The state is seeking reduction and revenue enhancement plans from the city before approving a reduced $145 million municipal tax levy that was passed by the city council last week, according to a letter sent to city officials on Monday.
Timothy Cunningham, director of the Division of Local Government Services within the New Jersey Department of Community Affairs (DCA), states in the letter he could not in “good conscience” sign off on a preliminary tax levy that will create “severe negative cash flows” for the city.
Cunningham’s letter requests mayor Jose “Joey” Torres’ administration to quickly list specific spending cuts and revenue enhancements needed to run government on a $145 million tax levy. He is also seeking the time frame for the implementation of both plans.
Torres’ administration has been scrambling to reduce spending. It has been putting together a reduction in force and furlough plan. It also plans to reduce overtime by $2 million to create savings. There’s also a move to reduce garbage collection to one day a week to generate savings. It’s not clear how much spending cuts the administration has identified so far.
Torres did not respond to a call for comment on Tuesday afternoon.
Council president William McKoy said the city may not have enough time to compile the two plans and also provide an analysis of appropriations reduction. “It’s doubtful whether they can put together all of the things the DCA is asking for in time,” he said.
McKoy said it’s clear the state is unwilling to approve the $145 million preliminary levy. He said the council will discuss the matter at its meeting on next Tuesday night.
Andre Sayegh, 6th Ward councilman, said he has been asking for plans. “The administration should always have a contingency plan,” he said. “They knew there was a looming fiscal crisis. This administration needs to be held accountable. They have not introduced any new revenue streams nor have they offered any significant cuts up until this juncture.”
Torres administration has to reduce spending by $23 million. A reduction of $14 million as a result of one-time revenue items used to plug holes in previous fiscal year’s budget and another $9 million in cuts to bring spending to $145 million level. In his letter, Cunningham noted the council, just last month approved a temporary budget based on the same level of spending as the previous fiscal year.
McKoy said the council approved the temporary budget for three months to get the year rolling. He said council members expected to scrutinize the budget later on in the year. “We’ve put pressure on the administration much earlier given our experience last year,” said the council president.
The council told the administration to reduce spending last year; however, this year, the administration told the council those cuts were “artificial” and were not put in place. Although the administration is working on a layoff plan it will take 60 to 90 days to complete producing very little in savings, noted Cunningham’s letter.
Council members voted down the mayor’s tax levy three times before approving a reduced levy last week.
The city cannot send out August tax bills until the state approves the levy. Without money in the treasury the city may have to issue bond notes to borrow money to run government. In a previous letter, the director warned the state will not look kindly on borrowing.
“I cannot, however, in good conscience sign off on a preliminary tax levy that produces immediate cash shortfalls that will likely ripple into delayed payments to the Paterson Board of Education, the County of Passaic and many of the City’s vendors who rely on timely payments for their livelihood,” reads Cunningham.