Automatic parking garage to be sold A look inside Hoboken's $72M budget
by Tom Jennemann
Oct 19, 2004 | 521 views | 0 0 comments | 4 4 recommendations | email to a friend | print
The good news about Hoboken's proposed $72 million budget is that the tax rate is staying relatively stable. The bad news is that instead of hiking taxes, the city will again need to raise money by relying on the sales of public facilities.

A sizable structural deficit, largely caused by $6.2 million in unpredicted overspending on health insurance increases and other matters, has prompted the administration to rely on several controversial one-time, non-recurring revenues. These include frontloading several PILOTs (payments in lieu of taxes from tax-abated properties) and the selling of city owned land for the purpose of short-term tax relief.

The budget includes the sale of two city garages, including the automatic garage at 916 Garden St.

Causing problems are budgetary increases in health and liability insurance costs, as well as increases in police and fire salaries.

"Hoboken is not alone in experiencing these sharp increases, which are beyond our control," said Roberts in his budget message. "We will take strong measures to harness these costs by implementing a multi-year financial plan to ensure seamless transitions to upcoming fiscal years."

The City Council has scheduled a public hearing on the budget for this Wednesday, Oct. 13 at 7 p.m. at City Hall, where the council can vote on the budget.

Nuts and bolts

The total amount of appropriations in the proposed 2004-2005 fiscal year budget is $72 million, which is significantly up from last year's approved budget of $59.9 million. This figure does not include the approximate $10 million operating budget for the Hoboken Parking Utility, which is kept separately.

The budget covers spending from July of 2004 through June of 2005. The city is on a fiscal, rather than a calendar, year.

According to Roberts, because $6.2 million in deferred charges was caused by overspending in past years, the operations portion of the 2005 budget is around $66 million. He added that the municipal portion of the tax rate will remain stable at approximately $7.84 per $1,000 of property owned.

Overall, taxpayers pay the municipal tax rate ($7.84) as well as another amount for school and county taxes. Last year's approved budget needed $18.4 million to be raised by local property taxes. The budget that was introduced Thursday calls for $19.1 million to be raised in municipal property taxes. The $700,000 increase in the tax levy should be offset by new ratables, or taxpaying properties, that come online. When there is new taxable property in the city, each property owner pays a smaller percentage of the $18.4 million.

The need for one-shots

This FY 2005 budget has over $15 million in one-shot revenues to plug the structural deficit. A structural deficit is when the city's annual revenue is less than its annual appropriations, making the city use non-recurring revenue sources to close the gap.

According to Roberts, because the city has to make up $6.2 million in spending from past years, there is a need this year to use more one-shot revenues than in years past. But he added that next year those deferred charges will not be part of the 2006 budget, so hopefully there will be fewer non-recurring revenues.

But the mayor's critics worry that the administration is digging too deep a hole that will be harder to get out of in the future.

"We are going into this budget with a structural deficit that is nearly equal to our entire tax levy," said Councilwoman Carol Marsh. "What's worse is that most of these one-shot revenues take away from the city's future stream of revenue."

Selling the garage

Possibly the most controversial move is the city's decision to sell its municipal garage on Observer Highway. According to Business Administrator Richard England, the city plans to sell the garage to the Hudson County Improvement Authority, a quasigovernmental agency, for approximately $8 million.

This money would be plugged into the budget to offset the budget gap. The HCIA then would lease the property back for an annual rent equal to the interest on the HCIA's bond. Then if the HCIA in the future decides to sell the garage, the city will receive any monies above the original sale price.

"This profit is intended to be used for the creation of a new municipal garage," said England.

Marsh, who is often a critic of the Roberts administration, expressed concern about the proposed deal Thursday afternoon.

"It's outrageous for them to sell an operational resource like the garage to plug a budget shortfall," she said. "The city shouldn't be selling any of its land, period, and especially not for short-term tax relief."

She also said she is not comfortable that the garage isn't going be sold through a public bidding process and worries that this is going to end up costing the city in the future when it is time to build a new garage.

Sale of 916 Garden St.

It has been rumored for some time that the city is considering selling the automated parking garage at 916 Garden St., a building that has a long and troubled history of delays and cost overruns. The proposed budget anticipates $1.1 million for the sale of the garage.

England said that the actual price would probably be $8.5 million, which would pay off the city's $6.3 million remaining on its bonds.

