Tell the council what you think. Budget and bond restructuring hearing to be held Wednesday

Tell the council what you think

Budget and bond restructuring hearing to be held Wednesday
09/28/2003 Hoboken Reporter 

This Wednesday's Hoboken City Council meeting should be one of the more interesting and contentious meetings of the year.

The city's governing body is scheduled to hold a public hearing for the city's proposed $53.7 million budget for the 2003-2004 fiscal year. Also, the nine-member board will hold a public hearing and a final vote on a controversial proposal by Mayor David Roberts' administration to restructure the city's debt.

The hearings are scheduled for 7 p.m. Wednesday, Oct. 1 at City Hall. Copies of the budget are available at the City Clerk's office.

The budget

Last year's budget needed $17.5 million from 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, the $900,000 increase in the tax levy should be offset by new ratables, or taxpaying properties, that come to fruition. 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.

"We have gone through great lengths to show this council that we are keeping costs down and are going to hold the line on spending," said Roberts Wednesday.

The 2003 proposed budget calls for $53.7 million in spending, of which the bulk goes toward municipal salaries and benefits. Most of the salaries are in the police and fire departments, where the police are scheduled to make $12.14 million and fire department employees are scheduled to make $9.06 million in salary. Combine the salaries of the two branches of public safety and they make up approximately 38 percent of the budget.

The $53.7 million is significantly lower than the $62.8 million spending plan that was approved for the 2002-2003 fiscal year, which had been a big increase over the previous year. The new proposed budget is essentially equal to Roberts' first budget, fiscal year 2001.

While taxes with this budget remain stable, the budget is not without debate. Much of the budgetary savings comes from $2.7 million in salary and wage cuts. It has not been announced exactly which positions are going to be laid off, but the layoffs will be across the board and will include cuts in fire, police, Environmental Services, Human Services, Administration, and the Parking Utility, according to city officials.

According to Business Administrator Drasheff, the only departments that will remain untouched are the public library and Finance Department.

The heads of all six of the city's municipal unions have spoken out against the proposed cuts. It's likely that there will be a large number of city workers and union representatives at Wednesday's meeting to speak out against proposed cuts.

According to Drasheff, the council's Revenue and Finance Subcommittee will be holding at least one meeting between now and Wednesday to discuss modifying or possibly reducing the numbers of cuts. Until a final vote is taken, the council has the ability to amend or adjust the budget.

According to Drasheff, several minor amendments to the budget may need to be made Wednesday. If that does occur, then a final vote on the budget will have to wait until mid-October.

The city's layoff plan could be approved as early as Oct. 20.

Another method of savings, according to Drasheff, is that in last year's budget the city had to reconcile $4.7 million in overexpenditures from past years. Those overexpenditures, said Drasheff, have been taken care of, creating significant savings in this year's budget.

Roberts said Wednesday that his administration has cut professional services contracts by over $2 million and overtime by more than a $1 million over the course of his administration.

Roberts makes his case

The most controversial aspect of this year's budget is Roberts' intention to restructure the city's debt. The administration wants to lower the city's $42 million in debt payments by $11 million over the next five years by restructuring the debt. But to do this, the city must extend the period of the loan by almost eight years at a higher interest rate, costing the city $18 million in additional spending on the back end of the bonds, which according to Drasheff equates to around $2.5 to $3 million current monetary value.

Roberts said Wednesday that the restructuring is necessary to deal with an approximately $3 million leap in the city's debt service between last year and this year, which essentially doubles the city's annual debt service.

"I would challenge any business to have their debt service double in one year and still be able to keep afloat," said Roberts from his City Hall office. "What we are doing is similar to what a family does to get their credit card debt under control."

In selling his plan, Roberts added that the debt is too "onerous" of an increase to handle at once, so the restructuring is necessary. "By extending the terms of the city's debt," he said, "we are going to be able to stabilize costs. In doing so, tax ratables can catch up to the city's bottom line."

Roberts added that the anticipated increase in future revenues will more than offset the additional costs of the restructuring. He pointed to approved developments in the northwest section of town, as well as the following developments: a hotel and office building on the southern waterfront; the Monroe Center for the Arts; 1200 Grand St.; the Maxwell House project on the central waterfront; the expansion of the Hudson Tea Building project, and others. "Even with the most conservative projections," Roberts said, "Hoboken's overall value will rise from $4 billion in 2004 to over $8 billion in 2010. I highly doubt that any other city in New Jersey will double its value in the next six years."

Roberts' third argument for the bonding issue was that even with the bonding, the city is well under its spending cap. According to Drasheff, a municipality is allowed, by state law, to bond for up to 3.5 percent of its total value. If Hoboken is worth $4 billion in assessed value, then Hoboken could have $140 million in bonds. Currently Hoboken has around $42 million in debt. "We're only using a small fraction what we are allowed," said Roberts. "That proves that the fiscal health [of Hoboken] is sound."

Still many critics

The mayor's argument that future anticipated revenue from new development should offset the increase in cost doesn't carry weight with the mayor's opponents. Councilwoman Carol Marsh responded by saying that expansive development over the past 10 years hasn't resulted in a lower annual budget. In 1993, near the beginning of the development boom, the city's budget was $44 million. Last year's was $62.8.

"Has all this development done anything to improve the budget situation [in the past decade]?" asked Marsh. She added that it's an incorrect assumption that an increase in new ratables and an increase in assessed value correlates to lower taxes or lower spending in the future.

She added that spending $18 million to lower debt payments for the next couple of years is entirely too big a price to pay for keeping taxes down now.

"We could spend this $18 million for open space or to hire new police officers," added Marsh, "but instead we are going to use it to pay off a 30-year-old debt."

Another criticism is that the bond will be refinanced at a higher rate, a relatively odd occurrence when refinancing. According to the Ernst and Young's June 30, 2002 audit, which lists the interest rates for all of the city's loans, well over $30 million of the city's outstanding bonds are currently financed at an interest rate of between 4.15 and 4.75 percent. According to the audit, only one $2 million bond was financed at almost 9 percent, so most rates are lower than the 5.75 percent that the city estimates it will get as the rate for the proposed refinancing.

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