The city is borrowing $5 million to cover severance payments for retiring employees, mostly from police and fire. Council members gave preliminary approval to the borrowing measure on Tuesday night which still has to be approved by the state and granted a final governing body approval at a later date.
Some council members complained about poor planning on the part of disgraced mayor Jose “Joey” Torres’ administration. “If the mayor’s office was more transparent and let us know this was going to come down the road five, six, seven months later, we’d not be where we are now,” said interim mayor Ruby Cotton, who is also the council president.
Business administrator Nellie Pou circulated a list of individuals retiring this fiscal year. Her list did not have names of employees. In the past, the city has provided council members with list of names of those retiring from government employment.
Other council members worried about the city’s eroding debt capacity.
“If we continue to bond pretty soon we will have nothing left in the cookie jar,” said Kenneth Morris, councilman at-large, chairman of the finance committee. In this round of borrowing, the city is taking on $21.64 million in debt, for sewer repairs, fencing at the ATP site, and HVAC and elevator repairs at the Paterson Museum and the police headquarters.
The city has $121.25 million in outstanding debt. This will increase to $142.89 after this round of borrowing, according to municipal records, while decreasing the city’s debt capacity to $79.35 million.
“We chewed up quite a bit of our capacity with that $38 million for road resurfacing,” added William McKoy, 3rd Ward councilman.
The city borrowed $35 million for Torres’ road repair project. Almost $2 million was added on top of that as down payment.
A slight decline in the $6.35 billion valuation of properties in the city can quickly further erode the debt capacity, pointed out McKoy.
Morris said the city is caught between a “rock and a hard place.” He said some of the retiring employees will get checks in excess of a quarter of a million dollars.
“It has to be paid one way or the other. We need a well-thought-out plan moving forward,” said Morris. “Something’s wrong with the contract when we have to borrow $5 million which means not only we pay, but also our children.”
McKoy said governor Chris Christie limited retirement payout for teachers, but failed to do the same for police and fire. “I think there’s something inherently unfair about that. All employees should be treated the same way,” he said.
The state has to assist the city in finding a solution to this problem, said McKoy. “Employees will be retiring every year. So, what do we do next year?”
If the city does not borrow the $5 million to pay for the payouts taxes will have to be increased to raise that amount.
“If we don’t do this we’ll have to go after the taxpayers,” said Luis Velez, 5th Ward councilman.
The state’s local finance board will determine whether the borrowing is for three years or five years, said finance director Marge Cherone.