Unresolved issues in the budget include the yet-unapproved sale of the municipal garage to a county agency and the pressing need to get a "cap" waiver from the state so the city can increase the spending amount.
The four-member council minority, who say they have been frustrated by Mayor David Roberts' budgeting efforts, pulled out their biggest weapon Wednesday night by voting against "temporary emergency appropriations," which could effectively close the city as early as Feb. 3.
But Roberts said that is something that he isn't going to let happen.
Can they close the city?
The 2005 fiscal year started July 1, 2004. Because there isn't an approved budget, the city has been approving "temporary emergency appropriations" each month, which cover the salary, wages and operating expenses of the city for that month.
These temporary budgets, unlike most other votes, require a two-thirds vote from the nine-member council, which gives the minority an unusual amount of leverage.
If the council doesn't pass temporary budgets, then there won't be money to pay employees and the city will shut down.
"We have enough money make it to the Feb. 2 council meeting," said city Business Administrator Richard England Wednesday. "But if the budget does pass and the council doesn't approve another [temporary appropriation], then we'll be forced to tell employees not to come to work the next day."
Councilwoman Carol Marsh, who is considering running for mayor, said that it's not their intention to close the city, but this is about the only threat that can force the administration to cut the budget.
"We will not vote over and over and over again for temporary emergency appropriations when they have yet to present us with a budget that doesn't insult our intelligence," said Marsh. "For two years we have said that administration has been overspending its budgets, and for two years we have been ignored. We're not going to be ignored anymore."
Councilman Tony Soares added that the mayor needs to present the council "with an honest budget" and quickly. "The mayor has two weeks to get his house in order," said Soares. "So he better get working."
Meanwhile, Roberts said the minority are obstructionists that are so driven to score political points that they are willing to shut down the city, which would have disastrous effects.
Roberts added that his opposition is long on criticism but short on ideas.
"Where's their vision?" said Roberts. "During this entire process, the naysayers on the City Council, I like to call them 'the obstructionist block,' haven't offered any ideas or amendments of their own, and now they are willing to shut down the city for their own political reasons."
Marsh has been planning to run for mayor this May, with Soares on her council ticket.
Why so frustrated?
Even though it's against state statute, it has become an annual tradition in Hoboken to overspend its budget. Last year alone, the city overspent its budget by over $6 million, partially because of rising health insurance costs throughout the state.
The straw that might have snapped the proverbial camel's back for the council last week was the announcement by the tax collector that the city sent out tax bills for the third and fourth quarter before the budget is struck. This is significant because if the administration's funding doesn't come through, it can't be made up in this fiscal year's tax bills, and would have to be made up in tax bills of the first quarter of the fiscal year of 2006, which will be several months past the May election. So people would find themselves paying for new budget increases after they case their votes.
The council minority hopes to make the city's handling of the books a major campaign issue, but even if the city's revenue stream dries up before the budget is passed, the tax impact won't be felt until next fiscal year's bill.
"I can't believe that we are sending out bills before we even have a budget," said Councilwoman Theresa Castellano.
Councilman Michael Russo added that he believes it is illegal to send out fourth quarter tax bills without an approved budget.
Roberts responded that it common practice to send out an estimated tax bill, and if a revenue doesn't come through, the money will be made up in the first tax bill of next year.
"They are trying to make an issue out of nothing," said Roberts. "We will present a budget without a tax increase."
There are two major lingering issues in the budget: the status of the cap waiver and the proposed sale of the municipal garage (see sidebar), both of which need to be resolved before the budget can be approved. Every year the state sets a limit, or a cap, as to how much municipalities can increase their budget. This is a tool the state uses to ensure that municipal budgets don't fluctuate wildly year in and year out. If a city wants to increase by more than the limit, they must ask for the state's permission.
In December, Roberts presented a reduced $69 million amended budget that kept spending under the limit, or cap. But two weeks ago, the state said that there were several errors in the administration's work, which forced the council to rescind the amendments at the Jan. 5 council meeting.