"While the introduced budget shows a $1.1 million revenue shot for this sale, I expect the amended budget to use the entire $2.2 million," said England.

In January, after five years of legal rancor, a settlement with a subcontractor allowed the city to finally assume full control of the 324-car automated garage. The garage has been a thorn in the sides of local politicians for over five years. Even though the Hoboken Parking Utility is training workers how to operate the computerized garage, the $38,000 per month management contract that the city has with the company that installed the computer aspect of the garage has lead many to wonder if the garage would ever be profitable if run and operated by the city. In late 2002 a possible buyer, who has close ties to the current contractor who manages the garage, came forward with a winning bid of $5.75 million, but a few months later pulled out. Now that the garage is operating and in the city's hands, the city hopes it will sell for more now.

Front-loading PILOTs

According to England, New Jersey Transit, currently and in the past, paid the city a Payment in Lieu of Taxes (PILOT) of $149,000 for the bus terminal near the PATH station.

"For budget relief, we have agreed with [NJ Transit] to front-load $2.5 million with them being relieved of future PILOT payments until such time as the present value of $2.5 versus $149,000 is achieved."

Roberts said that using his good relationship with governmental or semi-governmental agencies helps a city in need.

"Hoboken continues to draw hundreds of millions of dollars in public investment through dynamic partnerships with the State of New Jersey, the Port Authority of New York and New Jersey and NJ Transit," said Roberts in his budget statement.

In addition to the NJ Transit upfront payment, the city is also scheduled to receive a one-time upfront $3 million PILOT payment from the Port Authority of New York and New Jersey.

Critics of the administration worry that by taking money upfront for something that is short-lived as tax relief, the city is just borrowing from future taxpayers in order to spend more now.

Tells the true tale of overspending

Another item of intrigue in this budget is that it begins to explain how much the city overspent last year's budget. From the moment that last year's $59.9 million budget was introduced, the critics of the mayor said it wasn't close to being an accurate representation of how much the city was spending.

It turned out they were right.

For the past decade, under-budgeting has been common in Hoboken, forcing the money to be made up later. Some complain that it's a tool that can be used to maintain a stable tax rate while increasing spending. According the to 2005 proposed budget, the city must make up $4.9 in overspending from 2004, and $1.3 million in overspending from 2003 for total of approximately $6.2 million in deferred charges.

For the past two years, the administration didn't budget for an increase in group health insurance, even though they had overspent it in 2002 and there have 20 percent increases in costs over the past several years throughout the state. Midyear, the administration asked for around $2 million in emergency appropriation to make up the gap in group health insurance, but it was voted down because a number of councilpersons still did not believe they were getting a full accounting.

Critics of the administration contend that overspending the budget is in violation of state statute - in fact, one of the city's previous CFOs was suspended for just such an allegation - and that the overspending in past years continues to drive up the budget.

In just four years, they say, it's gone from $57 million to $72 million.

"The city's finances are a complete mess," said Marsh. "You can't overspend a budget by $5 million unless you have a problem with your spending habits."

England, who has a reputation of being a more conservative budgeter than former Business Administrator Robert Drasheff, whom he replaced two months ago, said that the overspending problems that existed in the past should not happen this year.

"It's my goal and intention to present the City Council with a proposed budget that fully funds the city's existing functions and services," he said.

Police and fire

Every year, in the municipal budget, the biggest line items are always salaries, especially for police and firefighters. According to the proposed budget, police employees will make just over $14 million this year. That is about $1 million more than what was budgeted last year.

Why the increase?

England said that not enough had been budgeted last year, especially with a new police contract that was signed last year. The same went for the fire contract.

"Police salaries were overexpended last year to the tune of $362,401," said England. "Factor the overrun into the budget and the increase in [police salaries], and the budget is [up] 5.5 percent.

There was also an increase in the Fire Department. In 2005, nearly $12 million is budgeted for fire salaries, which is about $1.7 million more than in 2004.

"Fire salaries were overexpended last year by $267,524," said England. "Combining that with a one-time retroactive payment of $554,000, that's payable this year and there is an 8.7 percent increase." He added that this figure also includes funds for four additional firefighters.

Copies of the preliminary budget are available at the City Clerk's office in City Hall, and there may be a photocopying charge. Internet users may also download a copy of the budget from the city's web site, www.hobokennj.org.

A public hearing will be held in City Hall at 7 p.m. this Wednesday in the first-floor council chambers.
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