Doubts about receiving Distressed Cities Aid, reimbursements from FEMA, and other revenue items left the City Council acknowledging that there could be a $6 million deficit in the $340 million budget as it stands on Wednesday.
At Councilman William Gaughan’s request, the City Council sat down with the city’s business administrator to discuss certain revenue line items in the budget, items that some officials think may be too optimistic.
The first of those line items is the infamous Distressed Cities Aid that Jersey City receives from the state each year in light of its Distressed City status. The $16 million line item exceeds the reality of what the council expects. They cited $11.5 million as what the state has rattled off in recent weeks. That number, too, is considered hopeful with the state facing a $2.4 billion deficit and the incoming administration speaking of sweeping spending cuts to plug its hole.
"I know there’s a strong push in the [state] Consumer Affairs Department to get us the whole $16 million," said Carlton McGee, the business administrator.
Aside from questioning the amount of money the city will receive from the state, the City Council asked McGee to find out how it would be received. According to Gaughan, the state – which has been highly critical of Jersey City’s accounting practices in the past – uses some skewed accounting methods as well.
Last year, when the city only received $4.1 million in Distressed Cities Aid out of the $12 million requested, the state explained the difference by pointing out expenses that it subtracted elsewhere. For instance, the state decreased the amount that the city was forced to pay the state for the Police and Firemen’s pension funds by $7 million as a result of a surplus in the state’s account. Therefore, state officials said, this reduction explained the shortage in Distressed Cities Aid.
This year, the city has allotted $3.3 million for this pension fund. Gaughan wants to know ahead of time if the state is going to consider this a savings of $9 million from what the city could have spent. And if so, he wants to know, will this $9 million be subtracted from the Distressed Cities Aid?
Another item of contention in the budget has to do with the money the city expects to receive from the Federal Emergency Management Agency (FEMA) in light of the overtime accrued as a result of the Sept. 11 attacks. According to Kathleen Dealy, the city’s chief of administrative services, the city will receive approximately $1 million less than the $7.1 million listed in the budget.
She added that this shortage, which is part of the overtime the Police Department has claimed, would not be detrimental because she believes the Police Department’s budget is already padded with "fluff."
Leaving the meeting with a $6 million deficit branded in their minds, the council did not have time to scour the rest of what they considered ambiguous line items. In particular, the $16 million that the city anticipates from the Municipal Utilities Authority each year has not been realized in the past two years.
The MUA, the autonomous agency that handles the city’s sewage and water utilities, is supposed to pay $8 million to the Jersey City Incinerator Authority each year, and $8 million to the city directly as a result of a deal made under former mayor Bret Schundler’s administration. Although the MUA has paid the $8 million to the JCIA each year since the 1998 agreement began, it only paid $6 million to the city in 2000, and $4.4 million in 2001, so they still owe the city money.
If the MUA follows the trend for this fiscal year, the budget deficit could stretch to $10 million.
Choosing a Plan B
With Mayor Glenn Cunningham refusing to raise taxes, the City Council must find an alternative method for covering the anticipated budget deficit.
Council President L. Harvey Smith suggested that department directors review their expenses for the remainder of the fiscal year and cut them. However, councilpeople noted that half of the current fiscal year is over, and it would be hard to make significant cuts with only a few months of the fiscal year left.
Another possible source of revenue, according to Gaughan, are municipal court fines. According to Gaughan, many of the municipal court fines are the result of state violations. Therefore, the money goes to the state. Judges, however, could reduce the violations to city ordinances and thereby create a revenue for the city instead.
Other officials offered suggestions. Councilman Mariano Vega recommended that the city sell the historic City Hall building to a private company that would generate revenue for the city by maintaining it as a tourist attraction. Such a program would mimic a program that New York City’s City Hall is implementing, Vega said.
McGee revealed his own idea. "Sometimes as a newcomer, I think it would be better to go back to the regular [fiscal] year," he said. One of the problems, McGee said, is how the city’s fiscal year, which begins in July, conflicts with the state’s fiscal year that starts in January. By matching the city’s fiscal year with the state, McGee said that the council would not have to guess about the numbers in the budget.
Attempting to alleviate the council’s concern, McGee said that the budget holes would not be a problem and informed the council that his department is still collecting information from each department about grants that they might receive, but haven’t reported yet. He said that such grants would offset the budget deficit. "There’s going to be many amendments to the budget," McGee said, "and there won’t be any surprises."
The council, however, said that it could not count on those grants until they were guaranteed.