The city council refused to allow mayor Jane Williams-Warren’s administration to take on $4.3 million in debt to pay for health insurance, workers’ compensation, liability cases not covered by the budget.
Council members rejected the measure in a 4-4 vote on Tuesday night. Some council members wanted to wait before taking on new debt to see whether there will be millions of dollars from unexpended budget line items to cover the expenses at the end of the current fiscal year.
“My concern is that there’s money within the budget through transfers to cover this amount. Why go out and incur this debt when there’s no need to,” said Kenneth Morris, councilman at-large, chairman of the finance committee. “I don’t want to enter into short-term debt to pay for immediate operating expenses unless we absolutely have to.”
Finance director Marge Cherone needed the council’s approval on three measures to submit an application to the New Jersey Local Finance Board for its May 9, 2018 meeting. She said the board will determine whether the bond is repaid over a two or three years period.
Cherone said there may be just $1 million in budget transfers at the end of the current fiscal year. The fiscal year starts on July 1 and ends on June 30. Transfers are usually done in June, she said. She said some of the transfers may be needed to cover shortage in other line items.
“We’ve known historically, there is significant amount of transfer that occurs. More than enough to accommodate the $4.3 million,” said Morris. There was an $8 million budget transfer towards the end of the previous fiscal year, according to municipal officials.
It’s too “premature” to borrow now, said Morris. There’s money in unexpended salaries, he said. He pointed out the city, which has $142.86 million (including the $4.3 million) in outstanding debt, has just $80 million left on its “credit card.”
“I support councilman Morris’ suggestion to just wait on this,” said Alex Mendez, councilman at-large. “We have to tighten our belt.”
The administration said it needed to borrow the funds to pay for the following expenses:
- $2.7 million for health insurance claims
- $952,000 for general liability cases
- And $718,000 for workers’ compensation claims.
The council last week approved a number of workers compensation settlements. Those settlements will be paid using the borrowed funds, said city officials. The city budgeted $6.3 for workers comp., up from $4.9 million the previous year.
The city budgeted $46.6 million for health insurance, down from $50.1 the previous year.
“We have high incidents of high claims. Over $100,000 this year,” said Cherone. There were 52 large claims from extremely sick employees. An average expense for each claim was over $100,000, said business administrator Nellie Pou.
“If no action is taken then whatever the shortage is in any of these three line items becomes a deferred charge as an over expenditure in the budget next year,” said Cherone.
“And you will start with that deficit,” added Pou.
Council members at one point wanted to hold a special meeting on May 1 to consider the measures.
Councilman Luis Velez suggested amending the measure to reduce the bond amount to borrow just for health insurance. An amendment was made.
Velez and council president Ruby Cotton made the ostensible claim that rejection of the borrowing measure will mean employees may have to go without health care. Morris rebuked both of them for their incorrect and emotional argument.
“Does this preclude people from getting health insurance covered?” Morris asked Pou.
“No, it does not,” replied Pou.
“When you make comments please know what you are talking about. Don’t use these scare tactics that make absolutely no sense,” Morris, who has decades of experience in the healthcare industry, told Velez and Cotton.
The council rejected the bond measure.
Council members Morris, Mendez, Shahin Khalique, and Michael Jackson voted against while William McKoy, Andre Sayegh, Ruby Cotton, and Velez voted in favor.
Maritza Davila, councilwoman at-large, was not present during the vote.