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Posted by Manolo on April 08, 2003 at 10:07:29:
Council Flirts With Tax Increase Urban Times News
April 4 - April 10, 2003 By: Steven Glazer Jersey City-Hudson County
employees, moonlighting as Jersey City
Council Members and led by Council
President L. Harvey Smith refused to
approve scheduling an ordinance for first
hearing at their regular meeting that would
amend the budget, avoiding tax increases
for three years. The proposal involves refi-
nancing the debt of the Municipal Utility
Authority and extending the MUA's man-
date by 25 years. In return, the city would
receive an increased franchise fee from the
MUA, bringing the city an infusion of $42
Million dollars over three years starting
now. solving a host of budgetary problems
at once and virtually guaranteeing stable tax
rates through the end of 2005.
The plan proposed by the MUA was formally presented to the council in
November in voluminous detail in a com-
prehensive memorandum prepared by
Counsel to the MUA, Edward
McManimon. Council President L. Harvey
Smith explained that after discussion by
council members at their caucus meeting,
council members were still not comfortable
and felt more information was needed
before putting the measure on the regular
Council meeting agenda. Business
Administrator Carlton McGee explained
that time that time was of the essence if the measure
were to he ready in time to avoid a tax
increase in the current Fiscal Year. McGee
explained that the process would require
approval by the State's Local Finance
Board. two Council hearings on an ordi-
nance. arranging a bond sale by the MUA.
and receiving the proceeds in time to apple
the funds to the current budget.
Council member William A.
Gaughan said that he would not feel com-
fortable leaving excess funds in the custody
of the MUA and wanted the Council to have
control over the funds. Gaughan also ques-
tioned the amount of the MUA refinancing
that he had thought was to he $50 Million
but is in fact slated to be $70 Million.
Council member Jeremiah Healey interject-
ed that there had been no change in the plan
that consisted in two parts including a $50
Million amount to cover the additional fran-
chise payments to the city and a $20 Million
amount to cover MUA's other needs.
McGee pointed out that the agreement pro-
vided an escalation clause allowing the city
to share in increased MUA rates in the
future. MUA franchise fees paid to the city
would go up based on a percentage formula
keyed to the MUA rate increases.
Earlier in the day Mayor Glenn Cunningham met with heads of the city's
labor unions explaining that there would be
major layoffs to slash payrolls if the MUA
refinance plan were to derail or to delay past
the fiscal year end. The city would have no
choice but to raise taxes by about $2.40 per
thousand of assessed value. Preparing for
the worst, Cunningham gave union leaders
the heads up, in case the MUA proposal met
the same fate as the proposed change in
funding of the city's health benefits plan.
Council members, led by Smith, are still
studying that proposal, which would have
saved the city $2.4 Million. Those council
members still maintain that they do not
have enough information to "feel comfort-
able." That proposal changes only the way
the existing health benefits plan is paid for,
and not the insurance coverage or any
aspect of it. The savings were one assump-based on and would have been balanced
had the change been made.
Council members are still deliberating
the wisdom of saving $2.4 Million.
While Council President Smith prundently
examined the hidden dangers of saving the
city $2.4 Million, the actual cost of the
existing, unchanged health benefits
increased by $1.5 Million, poking another
hole in what started out as a balanced budg-
et. State Aid to distressed cities was anoth-
er key assumption in the original proposal
for a balanced budget. Administration offi-
cials were told to expect 'no more" than the
$10.5 Million received the year before.
Instead, the City received drastically less:only $2 Million, leaving a further $8.5
Million hole in the spending plan. The
budget was then underwater by $2.4
Million plus $1.5 Million plus $8.5
Million, producing a total shortfall of
$13.4 Million.
Partial relief came recently with
the sale of some city-owned property at
Pershing Field to the Board of Education
for $4.3 Million, reducing the shortfall to
$9.1 Million. But, cautions Business
Administrator McGee, the cash is not yet
in the city's account and that transaction is
not yet closed. Though McGee says he
does not anticipate any major problems
with the closing, he is quick to add that the
deal isn't done until the money is in the
bank and this one is taking longer than it
should. Even if the closing comes off in
time there is still a considerable shortfall.
Cunningham was preparing for
failure of these fixes to save the budget
leaving no other source of cash except the
city's taxpayers. Most of the large com-
mercial properties that line the City's Gold
Coast waterfront are protected by tax
abatements, so the bulk of any increase fall
almost entirely on homeowners already
under pressure in a lagging economy
nationwide. If the MUA financing does not
come off as planned, there will be instead
of three years of stability, an immediate tax
increase. The state has already given the
nod to the MUA proposal and all that
remains is council approval and a final
thumbs up from the Local Finance Board.
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