Urban Times News
By Steven Glazer, E-mail: sglazer@urbantimesnews.com

Jersey City—The Cunningham administration has prepared for the return to a normal post-holiday schedule, readying a choice of two resolutions for the City Council to adopt at their next regular meeting. One resolution will leave the city’s property tax rate as is, but include language committing the council to approve the proposed debt restructuring transaction derailed by council opposition before the holidays. The other resolution, if adopted by the council, will approve an increase in the tax rate from the current level of $19.35 per thousand of assessed value to $27.77. This resolution will also require the council to adopt a budget for the city that does not include the benefits of the proposed refinancing.

If the council votes to approve the resolution requiring the tax increase, the owner of a hypothetical home assessed at $150,000 would see their tax bill jump from $2,902.50 to $4,063.50, at the new rate, an increase of 40% in the rate. The law requires city tax collector Maureen Cosgrove to send out first quarter tax bills at this time, adding an urgency to act and for the council to strike a tax rate. If the council should refuse to act either way and if there is no increase and no financial relief either, in the form of a financial transaction there is the possibility of a default on debt service related to outstanding bonds as early as February.

Each month that passes without action by the council means that significant savings that would have been available under the restructuring proposal are lost forever. So far, the cost of the savings passed up by the council’s failure to approve the plan have cost the city $8.5 Million, plus additional losses due to increase in interest rates since the plan was first presented for approval.

“We have thumbed our noses at the rating agencies, and slapped the face of one of the world’s leading investment bankers, who also happens to be one of our own foremost corporate citizens. By our actions in failing to get this debt restructuring done and for the reasons that were given, we are telling the market that we think we know more about the bond business than they do. We have sent the same message to other companies who were perhaps thinking of moving here, telling them,‘Don’t even think about it.’” Said Carlton McGee, Jersey City business administrator. McGee said it was as though we are telling the treasurer of New Jersey and the individual members of the state’s local finance board, that we think that the members of our city council know more about municipal finance than they do, and more than the combined wisdom of the best and brightest of Wall Street. Furthermore, said McGee, we have told them all that we are willing to play political “chicken,” with the homes of our taxpayers and livelihoods of our police officers and firefighters.

McGee said that the only way to cover the budget shortfall of $20 Million dollars left by the absence of the restructuring was either major layoffs. Since seventy percent of the city’s budget is police and fire personnel, that would mean deep cuts in both departments to save money. The other source of funds, said McGee, was a sharp increase in taxes, from $2900 to $4000 for the hypothetical $150,000 home, or some combination of the two. Next year’s deficit will be more than twice as much, McGee said, implying an even bigger tax increase next year. “The administration is studying a number of alternative revenue measures, but even if they all work out, none of them could come on line quickly enough to give us the relief that we need,” said McGee.

Cunningham has said repeatedly that “It is all unnecessary. If we go ahead with the restructuring transaction that has been proposed, then no tax increase of any kind is necessary and no layoffs would be needed.” But the council opposition to the restructuring plan, led by County Chief of William A. Gaughan, has refused to negotiate any compromise. Worse, according to Cunningham’s Chief of Staff, William Ayala, “They haven’t come up with any alternate or any better idea of their own. Gaughan told us flat out that they want to force Cunningham to increase taxes to hurt his chances for reelection.”

Gaughan is Hudson County Chief of Staff to County Executive Tom DeGise, and is also Jersey City Chairman of the opposition to Cunningham, the HCDO. That makes Gaughan the political and employment “boss” of council members opposing the bond intitiative and the leader of the opposition to Cunningham in the move to restructure the city’s capital structure.

Ayala was also critical of Gaughan because the County’s finances are in worse disarray than those of the city, and Gaughan has a high degree of responsibility for the widely anticipated tax increase expected shortly from the County of Hudson. County offices are almostl entirely controlled by the Hudson County Democratic Organization, ironically. Sources have said that this year’s increase will easily be double that of last year. In April of last year, County Executive Tom DeGise said that there “would be no new taxes.” Exactly seven days after the June primary elections, DeGise then changed his tune and announced a $15 Million tax increase. This year, sources expect that number to be not less than $30 Million. Jersey City will be apportioned roughly 40 per cent, or $12 Million of the County total, ratably according to population. In addition, critics have complained that the County payrolls have risen by more than $2.2 Million with new hires and raises, and that grant monies dropped by $10 Million, nearly swallowing last year’s entire tax increase. “Look who is talking about getting their house in order,” said Ayala. “And this guy is dismissing one of the world’s leading investment bankers, the state treasurer, and the state’s Local Finance Board, like they are amateurs and he knows what he is doing.”

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