City Budget: Mayor introduces $57.3M budget Is likely to include layoffs; tax rate stable

Mayor introduces $57.3M budget
08/31/2003 Hoboken Reporter

Is likely to include layoffs; tax rate stableĀ 

At a brief meeting of the Hoboken City Council Tuesday, the city's governing body voted to introduce Mayor David Roberts' $57.3 million 2003 to 2004 municipal budget.

The mayor's preliminary budget is significantly lower than the $62.8 million spending plan that was approved for the 2002-to-2003 fiscal year, which had been a big increase over the previous year. The new budget also is a couple of hundred thousand dollars less than Roberts' first budget in 2001.

The tentative spending plan covers expenditures from July 1, 2002 through June 30, 2003. The city is on a fiscal, rather than calendar, year. Many government entities are like Hoboken and run on fiscal years, although locally, the town of Secaucus runs its budget from January through December.

The City Council has scheduled a public hearing on the budget for Oct. 1 at 7 p.m. Copies of the preliminary budget are available at the City Clerk's office in City Hall. There may be a photocopying charge.

Tax rate stable, levy higher

Last year's budget needed $17.5 million to be raised by local property taxes. The budget that was introduced Thursday calls for $18.4 million to be raised in municipal property taxes. According to city Business Administrator Robert Drasheff, that $900,000 increase in the tax levy should be offset by new ratables, or taxpaying properties, that come on line. If there is new taxable property in the city, each property owner pays a smaller percentage of the $18.4 million.

According to Drasheff, the tax rate will remain stable at approximately $7.84 per $1,000 of property owned.

"This budget is significantly lower than last year's, when we had to reconcile over $4.7 million in expenditures from the previous administration, and is less than my adjusted budget of 2002," said Roberts in a budget statement Tuesday. "I have reduced the cost of legal and accounting fees by more than $2 million during the course of my administration. I am also seeking to continue to reduce other city expenditures, such as overtime, now and into the future."

The savings

The reduction in spending from last year to this year comes from two major sources, said Roberts. "This is an austere budget which calls for a $2.7 million reduction of the municipal payroll and a taxpayer savings due to the refinancing of the city's General Obligation Bonds to benefit from the historically low interest rates," he said.

According to Drasheff, the $2.7 million in salary and wage cuts will be "across the board" in all departments, including fire and police, sanitation, human services, administrative and the Parking Utility. He added that the only departments that will likely be left untouched are the public library and the Finance Department.

At Tuesday's meeting, there was a large number of police, fire and municipal employees in audience. All six of the city's unions have voiced their objections to layoffs.

According to Drasheff, the exact number of employees that will be laid off is not yet known for several reasons. First, the city is considering offering an early retirement package that could offset layoffs. Drasheff said that between 40 and 60 employees are eligible for an early retirement package.

Another reason that the exact number of layoffs is not known, said Drasheff, is because new revenue might materialize in the next month. For example, the City Council recently voted to approve $7 million in bonds to refinance an early retirement incentive program from the 1990s. The refinancing allows the city to take the savings upfront, approximately $1 million, which was not included in the budget that was introduced Tuesday.

Another possible revenue source that might materialize is additional state aid. The city recently applied for $1 million in extraordinary state aid. Last year the city applied for $4 million in extraordinary aid and received $500,000. The state should announce with the next month the amount, if any, that the city will receive.

Drasheff added that if the council wants, it can use some of this newfound revenue to offset layoffs. Several council members have recently expressed interest in using some of these funds to save jobs.

But even if all these funds are used, Drasheff said there are going to be layoffs coming. He said the target date for the layoffs is tentatively scheduled for Oct. 25.

Bond refinancing

Another controversial part of the budget is the refinancing of the city's general bonds. The budget anticipates the passing of a $55 million bond ordinance in September. The bond issue is divided into two parts. Approximately $40 million of the bond will go to refinance the city's debt, while the rest, around $15 million, will go to capital improvements.

According to Drasheff, most of the city's current debts are financed at relatively low levels and there will be "no net savings" from refinancing. But what the refinancing does is extend the period of the loan for seven years, which lowers the city's annual debt service.

Drasheff said without refinancing, the city would have to pay around $6.3 million in debt service next year, but with the refinancing, the city will only have to pay $4.1 million. He added by leveling future payments, the city will not be at the mercy of future "spikes" or fluctuations in the city's debt service.

The additional $15 million in capital improvement projects will pay to acquire open space and build a new municipal garage and a new central fire station.

"The bond issue will allow the city to reduce annual debt payments while providing the municipality the capital to undertake three key projects," said Roberts, "the acquisition of open space for recreation and the development of a new Public Works garage and a central fire station."

The mayor's critics say that by extending the period of the loan, the mayor is leveraging the city's future for temporary budgetary relief. Opposition councilpersons Carol Marsh, Tony Soares and Theresa Castellano have also criticized the mayor for asking for $15 million before actually showing the council plans for the capital improvement projects.

"It's like they are pulling the cart before the horse," said Soares, who has also said that until he sees concrete plans for these projects, he will continue to worry that the money will go to "to save the mayor's budget."

No go on packaging health care

Last week, Roberts said that he was going to produce a $56.8 million budget, but by Tuesday the budget had grown to $57.3 million. The reason for the $500,000 increase is because Blue Cross and Blue Shield, the city's health care provider, has decided not to offer a deal that would allow the city to prepackage three years of insurance.

Earlier this year, for the first time, Blue Cross/Blue Shield was offering municipalities the option to buy three years at once. The advantage is that the city would be able to lock in one rate.

The problem is, said Drasheff, that nearly every municipality in the state that uses this insurance provider inquired about the deal.

"[The package] was more popular than they thought it would be, which caused them to get cold feet," said Drasheff. "They have decided to take a step back and reassess the program."

Because of this, Drasheff had to plug the anticipated savings back into the budget this week, increasing the budget by $500,000.

Parking money

Last year, the administration took a lot of heat when it took $8 million from the reserves of the now defunct Parking Authority. On Jan. 1 of this year the city absorbed the semi-autonomous agency and created the Hoboken Parking Utility.

At the time, critics said that the mayor was using reserves marked for capital improvement projects for plugging a budget gap.

Now this year, the Parking Utility is part of the city, noted Drasheff, and the municipal government is able to use the utility's profits in the general budget and the preliminary budget for the first time.

He added that he does not anticipate raiding the remaining approximately $3 million in Parking Utility reserves. He also said that he expects the Parking Utility to generate $5.3 million in revenue in the 2003 to 2004 fiscal year.

"The [money the city makes from the Parking Utility] is no longer a one-shot revenue source," said Drasheff. "Now that it is part of the city we can anticipate this money every year, which basically closes the city's structural deficit."

He added that in the budget that was introduced, the city's structural deficit is only $1.5 million. He said that the only one-shot, non-recurring revenue is a onetime mortgage payment from owners of the Rue School building. A structural deficit is when the city's annual revenue is less than its annual appropriations, making the city rely on non-recurring revenue sources to close the gap.

Even if the $1 million in cash from the retirement financing and $1 million in extraordinary state aid are included in future budget drafts, the city structural deficit will not be more than $3.5 million.

"For the first time in a long time we are going to be successful in stabilizing revenue," he said. "There are going to be people that are going to say that there's over a $10 million structural deficit, but this budget proves that's just not case."

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