Union City secures another $6 million loan from NJ

'Unanticipated overspending, and shortfalls in last year’s revenue' were the reason

The state's Department of Community Affairs provided Union City with $26 million this year, following 2018 budget shortfalls.
The state's Department of Community Affairs provided Union City with $26 million this year, following 2018 budget shortfalls.

According to this year’s municipal budget adopted in April, Union City received a $20 million grant of transitional aid last October through a program run by the state’s Department of Community Affairs. Just eight months later, the state loaned Union City another $6 million, sourced from transitional aid funds.

Union City Mayor Brian Stack said in an October 2018 letter to the Department of Community Affairs’ acting coordinator that the city needed additional funding due to unanticipated overspending and shortfalls in last year’s revenue.

Without that funding, Stack warned Director of Local Government Services Melanie Walter that officials would have to institute major cutbacks in municipal services. He said the city’s ability to protect the “public’s safety, health, and welfare” would be on the line without more state aid.

Stack said in the letter that city officials are “reviewing department expenditures and operations to eliminate inefficiencies and identify costs savings,” and the city is continuing to work with the county, local board of education, and nearby municipalities to continue pooling resources in shared service agreements to make ends meet.

Gov. Phil Murphy has been pushing for an increase in shared services throughout the state to make municipal government more efficient.

Stack told Walter that infrastructure projects in the city have not been completed due to financial constraints. Stack also said that the rapidly rising cost of health insurance, a focus in budget hearings everywhere, apparently caused some unforeseen problems.

The city incurred an unexpected $2.6 million in insurance costs after 15 municipal employees experienced health issues during the 2018 flu season, Stack said.

Unlike the $20 million granted to the city last October, the $6 million loan recently received must be repaid to the state. The loan, which can either be directly repaid or offset by aid reductions in the future, comes with no interest charges.

Spending is frozen

On May 16, DCA Loan Approval Officer Cher Smith signed off on the additional $6 million in transitional aid, which came with some stipulations in the attached memorandum of understanding.

From May 16 until the 90-day repayment deadline is reached, Union City agreed to institute a nonessential spending freeze, and to submit monthly expenditure and revenue reports to the state.

The amount of transitional aid that New Jersey has been providing to municipalities has been in gradual decline for more than a decade. In the most recent records from 2018, about $90 million in transitional aid was awarded to just 11 local governments.

Party time?

Just over a week after Union City received the $6 million loan and the stipulations to which it was attached, Mayor Stack held a massive block party, rally, and street festival, with a lineup of internationally-acclaimed musicians and co-host Gov. Phil Murphy.

Officials reported that well over 15,000 attendees congregated on 32nd Street, several blocks of which were closed to vehicles. Public safety employees patrolled the event to ensure that things went off without a hitch.

The festivities were bankrolled by Union City First, the city’s Democratic municipal committee. The event drew out a massive show of support for the governor. Just a few years back, Stack embraced Murphy’s predecessor, then-Gov. Chris Christie, with similar enthusiasm and get-out-the-vote efforts during his time on the campaign trail, describing him as the “best governor New Jersey’s ever had.”

While the party was on the committee’s dime, it’s unclear if Union City incurred any tangential costs related to the affair.

A few days after the celebration, Stack, a state senator in the 33rd Legislative District, joined a small group of state legislators in support of Murphy’s proposed millionaire’s tax, along with Assembly members Raj Mukherji and Annette Chaparro.

The millionaire’s tax proposal will likely result in a square-off at the end of the month between the governor and Senate President Steve Sweeney, an opponent of the tax hike. A second New Jersey government shutdown has loomed larger since the millionaire’s tax entered budget discussions.

For updates on this and more check hudsonreporter.com or follow us on Twitter @hudson_reporter. Mike Montemarano can be reached at mikem@hudsonreporter.com.