City Budget: Mayor to present $55M bond issue; says layoffs are coming, but so is money for parks

Desperately seeking one vote

Mayor to present $55M bond issue; says layoffs are coming, but so is money for parks 
07/27/2003 Hoboken Reporter
BUSY LOBBYING - Mayor David Roberts is preparing to present a $55 million bond resolution before the City Council.  

In what is shaping up to be a defining moment in Mayor David Roberts' administration, he will likely present a $55 million bond resolution to the Hoboken City Council in the near future, but passage of it hinges on one vote.

According to the mayor, the proposed $55 million bond will pay to refinance the city's $40 million in outstanding bonds at a lower interest rate, fund an early retirement incentive package for public safety and other municipal workers, purchase a three-year health insurance package, buy "between 8 and 10 acres" of land for open space, build a new municipal garage, and construct a new central fire station.

"Now is the time to borrow," said Roberts. "Interest rates aren't going to get any lower than they are today, so it is time to act."
But there is a catch to Roberts' plan.

As of Thursday, he didn't have the have the six votes needed to pass a bond, and his opposition has been highly critical of the mayor's fiscal policy. Roberts only has a 5-4 majority on the City Council.

Over the past several weeks, Roberts' critics have been hesitant to approve bonds that the mayor supports. They recently opposed a $7.4 million bond to refinance a $6.2 million debt from a 1990s early retirement incentive package. The mayor wanted to use the interest savings to borrow an extra million upfront and use the cash to close the city's structural deficit. The four opposition members were not going to vote for the mayor's plan, and the resolution was tabled.

The opposition believes that the mayor talks of belt tightening and austerity but has not yet delivered on that promise. Last year, the city budget increased dramatically from the year before.
Second, they said, the mayor is asking for millions in cash but hasn't presented any plans for capital improvements.
Thursday, Roberts told the Reporter that he is ready to address both of those concerns.

Ready for cuts

According to city Business Administrator Robert Drasheff, the administration will present the 2003-2004 budget to the City Council during the second half of August. The fiscal year runs from July 1, 2003 to June 30, 2004. Last fiscal year, the city spent nearly $65 million.

"There are going to be significant cuts in this year's budget," said Roberts. "That's a promise."

He said that he and Drasheff are "formulating a layoff plan."

"There are going to be layoffs," said the mayor. He added that there realistically could be layoffs in every city department. According to Drasheff, as many as 100 layoff notices could go out shortly.

Layoff notices are not pink slips, but rather warnings that the city is considering layoffs. Once the notices are handed out, the state must approve the city's plan. That is a process that takes at least 45 days.

The mayor said that the administration is also developing an early retirement package.

Other cost-cutting measures the mayor is considering are the restructuring of city departments and the possible privatization of some city services, although he said it is premature to announce specifics.

How the money would be spent

Roberts said Thursday that he has a "prudent" plan to use the $55 million bond. Most will be spent on refinancing the city's $40 million in bonds. Drasheff said that it is likely that bonds will be refinanced at "4 percent and change."
He added that it is his proposal to extend the term of the bond, which will have the effect of lowering the yearly debt service. According to Roberts, in the 2003-2004 fiscal year the city is scheduled to pay $6.5 million in debt service. He added that if the bond ordinance is approved and the term is extended, the annual debt service can be reduced to less than $4 million a year. But of course, the city will have to pay for a longer period of time.
The $55 million bond will also be used, said Roberts, for the acquisition of new public open space. "We are now in the process of finalizing a plan for the acquisition of open space," said the mayor. He said that "by any week now" the administration will formally present a plan to the council.

Thursday he flipped through a draft of the plan in front of the Reporter to prove that it does exist and is nearing completion. He added that to he would like to spend around $5 million for land acquisition.

"Optimally we would like to purchase around 12 acres of land, but given the condition [of the real estate market] that might not be feasible," said the mayor. "Realistically we believe we will be able to buy between 8 and 10 acres of property to use for parks and open space."

