Most area municipalities have just caught their breath from preparing this year’s budget, and it’s still five months before it’s time to prepare more, but already some local governments are forecasting deep cuts and steep challenges for next year.
The recession, which has depressed property values, along with an increased demand for services and a new state-imposed 2 percent cap on property tax levy increases could make the the budget battles of 2011 worse than this year’s.
In July, Hamilton Township was projecting a $2.4 million shortfall for 2011, a cut so severe its administrator cited it as one of the reasons he would retire early at the end of the year.
Egg Harbor Township just passed its 2010 budget, which included $2.5 million in cuts and a 10-cent tax rate increase, but officials there already know 2011 won’t be any easier. One indication: last year it had $2.4 million in surplus, this year it has just $685,000.
“That seems to be the same scenario that’s being repeated up and down the state, whether you’re talking about an urban, suburban or rural municipality,” League of Municipalities Director Bill Dressel said of projected shortfalls and the decline surplus funds that municipalities began to rely on during the boom years to keep taxes low. “All of this comes at a time when there (is) a depressed real estate market, and the property tax revenue is the only source of revenue that municipalities, under law, have to be able to provide the basic quality-of-life services.”
Those services can be anything from leaf collection to street sweeping, from maintaining recreation fields to how long one must wait at town hall for a marriage license or birth certificate.
The challenge for local governing bodies in the coming months will be determining what they need to provide for residents and which services they will need to cut, start charging for or even privatize, Hamilton Administrator Ed Sasdelli said. As more employees leave or are laid off, wait times for services will increase, and some programs beyond what the state mandates could be cut altogether. Among those nonmandated services are animal control, senior programs, recreation, holiday decorations, community events, swimming programs, leaf pickup and drug education programs, he said.
“There’s no way this municipality or other municipalities can continue to offer the existing levels of service,” he said. “That’s going to be the big decision, which ones we’re going to cut back.”
Less from development
Many area municipalities rely on surpluses to pay toward the next year’s budget, using money that comes in from construction and building fees as well as other revenue. For the past few years, Egg Harbor Township put millions of surplus money into the budget to moderate tax increases.
A downturn in development and construction has made generating additional money nearly impossible for other area towns as well. In Hamilton Township, Sasdelli said, its surplus is down to $816,000, less than a third of what it was at the beginning of the year. “Economic development, whether it’s ratables or construction fees, ... when building stops, all those things go away,” he said.
Stafford Township, Ocean County, Administrator James Moran said his municipality had to use all of its roughly $3.2 million in surplus funds this year to cover a shortfall in revenue.
“It’s a real issue for us moving forward, because we may not generate enough revenue to replenish those funds,” Moran said. “Obviously, if we don’t have enough money to cover our costs, we’ll have serious problems.
Galloway Township officials have just started looking at next year’s budget projections, but Chief Financial Officer Jill Gougher said she’s already projecting a major shortfall because this year’s budget used $2.5 million in surplus money that likely won’t be there next year. Because of that, Gougher said, she expects the township will have a nearly $3 million deficit, or 13 percent of the current operating budget. Of that deficit, $1.2 million is from the township deferring school taxes from 2010.
To deal with that, Gougher said, the township may have to make additional cuts or find new revenue sources, such as land sales or sharing services with neighboring municipalities. “This is definitely the most extreme I’ve seen,” she said. “It’s not unique to Galloway. It’s statewide.”
Galloway Mayor Keith Hartman said his goal is for the township to make its cuts without residents noticing, that services stay the same and taxes don’t rise, but if that doesn’t occur, services will be reduced. All the township’s collective bargaining agreements are up for renewal at the end of this year, and officials already are meeting to find ways to save money, Hartman said. Additionally, the township just met with school district officials to find ways to combine certain services as a way to save money for both entities, Hartman said.
Less from state
In addition to local revenue problems, almost every municipality is pointing at the state, which cut how much money it reimburses localities from energy tax receipts and state aid. “Then when things couldn’t get any worse, the governor imposes a 2 percent cap on how much you can raise for local property taxes without really enacting the management reforms and the mandate-relief proposals that are necessary to help offset the reduction in state aid,” Dressel said.
That cap provides exceptions for certain expenses, namely health care and pension payments, Dressel said. But last month, the state approved a 12 percent rate increase for the state-run health plan for municipal workers — the plan to which some area municipalities and school districts switched to save money.
Due to the tax-increase cap, Sasdelli said he expects property tax rates will increase between 2.5 percent to 3 percent. He does not expect the township to ask voters to approve a tax rate increase above the cap.
But Egg Harbor Township Mayor James J. “Sonny” McCullough said he expects next year’s budget will have to go to a referendum and residents will have to make the decision as to which services they want to continue. “Because of the tax levy (increase cap), we don’t have the income. We’re faced with that situation again,” McCullough said. “I think the voters should have the option to decide which direction they want us to go.”
The township was warned by auditor Bob Swartz last week to start preparing now for 2011, that the financial situation would be difficult at best. Business Administrator Peter Miller said township officials would start looking at income from the first six months of 2010 this week and until that was analyzed, there was no way to forecast the 2011 budget situation, other than it would be tight.
McCullough said he sees programs such as leaf collection and bulk trash pick-ups becoming likely victims to budget cuts and expects there to be fewer police officers and public safety programs. “All those types of issues are issues driven by manpower,” he said. “And if you don’t have the manpower, then you don’t have the program.”
‘It’s just shrinking everything’
Unlike most municipalities in the state, Vineland works on a fiscal-year budget that begins July 1.
Vineland Chief Financial Officer Roxanne Tosto said while officials in the state’s geographically largest city are still trying to piece the fiscal year 2011 budget together, they know the next budget will be more difficult.
“As things begin to shrink, meaning state aid begins to shrink and our budget begins to shrink, you become limited as to what you can replenish year over year, and whether you can replace the surplus you use,” Tosto said. “What you want to happen is to remain on an even keel. With reductions in revenue and state aid, it’s just shrinking everything.”
The city is putting $3.5 million in surplus funds towards the fiscal year 2011 budget. That’s up from $2.8 million used in the last budget. The end result is $4.2 million left in surplus funds. “Five million to $6 million, with a city of our size, is where we would probably feel comfortable,” Tosto said.
Work on the next fiscal plan — which includes the difficult task of cutting money from already pared-down departmental budgets — will begin once the proposed budget is in place, Tosto said. “It’s very prudent for us to continue to look at ... possible cuts in the next fiscal year budget,” she said.
Tuckerton, a tiny Ocean County borough, does not have the growth potential other municipalities have and therefore can’t generate much additional money through adding ratables, Chief Financial Officer Laura Giovene said. “We usually use exactly the surplus we created to offset the tax rate in the budget.”
But this year, using all the surplus money may not be enough to prevent losing services, she said.
“There are a lot of assessments being challenged. Our biggest rate payer (Bartlett Landing Apartments) just won their tax appeal, which relates to nearly a $50,000 loss in tax revenue for us right off the bat,” she said. “And for us, it’s not easy to cut $50,000. That’s an employee. … We’re not a big town with a large budget, and we don’t have a lot of projects going on with crazy spending. So unfortunately, the only area that leaves us to make any cutbacks is in salary and wages, which means potential layoffs. You almost have to pray for someone to quit or retire before next year so that doesn’t have to happen.”
Staff writers Robert Spahr and Thomas Barlas contributed to this report.
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