As the New Year — and Gov. Chris Christie’s newly mandated 2 percent budget cap for municipalities — approaches, many towns face the likelihood of work force or service reductions because the towns approved raises before the cap was put into place and now cannot pay for them.
“All the mayors and governing body officials are looking down the barrel of a cannon that is going to go off on Jan. 1, which is mainly due to the 2 percent cap on how much monies they can raise on property taxes,” said Bill Dressel, the executive director of the New Jersey League of Municipalities.
The cap, which Christie signed into law in July, prevents municipalities from increasing taxes more than 2 percent per year. It permits exemptions for costs such as health care benefits, pensions and emergency expenditures.
“The only thing towns can do, other than raise taxes, is reduce their expenses. And, in many cases, that means asking public employee groups to reduce their contractual salary increases and to settle for less than what they normally would have received,” Dressel said. “But from what I’m hearing, that’s not going to be enough in many cases. And towns are being forced to do these draconian layoffs and furloughs.
“So instead of red ribbons hanging on the doors or windows of the offices of municipal workers, many of them will be getting pink slips. And if it doesn’t happen before the end of the year, it will almost certainly happen right after. Because Jan. 1 will be an unforgiving date.”
A handful of Barnegat Township’s employee unions are due 4 percent raises in 2011, which Township Administrator David Breeden said has the town facing a “very challenging” future.
“We’ve already reduced our full-time work force by 20 percent over the last few years. Now we’re sitting down with various groups to discuss concessions, such as health care contributions and other reductions,” Breeden said. “We are taking all the necessary steps to reduce our operating costs. ... Because if the governor’s ‘tool kit’ isn’t put into place, next year is going to be very challenging.”
‘Time is slipping by’
The state Legislature was expected to work on a “tool kit” of 32 property tax reform proposals over the summer, which were to help municipalities curb costs and deal with the tax cap burden. However, little progress was made.
“The governor got the 2-percent cap passed in July with great ceremony and theater, if you will, saying that they ‘finally solved the property tax problem.’ But that was somewhat dishonest, because they have not, to date, demonstrated the same commitment or enthusiasm to freeing up tax dollars to offset the cap. The cap should have been the cherry on top, not the centerpiece. And that’s the tragedy,” said Dressel, adding the state still imposed increased health care and pension costs on municipalities. “These items have been up for discussion since March, but there continues to be political bickering on what version of a particular bill will meet the satisfactions for providing relief.
“But I say if screwdrivers, wrenches and hammers aren’t enough, then bring in the bulldozer. Bring in whatever tool you think is needed to free up funding to the municipalities. Because time is slipping by. And I’m hearing cases where towns are planning to stop some services altogether come January 1 because they can’t afford them anymore. It’s a whole new crescendo of hurt out there that we’ve never seen before.”
When Tuckerton gave its police department 2.5 percent raises for each of the next three years in April, it all but guaranteed that the nine-officer department — which has been operating down an officer since its former chief retired last year — would remain short-staffed once the cap was put into place.
“Our state aid was reduced by about $80,000 last year, so we probably wouldn’t have been able to replace the officer right away anyway. But with the cap and the new contract being retroactive back to 2007, there is no way we’ll be able to fill that position now, even though their raise really only works out to 1.5 percent because they’re now contributing to their health benefits,” said Tuckerton’s Chief Financial Officer Laura Giovene, adding the department also didn’t promote a lieutenant once newly appointed Chief Michael Caputo was promoted.
Challenges in O.C., Absecon
Ocean City’s workforce is scheduled to receive 4 percent raises across the board in 2011.
“It’s a challenge, without question,” said Mike Dattilo, the city’s director of community services. “But it’s one that isn’t going to go anywhere.”
Dattilo said the beachfront municipality is better off than expected heading into next year, due in large part to an unexpected increase in revenue from beach tag sales and parking fees.
“We are probably right where we hoped to be heading into next year, or slightly above. But our budget is not without challenges, and the 2-percent cap absolutely raised concerns. Tough decisions are still going to have to be made. And if they are not made in 2011, they are going to be made the following year,” said Dattilo, adding that Ocean City has already cut its full-time workforce about 10 percent in the last four years, from 291 to 261. “All of our major contracts are up at the end of 2011, and I’d say our challenges increase dramatically without some relief from the tool kit.”
Absecon has already begun asking all department heads to find ways to reduce personnel costs and to reduce their nonpersonnel costs by 10 percent. The city’s Police Department is due a net salary increase of 3 percent next year.
“At this point we are not in a position to ask any of our bargaining units to open up their contracts, but that position may change as we get into 2011 and get a better grasp on our projected state aid,” said City Administrator Terry Dolan. “There’s no way we could continue the same level of service or maintain the same level of employment if we don’t receive more state aid. We’ve been struggling with a cap now for four or five years. But we had enough new development coming into Absecon that we never got close to that. But when the economy collapsed and the cap was cut by 50 percent, it only took about an hour for me to realize we are in trouble.”
Dolan said the city is scrambling to find ways to cut costs in response to the cap, including meeting with the local school district to find ways to share services.
“We don’t have any silver bullets yet, but we’re working on it,” he said. “It’s amazing how little discretion we have over our budget. Union contracts cover a majority of our employees. Long-term indebtedness has to be paid. We have trash that must be collected, roads that must be plowed and sewers that must be maintained. These are things that you cannot walk away from and still have a viable city.
“But eventually services will have to be reduced with this cap in place and the economy being what it is. And municipalities are charged with doing it right and doing it well.”
Without the passage of substantial tool kit measures, however, Dressel said that task will be impossible for municipalities.
“Revenue is going to have to meet expenditures and the only way to be able to do that — if the governor and Legislature fail to provide relief — is through these kinds of concessions and these kinds of reductions and this kind of pain,” Dressel said. “And there will be a substantial amount of pain.”
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