"The critics say to show them plans for a park," said Roberts. "Well that's exactly what we are going to do."

The next project the mayor would like to undertake is the construction of a central firehouse. According to Drasheff, the firehouse most likely would be built at 722 Grand St., the property which the EDA just recently finished decontaminating for mercury. Drasheff added that building a central firehouse would allow the city to close the outdated firehouses at Eighth and Clinton and Second and Jefferson. Roberts said that the city could then use those buildings for other matters. Roberts said that project could cost around $5 million.

Also, the bond would pay for, said Roberts, the construction of a new municipal garage in the far northwest, formerly industrial, corner of the city. Currently the garage is on Observer Highway.

"Our current facility is too old and inefficient," said Drasheff about the need to build a new garage. He added the property where the current garage sits is extremely valuable and could be sold for a handsome price. The mayor said this project will also cost around $5 million.

Roberts said the bond will also pay upfront for three years of health insurance. According to Drasheff, in the past it has been traditional for the city to purchase health insurance one year at a time. This year, for the first time, Blue Cross/Blue Shield is offering municipalities the option to buy three years at once. The advantage is that the city gets to lock in one rate. Over the past three years, there has been nearly a 20 percent increase in rates each year. Drasheff said savings could average out to $800,000 a year.

Still skeptical

While they did not outright say they will vote against the bond resolution, Roberts' critics said last week that they are very skeptical about bonding for $55 million.

Councilman Tony Soares said Thursday that the mayor has not contacted him about the bond issue.

"They seem perfectly willing to go to the press, but the fact is that they haven't even called us yet [about the bond issue]," he said, "and we're the ones that are going to be voting on it."
He added that the mayor is asking for $55 million, but he hasn't seen one plan for a park, or new construction.

"They are putting the cart before the horse," said Soares. "Let him cut the budget first, and then we will think about it. Let him show us plans for these parks before we approve the borrowing of millions of dollars in cash."

Soares added that he is also not confident that there is really a need to refinance the city's debt.

He pointed Ernest and Young's June 30, 2002 audit which lists the interest rates for all of the city's loans. According to the audit, well over $30 million of the city's outstanding bonds have an interest rate of between 4.15 percent and 4.75 percent. Soares said that he is not convinced that refinancing will save a substantial amount of money, if any money at all.

He also speculated that the administration's real motive might to extend the term on the loan, thereby lowering the city's annual debt service, which would free extra revenue for the mayor to spend in his budget.

Drasheff responded that the city will "most definitely" reap savings by refinancing the debt at current interest rates.

Next one August 6

Councilman and former Mayor Anthony Russo also expressed his concerns. In the past he has been highly critical of the mayor's spending habits. He said he fears the bond issue might be an excuse to spend more money on operating expenses and temporally fill the city's budget gap. Last year, the city filled it with $8 million that the Parking Authority had saved, which they were able to do after the city took over the agency.

The next City Council meeting is scheduled for Wednesday, August 6, at 7 p.m. although it is possible that if the mayor knows he has six votes, a special meeting could be called sooner. 

Roberts to meet with business leaders

Mayor David Roberts has invited six regional business leaders, including former New Jersey Commerce Secretary Gualberto "Gil" Medina, to consult on the municipal budget and long-range financial opportunities for the city.

"Hoboken has a wonderful opportunity to utilize some of the sharpest minds in the business community to work with the city in its budget and strategic economic planning," said Mayor Roberts. "I look forward to working with these individuals as we move forward in our budget process in a time when the national and regional economies are uncertain."

The group will consist of Medina; William J. Pesce, president and chief executive officer of John Wiley & Sons; John Wessling, president of Hoboken-based Haven Savings Bank; John Parchinsky, president of the Hoboken Chamber of Commerce; Joe Covello of the Hoboken Taxpayers' Association, and Sean Sovak, Chief Acquisition Officer of W.P. Carey & Co.

The group is scheduled to hold its first meeting on August 1.

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