meeting.
The vote is a clear indication that the members present, even those who normally support the administration and who have voted for the emergency appropriations twice before, do not have confidence that the overages were indeed “unforeseeable,” which is the statute requirement for passing an emergency appropriation.
The negative vote was despite a recent order from the state Department of Community Affairs (DCA) that demanded that they take action and approve the appropriation in order to avoid illegally overspending its approved budget of approximately $60 million.
Emergency appropriations are permitted under the New Jersey Local Budget Law after the budget has been adopted, to provide for emergencies that were not foreseen at the time of the budget adoption.
Continued opposition
The four-member minority on the council has voted against approving the new spending since the beginning. The measure needed a two-thirds vote to pass, and twice already, the council minority had enough votes to reject the emergency appropriation.
None of the four ever voted for the original budget, and for the past year they voiced their worries that group health insurance was in jeopardy of being overspent. They have also charged that the group health insurance was “deliberately” underbudgeted in order to bring in a level and stable tax rate. “These overexpenditures do not appear to have been unexpected,” wrote the four minority council members, Tony Soares, Carol Marsh, Theresa Castellano and Michael Russo, in a letter to the state Department of Community Affairs dated June 3. “For many months now this administration has been questioned closely about the serious possibility that this particular line item was being overspent.
They added that they would welcome additional DCA involvement, and would invite the state to conduct a full investigation into the city’s budgeting process.
City Business Administrator Robert Drasheff Wednesday night denied that he or the city’s chief financial officer had ever underbudgeted to shoehorn in a lower tax rate. He added that at the beginning of the fiscal year, the city had three to four million dollars in cash in the Hoboken Parking Utility reserves that could have been used to bring in a stable tax rate.
“There was no need to underbudget,” said Drasheff.
Drasheff added that, even with the overexpenditures in group health, he expects that the city will end the year with “around $7 million” in cash reserves thanks to new revenues received this year that are not reflected in this year’s budget; like $600,000 for the sale of taxi medallions and increased revenue from the municipal court. The council minority has not agreed with Drasheff’s rosy assessment that the city will end the year with a surplus.
An emergency or not?
If an emergency appropriation were to be approved, a short-term bond, which is to be paid back by the end of the next fiscal year, would have been obtained. If the Emergency Appropriation is not approved by the end of the fiscal year, the debt will be rolled over as a deficit and will still have to be made up next year.
In a monetary sense, the implication of the emergency appropriation vote has the exact same budgetary impact; either way, the money will have to be made up next year. So why is this vote so controversial?
Because it touches on whether or not this is truly an emergency that was unforeseeable. If it is approved, then it supports the notion that the administration could not have known that there were going to be cost overruns.
If the emergency appropriations are not approved, then the implication is that either a mistake in the budgeting process or worse, a possibility that the budget was deliberately underbudgeted.
In September of 2002, the city suspended then-CFO George DeStefano, who is the brother-in-law of former Mayor Anthony Russo, for allegedly failing “to adequately monitor the city budget,” which allegedly led to overexpenditures.
For months now the council minority has expressed concerns about the accuracy of the numbers presented by the city’s business administrator. Now, four of the administration’s biggest supporters, after voting twice for the emergency appropriations, have begun to question the numbers, and appear to be showing some degree of wavering confidence in those presenting them.
Sixth Ward Councilman A. Nino Giacchi, generally a pro-administration supporter, said that last year the city budgeted $8.5 million but ended up, after line item transfers and emergency appropriations, spending approximately $10.4 million on group health insurance. So why then, he asked, did the city only budget approximately $9 million this year?
“It’s clear that a mistake was made,” said Giacchi as he left City Hall Wednesday. “Not nearly enough was budgeted. We should have started the [group health] budget at least $10.4 million and gone from there.” That’s why, he said, he didn’t vote for the emergency appropriations. But he did add that, even though it is likely that this will be held over as a deficit, he is confident that there is money in reserves to pay for the overages without affecting the tax rate.
Others, like Councilman Christopher Campos, who has already twice voted for the emergency appropriation, said they have been convinced that there are “discrepancies” in the numbers being presented, and until those numbers are satisfactorily cleared up, they will not be able to vote for the emergency appropriations.
Budget transfers
Also Wednesday, the City Council voted down $232,000 in budget line-item transfers by a 5-3 vote. This item also needed a two-thirds vote to be approved. Council members Soares, Russo and Castellano voted against the item. Normally budget transfers are a relatively routine housekeeping measure at the end of the fiscal year where funds from accounts that have money left are transferred to accounts that need money to finish the year. Budget transfers are different from emergency appropriations because they are not new spending, but instead are just the moving of funds that have already been allocated into different places.
Councilman Campos criticized those who voted against the transfers and said that they did nothing more than “overtly political posturing” in an attempt to incorrectly tie housekeeping matters to administration spending. “They have no valid reason to vote against this,” said Campos. “Budget transfers are something that every major city in the state uses on a yearly basis.”
Councilman Russo acknowledged that budget transfers are normally routine, and very well may be necessary in this case. He said there has been a “breakdown of trust when it comes to getting accurate numbers.”