The New Jersey Department of Community Affairs (DCA), which provides the city with millions of dollar in financial assistance every year, is urging both the city council and the mayor to end the temporary budget impasse that could leave 1,800 city employees without paychecks this week.
Timothy Cunningham, the director of Division of Local Government Services, wrote in a letter dated last Wednesday to council president William McKoy, “The City Council’s failure to act on a temporary budget jeopardizes the fiscal well-being of the city. Instead of inaction, the more prudent course would be for the council to work with the administration to identify specific budget cuts to be comfortable with the level of temporary appropriations while still meeting the city’s obligations.”
Kenneth Morris, chairman of the council’s finance committee, found fault with the word, “inaction.” He said the council’s duty is to vote on ordinances and resolutions and in this case it did take action by voting down the temporary budget. “I don’t see where the city council failed to act. Isn’t a vote taking an action?” he said on Monday morning.
McKoy on said the letter is a reminder the council has a fiduciary responsibility to pay its bills and meet its contractual obligations. He said the letter also recognizes a legitimate concern over spending.
Council members rejected a $50 million temporary budget for December and January because, they said, mayor Jose “Joey” Torres’ administration has been deaf to calls to rein in municipal spending.
Business administrator Nellie Pou last Wednesday said the administration intends to put in place spending cuts before the final budget is adopted. Morris did not think cuts could be made after the city incurred expenses.
From July through January the city will have spent $151 million, according to city records. It’s entire budget last fiscal year was $252.6 million, according to city documents. Council members have said the city is on track to spend more money than it has in its coffers.
The city usually waits for a transitional aid number from the state – last year it received $25 million – before it adopts a budget in the early part of the year.
Cunningham wrote the council should host a special meeting if needed to resolve the budget standoff. McKoy said the temporary spending measure will be up for consideration again during an emergency session tonight.
Since the temporary appropriations measure was voted down, Torres has been making overtures to council members to gather the six votes needed for passage.
Torres could not immediately be reached for comments on Monday morning.
The council president said the mayor will present spending cuts his administration intends to make sometime in the next month.
Pou said the city will not be able to make payroll on December 4th, 2015. Morris said he is concerned about a potential lawsuit from employees which could cost the city a great sum of money.
“If folks aren’t paid they may initiate a suit,” said Morris. He said a lawsuit would result in back pay plus 100-percent.
Morris also mentioned the plight of a third of taxpayers who have witnessed thousands of dollars in tax increases following the completion of the most recent property revaluation. He said city property owners could easily expect to see a two-percent tax increase – within the cap. However, there are also exceptions — debt service, health insurance expenses, pension obligations, and so forth — the city often uses to go beyond the two-percent which could result in an eight-percent tax hike, said Morris.
“Lay another eight-percent on them and what you think is going to happen?” asked Morris. He cited commercial businesses whose taxes have increased as a result of the revaluation. He said this could result foreclosures and revenue loss for the city which would require higher reserves for uncollected taxes compounding the city’s financial problems.
If the council believes there are areas to cut it should exercise its authority to do so without “jeopardizing timely payment of non-discretionary items,” wrote Cunningham.
“That’s the plan,” said Andre Sayegh, 6th Ward councilman, who voted against the temporary appropriations.
Four council members voted against — Morris, Mohammad Akhtaruzzaman, Sayegh, and Julio Tavarez — the temporary spending measure and four voted in favor — McKoy, Maritza Davila, Michael Jackson, and Ruby Cotton — on Tuesday evening.
Alex Mendez, councilman at-large, abstained from the vote, but asked for budget projections. The measure required six votes for approval.
Morris, Sayegh, and Akhtaruzzaman said they would like to see drastic cuts in spending.
Correction: November 30th, 2015: A previous version of this report erroneously stated the mayor would be present at Monday’s emergency meeting. The mayor will not be present at tonight’s emergency meeting, but he will present his cuts at a session later in December.