Wednesday night the City Council made a difficult decision to approve by a vote of 8-1 an amended 2020 Municipal Budget with a $4.2M or 7.5% increase to the Municipal Tax Levy.
In a year where everyone is hurting in every way, it is not lost on any City Council members how difficult of news this is. We were able to reduce the rate from the 9.8% proposed by Mayor Bhalla in July by including $1.3M more from expected Cares Act reimbursements that were not included in the budget. Because the budget process was so late in the year, it was nearly impossible to make any more meaningful cuts. With this decrease it effectively means that your November tax bill will decrease by a smidge (-.2%) vs your August tax bill and your all-in tax rate increase for the year will be .75% vs 2019.
Brief reminder of how did we get here. As I mentioned in my newsletter in March, Hoboken’s fiscal mess was created by a decade of rising costs and increased spending, financing open space and little revenue growth. Revenue growth comes from tax increases, third party contributions toward expenditures and expansion of the ratable base. With ¾ of our cost base coming from labor costs, most of which is public safety, that increases ~2+% per year (health care, pension and contractual increases), out of the gate each year we would need 1.5% more revenues just to cover this.
What happened in the past two years is lack of any financial discipline by the administration. Although the City Council cut the budget each year, the administration increased spending within these reduced budgets (for example, did you know the mayor and his three closest aids now cost the city almost $1M annually?). The result is a squeeze of and significant depletion of the city’s surplus (with unbudgeted amounts not spent going to surplus).
A brief summary of where we started this year and how we ended.
- $13M operating shortfall identified in January (miscalculated by the administration by $6M). This mainly was caused by surplus shortfall, multi-year settlements of union contracts, public safety pension increases, health care and other expense increases
- $1M of net COVID expenses after Cares Act reimbursements and health care savings
Major steps taken to reduce the $14M shortfall:
- $4.7M add’l use of surplus
- $3.6M to settle contracts pushed into 2021
- Net neutral impact this year of 26 employees laid off or forced to retire, greater impact next year.
- $1.5M in health care revised estimates.
What’s missing: any real expense reductions.
What will need to happen in 2021? Financial discipline with a top priority to settle our labor contracts and move employees to the state health plan which could save taxpayers $4-5M annually. The opportunity was there this year, but the administration didn't take it.
A time for austerity or a time for celebration? I hadn’t planned to put out a public statement yesterday about the budget until I saw the public statement Mayor Bhalla made that was sent out to the press and about 20K Hoboken residents and voters. Like some of my council colleagues, he attempts to create the narrative/headline around the much lower total rate of .75% which is driven by a massive decrease in County taxes this year instead of the higher 7.5% Municipal rate that is the only rate within his control. Although I completely disagree, had he just stuck with that, I probably would not have bothered to put a statement out at all.
But he doubled down. A low even for him, he actually seemingly celebrated the outcome of the budget process, taking credit once again for actions unrelated to his efforts and telling the public his budget was able to “deliver the lowest overall tax rate in a decade…” in the year he introduced the HIGHEST Municipal tax rate increase to Hoboken residents in a decade since the city was under a state fiscal monitor.
So I issued the following statement to the press yesterday to ensure the media coverage was balanced. And now to you, much less than 20K residents and voters:
Hoboken, NJ - Last night the Hoboken City Council, by a vote of 8-1, made the difficult decision to pass a $4.2M or 7.5% municipal tax levy increase for 2020. This comes a week after the Council voted 5-3-1 to reject Mayor Bhalla’s proposed $5.5M or 9.8% increase, the highest municipal tax increase in a decade since Hoboken was under a state fiscal monitor. Only Councilmembers Cohen, Doyle and Jabbour voted yes on that increase. Although the mayor previously cited COVID as the key driver, this proved to be a smaller factor with increased spending and rising costs behind most of the City of Hoboken’s fiscal mess.
Instead of austerity, Mayor Bhalla, issued a misleading public statement that read more like a victory lap while imputing false collaboration with Hudson County to deliver “Hoboken’s lowest overall tax increases in the last decade, at only .75%.”
Councilwoman Tiffanie Fisher, Co-Chair of the Revenue and Finance Subcommittee issues the following statement in response:
“They say the sign of a person’s true character is how they respond to difficult times and Mayor Bhalla last night chose dishonesty and hypocrisy. Instead of owning his historically high tax increase of 9.8%, like Mayor Zimmer always did, he instead created a misleading narrative that better suits him, taking credit for the much lower overall tax rate that was driven by declines in Hoboken’s share of County taxes over which he had no control.” said Fisher.
“Thankfully my City Council colleagues were able to reduce his proposed increase by $1.3M to 7.5% which is still way too high reflecting a rudderless year with Mayor Bhalla guided more by headlines than financial discipline. As we look ahead to 2021 it is going to be imperative that the Council carefully oversee the mayor’s spending so Hoboken residents don’t see another big tax increase next year.”
Fisher continues, “We should actually thank Jersey City as it was their significant increase in development that drove the 8.5% reduction in Hoboken’s share of the Hudson County tax levies and provided a much appreciated offset to Hoboken’s financial woes this year."
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Additional information:
The only tax rate that the Mayor and City Council of Hoboken control is the Municipal Tax Rate. Hoboken’s total tax rate includes Municipal, County, School, Library and Open Space taxes. With the Municipal tax levy increase now set at $4.2M or 7.5%, Hoboken tax payers will realize a total annual tax rate increase of .75% when combined with the other levies. The key reason for this much lower rate is that Hoboken’s share of the County tax levies (including County Open Space) decreased by $6.4M or 8.5% driven by development related increases in property values in Jersey City.
Public Statement Issued by Mayor Bhalla on Adoption of Municipal Budget as referenced above.
“Thank you to the County of Hudson and the Hoboken City Council for working collaboratively with my administration to overcome the unprecedented challenges of a pandemic to pass the 2020 budget. I'm proud that this budget maintains city services and invests in our future, while delivering one of Hoboken’s lowest overall tax increases in the last decade, at only .75% or an average of $70 per household.”
This has been a long hard road with this budget. And to say that it was frustrating is a significant understatement. And then to cap it off, the mayor sends out an intentionally misleading message to the public. When misleading statements are sent by credible sources and go unchecked, they then are often perceived as truth. Remember when I introduced the concept of “palter” to you (in which you say something that is technically true but in a way that has the intent to mislead)? We see this tactic used at the national level all the time. It has consequences. And we don’t need it in Hoboken. What we desperately need during this time of untold financial stress is true financial leadership that includes honesty and transparency. Especially when it comes to our tax dollars.
Feel free to email me at [email protected] or call me at 201-208-1674 to discuss what you have read or anything else that is important to you.
TiffanieFisher
Hoboken City Council, 2nd Ward
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