Paterson borrowing $25 million to address coronavirus shortfalls
By Jayed Rahman
Published: June 1, 2020
Municipal officials have agreed to borrow $25 million by issuing tax anticipation notes to address shortfalls triggered by the coronavirus pandemic.
Members of the City Council approved the measure to borrow the funds last Tuesday. The measure states the borrowing is needed because of the 30-day grace period granted to taxpayers as a result of the pandemic. Granting the grace period barred the city from conducting a tax lien sale for the fourth quarter of the fiscal year, according to the measure.
Notes will come due 120 days after July 1.
Finance director Marge Cherone told City Council members the borrowing is being done at 1.5 percent interest rate via the Passaic County government.
Cherone told the council, during a series of budget hearings, she is not sure whether tax collection rates will drastically decline later in the year.
“We don’t know what the actually tax collection in the August and November quarters will be,” Cherone told the council last week.
Council members have worried their constituents will not be able to pay property taxes. Local businesses were closed for two months because of the pandemic. Many local residents have lost their jobs.
New Jersey unemployment rate has surged to 15.3 percent. Paterson’s rate has always been nearly twice the state average.
Cherone said the city is facing a $7 million budget shortfall in next fiscal year’s budget. That deficit figure assumes the city is still in the state health insurance plan. An adverse court ruling on the insurance issue could create a $10 million hole in the budget, officials said. The city ditched its self-insurance program for the state health plan last year, but the move has been challenged by the police and fire unions.
Council members have been holding a series of departmental budget hearings for the fiscal 2021 budget.
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