The Hoboken City Council held a special meeting on June 24 to get an update on the city’s finances and the yet-to-be-introduced city budget.
Since January Hoboken officials have projected a multi-million-dollar budget gap this year, which has only been exacerbated by COVID-19.
Acting Business administrator Jason Freeman presented an overview of the city’s finances, including cost-saving measures the city has undertaken to reduce the budget gap. He proposed a one-time injection of roughly $4.7 million to further reduce the gap,which he says could result in a decrease in residents’ tax bills.
In January Hoboken estimated it would face a budget gap of roughly $7.8 million due to an increase in pension payments, health care, union contract payments, garbage hauling contracts, and a loss in revenues from court fees and the Hoboken Parking Utility.
The gap widened after councilwoman Tiffanie Fisher who sits on the council finance subcommittee noted that the funding in the city’s surplus account also decreased because the city failed to regenerate previously spent surplus funds, which brought the budget gap to approximately $14 million.
In March COVID-19 struck, an unforeseen challenge which resulted in increased spending due to overtime for front-line workers like the office of emergency management, fire department, police department, and department of environmental services
Further costs were incurred with city employees shifting to working remotely, testing for residents, meals for senior citizens, and enhanced cleaning of city buildings and the housing authority.
According to Freeman, this brought budget gap to approximately $19.8 million.
Freeman told the council that the city has been finding ways to narrow the gap, including roughly $3 million in savings related to health care appropriations, as well as department budget cuts, reductions in contract negotiations, layoffs, and cuts to discretionary spending in the mayor’s office, business administrators office, engineer and legal department.
The city also has CARES Act funding for COVID-19 cost reimbursements, including for employee overtime, and the city expects more in future CARES Act disbursements.
This decreased the budget gap by about $10.9 million bringing it to an estimated $8.9 million.
Freeman said if the city uses about $3.3 million more of the its surplus monies in this year’s budget, it will reduce the gap to about $5.6 million which, if made up by the taxpayer, would represent a municipal tax increase of about 10 percent, or a 2.2 percent increase on the overall tax bill which at an average assessed home of about $522,000 would be an increase of about $120.
A resident’s tax bill is made up of five components: county, municipal, board of education, library, and open space taxes.
Freeman explained that this could be reduced by about $4.6 million which would bring the city’s budget gap to $1.03 million. If that gap was to be closed through taxes, that would mean a municipal tax increase of about 1.8 percent with taxpayers seeing a reduction in their overall tax bill by about 0.2 percent or a reduction of an estimated $78 at an average assessed home.
Where does this 4.6 million come from? If approved by the council on second reading, it would come from the library.
According to Freeman, the city would make a deal with the library to bond for $4.66 million for capital improvements and upgrades to the library, and the library would intern transfer its “excess funds” of the same amount.
The library doesn’t have the ability to bond, but the city does. The city would then pay off that bond with interest over the next several years.
The council voted to introduce the bond ordinance for the almost $4.7 million by a 5-4 vote. Council members Tiffanie Fisher, Jen Giattino, Michael DeFusco, and Vanessa Falco voted against its introduction.
“Bonding in the past got us something, which was a lot of open space,” Fisher said. “Right, wrong or indifferent: we have parks. For this, we actually don’t get anything for that bonding other than a short-term reprieve. This is a big deal, this is using debt to fund an operating shortfall.”
She compared it to a move by a 1990s administration in which the city sold its water rights to now SUEZ for a quick injection of cash.
She called for the administration to present a preliminary budget before a final vote on the bond is authorized, so the council can get a grasp on the city’s finances and perhaps make further changes.
But Freeman notes the city faces many mitigating factors in trying to present a comprehensive budget due to COVID-19. The city is awaiting guidance from the state regarding aid, and there is overall revenue uncertainty. By budgeting closely there will be a lack of surplus regeneration.
Fisher also expressed concern about using more surplus funding. She projects the city will not regenerate enough in upcoming years and faces uncertainty about revenue sources.
Council members Phil Cohen, Jim Doyle, Emily Jabbour, Ruben Ramos, and Michael Russo voted in favor of the ordinance’s introduction.
DeFusco called for an independent forensic audit prior to the ordinance’s second reading in a press release the following day and emailed the NJ Department of Community Affairs, questioning the legality of the bonding and library transfer.