User fees are common in all New Jersey towns, but in tourism-dependent Cape May County, municipalities rely heavily on the revenue they bring in.
Now, state legislation that would cap a town’s ability to increase the fees as a way to circumvent a 2 percent cap on tax-levy increases worries many Cape May County towns.
The city of Cape May raises almost 50 percent of its annual budget through beach tags, parking meters, room taxes, parking tickets and other fees. The state shares in the fees, taking $20.50 of each $32 parking ticket, as well as a large share of the 7 percent room tax; the state gets 5 percent, and the city gets 2 percent.
The proposed legislation, supported by Gov. Chris Christie and sponsored by Democrats and Republicans, would limit increases in user fees to 2 percent per year, a prospect that concerns many towns, but none more so than shore and destination communities, which cite the increase in services they must provide during the summer in justifying their user fees.
In Cape May, for example, the year-round population is 3,600 people, but on a summer day there can be 45,000 visitors in town, City Manager Bruce MacLeod said.
Without the fees, MacLeod said, towns would have to increase property taxes or eliminate services.
The legislation could have other unintended consequences.
MacLeod said the city has a high bond rating because of user fees, which raised about $7.4 million last year. Without the fees, there would be less money in surplus and the bond rating would go down. Debt-service payments would increase.
The budget line item “miscellaneous revenues” in most shore towns is made up of user fees.
Last year, Ocean City led Cape May County in collecting the fees, at more than $21 million, followed by Avalon at $10.4 million and Sea Isle City at $9.8 million.
Wildwood Crest Administrator Kevin Yecco said the major factor increasing municipal budgets was labor costs — mostly police and fire — but user fees help towns balance their budgets within the 2 percent cap on tax-levy increases.
The borough, which collected $7.3 million in miscellaneous revenue last year, has mercantile licenses, parking meters, ambulance fees and charges for use of the community swimming pool. Wildwood Crest employs 80 lifeguards but has no beach fees. It picks up trash from 10,000 units in the summer, up from 1,500 in winter, but has no separate trash fee.
Ocean City, which sees its year-round population of 11,700 increase to as much as 135,000 on a summer day, charges fees for use of the municipal airport, beaches, parking, a boat ramp, a swimming pool and fitness center and other facilities.
Frank Donato, Ocean City’s chief financial officer, said the fees were fair, although he said everyday uses such as trash removal, police and fire services should not have separate user fees.
The legislation arose partly because Medford, Burlington County, wanted to create a user fee for trash collection to come in under the 2 percent cap on property-tax levies, Donato said.
“This is a reaction to Medford. One bad apple is not fair to the rest of the towns that play by the rules and charge for logical items that are fair and reasonable, Donato said.
The state already limits tax-levy increases to 2 percent per year. Senate bill S-1914, approved in a 31-0 vote in May, and Assembly bill A-2975, which is in committee, would put user fees under such a cap. State Sen. Jeff Van Drew, D-Cape May, Cumberland, Atlantic, supported the bill as a way to prevent towns from getting around the cap.
But Van Drew said he was told the bill would grandfather in existing fees.
The legislation is actually very vague, referring to “traditional municipal services.” Local officials say they are unsure whether that would include things such as beach tags and parking meters.
The New Jersey State League of Municipalities opposes the legislation partly because of the lack of details, said Lori Buckelew, the league’s legislative analyst.
Cape May has asked Van Drew to submit to the state Office of Legislative Services specific questions about the legislation’s effect, a request to which the senator agreed.
Shore towns also want to know whether there will be a cap bank, something not discussed in the bill. Such a bank would allow towns to increase user fees 1 percent one year and 3 percent the next, as long as it averages 2 percent per year.
Donato said Ocean City just raised seasonal beach tags from $20 to $25, a 20 percent increase, but hadn’t had an increase in more than five years. Airplane tie-down fees went from $10 to $12, also a 20 percent increase, but it had been more than 10 years since the last increase.
A big concern in shore towns is being micromanaged by the state and losing flexibility in the budget process, especially when the state imposes user fees that are not under a cap.
MacLeod noted the state has doubled tolls on the Garden State Parkway.
Point Pleasant Beach Mayor Vincent Barrella said his Ocean County town of fewer than 5,000 residents received about 2 million tourists, and last summer “we experienced an enormous spike in ‘Jersey Shore’-type behavior.”
The 21-member police force adds 88 special officers in summer at a cost of about $400,000. Trash collection goes from twice a week to seven days a week in some areas during the summer.
“Is it a traditional municipal service for a town of 5,000 people to have 109 law-enforcement officers?” Barrella asked.
Cape May has a separate budget for the beaches, called the Beach Utility Fund, and beach-tag sales pay for lifeguards, tag checkers, replenishment projects and other costs. But revenue from tag sales also funds Public Works ($188,000), police ($74,000), and fire and emergency medical services ($37,000) because of the work those departments do on the beaches.
Just recently, the city set up a Tourism Utility to make sure fees to use the new Cape May Convention Hall pay for the costs. MacLeod said the goal was to match revenue streams with the associated costs of the service.
The revenue fees are needed, MacLeod said, to make up for a 35 percent decline in state aid over the past five years.
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