Now the budget is up to around $71 million, and according to England, the budget is about $1.8 million over the state's set cap.
On Wednesday, by a 5-4 vote, the City Council approved a resolution to allow the administration to seek permission to ask the Local Government Finance Board in Trenton to increase the city's budget above the state limit for year-to-year spending increases. If the cap waiver isn't granted, the city would have to find somewhere to cut $1.8 million, which with only a couple of months left in the fiscal year could be difficult.
Roberts said Thursday that he is going to try to expedite this process. On Thursday, after the council minority's threat to shut down the city, Roberts called the Department of Community Affairs, which oversees that Local Government Finance Board. After the phone call, he gave the Reporter a positive report.
"The message from Trenton is clear," said Roberts. "They will not allow one group of minority obstructionists to close down the operations of the city."
Roberts added that he has been informed that the Local Government Finance Board will schedule a special emergency meeting before Feb. 2 to have the hearing on the city's cap waiver.
Roberts added that if the cap waiver is granted, then he can present the City Council a budget without a tax increase.
Financial officer declines responsibility for budget
But when one boils this controversy down to its root, the council minority does not believe that the administration is controlling or monitoring spending properly. They have been asking the city's chief financial officer and auditor to attend the public portion of the City Council meeting. Both in attendance Wednesday night, and the council grilled them on the budget. Much of the questioning was directed towards acting CFO Louis Picardo, who pulls double duty as the city tax collector.
Picardo said that former Business Administrator Robert Drasheff, who retired last year, was the architect of the budget that was introduced in December.
"I signed it as a formality," said Picardo, "but I didn't prepare the 2005 budget."
He added that while he is aware that legally he is responsible if the city overspends it budget, he was unable to give any reason why the city overspent the budget by over $6 million last year.
This response drew major jeers from the council minority. According to state law, it is the CFO who is legally responsible for the budget, and that's why he has to sign it.
"If the city CFO, its chief financial officer, isn't assisting in the preparation of the budget, who is?" asked Russo. "It just shows you that we are aboard a leaderless ship where no one is watching our budget."
But Picardo did say that he is familiar with the budget and what's in it. "I believe this is a fair budget," Picardo said.
Garage sale needs 2/3 vote
Another revenue source that factors into this year's city budget is the sale of the municipal garage. According to city officials, the city plans to sell the garage on Observer Highway to the Hudson County Improvement Authority, a quasi-governmental agency, for about $8 million.
The HCIA then would lease the property back for an annual rent equal to the interest on the HCIA's bond. If the HCIA in the future decides to sell the garage to a third party, the city will receive any money above the original sale price.
Why would the city do this? According to state statutes, it's illegal to go out of bond, which is the government equivalent of taking out a loan to pay operational expenses. But by selling the garage and then leasing it back, it's essentially a back-door loan, with the garage being used as collateral.
The City Council has to approve the sale of the garage. To sell the garage, according to the ordinance, the sale needs a two-thirds vote to pass.
Right now there are four solid votes against the proposal.
"The sale of the garage is a fundamentally flawed plan," said Councilman Tony Soares. He added that also might be illegal, because city can't take out loans for tax relief. "There is no way that this is getting my vote," he said. The entire council minority was polled by The Reporter and they said they couldn't foresee any circumstance that would persuade them to vote for the sale/leaseback of the garage.
Roberts, on the other side of the aisle, said that this is a good deal. He said if the council passes it and the state OKs the purchase, then his administration will be able to deliver a flat tax rate, which will be the city's 11th in a row.
Roberts added that the council minority can't stop complaining. He noted that with the state contributing $125 million for school construction and New Jersey Transit investing $100 in the ferry terminal, "We're getting a quarter of a billion dollars to improve our city, but they sit there and complain that we are putting $6 to $8 million into tax relief. What new revenues have they been able to secure?"
What happens if the proposed sale were to fail? There would be an $8 million gap in what is an approximately $71 million budget.
"Then we'd be in a lot of trouble," said Picardo. - TJ