Garage sale fails. City must find $7.9 million or look to taxes, layoffs.

Garage sale fails

City must find $7.9 million or look to taxes, layoffs

02/06/2005 hr $7.9 million dollars?

At a raucous City Council meeting Wednesday, the council was unable to pass Mayor David Roberts' proposal to sell the municipal garage to the Hudson County Improvement Authority, a quasigovernmental agency. The intent was to use $7.9 million from the sale to plug a budget deficit.

Wednesday's vote required six of the nine council members, but only five of them voted in the affirmative. Thus, the council must find $7.9 million in new revenues for the 2004-2005 budget. Options include making drastic cuts to the municipal workforce or raising the municipal portion of the tax levy by over one-third, all of which could be burdensome considering there are only about four months left in the fiscal year.

They're also not happy prospects for Roberts, who is up for re-election in May.

Roberts said that by not voting for the sale, the council minority are being obstructionists who are quick to criticize but who haven't come up with ideas of their own to generate new revenues.

The council minority said that they have made suggestions, which have been ignored, and that the mayor and the administration are to blame for increases in spending.

What's this all about?

Roberts' municipal budget, which was first introduced in September, had a sizable deficit of about $18 million. To fill this gap, Roberts came up with what he has called "innovative" revenue streams; such as front-loading Payment in Lieu of Taxes (PILOTS) from the Port Authority and NJ Transit for $5 million.

But the most controversial item has been the mayor's proposal to sell the municipal garage and use $7.9 million of the proceeds to fill the deficit.

The city would sell the garage on Observer Highway to the HCIA, who then would lease the property back for an annual rent equal to the interest on the HCIA's bond, about $250,000 per year. If the HCIA in the future decides to sell the garage to a third party, the city will receive any money above the original sale price.

Why would the city do this? According to state statutes, it's illegal to go out of bond to pay operational expenses. But by selling the garage and then leasing it back, it's essentially a back-door loan, with the garage being used as collateral.

The final vote on the sale of the garage was 5-3, with Councilman Michael Russo absent. The five council members that voted for the sale generally support Roberts, and those who voted in the negative do not. Because the vote needed a two thirds majority, it failed.

Minority are vocal critics

On Hoboken's nine-member City Council, there is a vociferous four-member minority that has consistently said they believe selling an asset, in this case the garage, to pay operational expenses is a bad idea.

"It's like chopping up your furniture and using it as firewood to heat your house," said Councilman Tony Soares Wednesday night.

The council minority also has stated that the mayor is trying "to brush under the rug" how much his administration is spending and is too willing to pay for current spending in future years.

"You just don't sell off your assets without having a plan," said Councilwoman Carol Marsh, who is said to be running for mayor. "The only thing they planned was to plug this budget. What they did was send this garage to a big pawn shop."

Marsh responded that she is no longer going to pay the bills for Roberts' "overspending."

Cause and effect

Now that the City Council has voted down the sale of the garage, what happens next? According to City Business Administrator Richard England, unless some source of revenue is approved by the council, the governing body could make cuts to the workforce. But given the late date in the fiscal year, "a 30 percent cut in head count" would only save around $2 million, he said. The second option would be a substantial increase in the municipal tax levy. The third option, England said, would be a combination of new revenues, budget cuts, and a tax increase.

According to the unapproved budget, $7.9 million would represent over 10 percent of the $71 million proposed budget. Even more interesting, $7.9 million represents over a third of the approximately $19 million proposed municipal tax levy. If the city cannot find new revenues or make cuts, the tax levy could conceivably jump to nearly $27 million.

Mayor paints a different picture

Roberts Thursday morning characterized the council minority as "obstructionists" who are willing to hurt the taxpayers so they can score political points at his expense.

"They have had the budget since September, and they have been silent," said Roberts. "I welcome their ideas, but they have yet to produce a single revenue generating idea and haven't offered a single substantive cut in the past six months."

England said Wednesday night that he has invited the council minority to go over the budget, but as of yet, they haven't taken him up on the offer.

"I've invited [the council minority] as individuals and have made myself available in the evening, during the day, whenever would be convenient for them," said England.

Roberts added that in the past year, he has done what he can to find revenues and cut spending. "Just recently we went toe to toe with the city's unions over health care," said Roberts. "Through negotiations, the city was able to save over million in health care costs. And while we did this my opposition was nowhere to be found."

Roberts added that he has been able to use his good relationship with the Port Authority and NJ Transit to reach a deal where they front-loaded their PILOT payments. "While I've been working hard, they haven't lifted a finger," he said.

Before or after the election

Politically speaking, the budget's timing will have a real impact on the May mayoral and City Council elections. In January, the city sent out tax bills for the third and fourth quarters, even though a budget has not been approved. That tax bill was under the assumption that the budget was fully funded.

Now that the sale of the garage has fallen through, at least for now, what happens with those tax bills?

The council minority believes that the tax bills should be voided, and new bills should be sent out. If the council doesn't have a change of heart for the garage sale, and can't make cuts or find new revenues, then there is going to be a sizable increase in the fourth quarter tax bill.

Some council members said the tax bills should not have been sent out before the budget was struck. But Hoboken CFO Louis Picardo said Wednesday night that he had talked to an official at the state Department of Community Affairs and was given the OK send out the tax bills.

Roberts said that the obstructionists will be at fault if taxes go up.

But Marsh noted that during Roberts' first year in office, he raided the Hoboken Parking Utility for $9 million. Later in his term, he refinanced the city's debt at a high interest rate for a longer term to save some money upfront. Now, she said, Roberts wants to sell off city assets to fill a budget hole.

"He has already raised taxes," Marsh said. "Now it's just a question about when we get the bill."

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