Details of Tax Referendum, Other Alternatives Given
Three budget balancing options - one of which would include the holding of a referendum to obtain voter approval for an additional 9-cent municipal tax rate increase - were presented to Lawrence Township Council this week.
Editor's Note: Readers are encouraged to listen to the meeting audio and review the budget presentation document in the media box to the right to better understand the material presented in this story.
Members of Lawrence Township Council, at their meeting Tuesday evening (Feb. 7), were presented by Township Manager Richard Krawczun with three scenarios each of which, in its own way, would allow the township to avoid the financial crisis that would result in 2013 from the township having to use 97 percent of its surplus to balance this year’s municipal budget.
The three scenarios are alternatives to the initial budget proposal Krawczun put forth at the Jan 17 township council meeting. Under that proposal, in order to stay below the state’s 2 percent tax increase cap, the municipal tax rate would need to be increased by 5 cents and nearly all the township’s available surplus – or $4.87 million out of $5.02 million – would need to be used as revenue to balance the $42.35 million 2012 municipal budget.
The 5-cent tax rate hike will be necessary regardless of which of Krawczun’s three scenarios township council and taxpayers support. It would raise the municipal tax rate from $0.84 per $100 of assessed property value to $0.89 and mean the owner of a home assessed at the township’s current average of $160,828 would pay an additional $80.41 in municipal taxes in 2012.
Each of the three scenarios addresses the need to use a smaller amount of the township’s surplus as revenue in 2012, in turn allowing the “saved” surplus – along with any surplus “regenerated” during 2012 through various means like the collection of delinquent taxes and unanticipated revenue like fines generated by the red light traffic enforcement cameras on Route 1 – to be available to help balance the 2013 municipal budget.
Krawczun told council he estimates it will be possible to “regenerate” about $2.6 million in surplus this year, meaning that the township can use an equal amount of surplus as revenue to balance this year’s budget. But in order to leave the remaining $2.27 million (of the proposed $4.87 million) untouched in the surplus fund this year for use later in 2013, the township must find another way to balance the resulting $2.27 million hole in this year’s budget.
The first scenario Krawczun presented to council would see the township generate the money needed to balance the budget by imposing an additional tax increase. By increasing the municipal tax rate another 9 cents (in addition to the aforementioned 5-cent hike), the township would be able to raise another $2,275,000. The additional 9 cents, bringing the municipal tax rate up to $0.98, would result in the average homeowner in Lawrence Township paying $144.75 more.
Because it exceeds the state’s 2 percent cap, such a 9-cent increase would require the approval of township voters through a referendum. Such a referendum, if authorized by township council, would be timed to coincide with the annual township board of education election and school budget vote that will take place on April 17.
The Lawrence Township school district is still in the process of crafting its budget for the 2012-2013 school year but district officials have offered a preliminary budget that would require the 2012 school tax rate to be raised 3 cents to a total of $2.36 per $100 of assessed property value, for an additional cost of about $48 for the average homeowner.
The other two scenarios offered to council by Krawczun would see the township balancing the budget by not finding $2.27 million in alternative revenue but instead saving the money by removing the cost of trash collection from the budget.
Currently, trash collection and trash disposal “tipping” fees are paid by the township through its municipal budget, with the costs being shared equally – through the collection of municipal taxes – by both homeowners and commercial property owners, even though commercial properties do not benefit from the trash collection services.
Under the first of the two scenarios, the “solid waste utility” option, residential trash collection in Lawrence Township would continue to operate as it currently does – with the services provided by a contracted trash company – but the funding for trash collection and disposal would come not from taxes but from a separate fee assessed against homeowners; homeowners would receive a separate bill from the township for trash service, much like they currently receive a bill for sewer service.
“It would be a fee-based service on residential property owners only,” Krawczun explained. “We would still have a contracted service. We would still pay the county a tipping fee. The difference is instead of being raised through taxes, the revenue would be raised through a user fee. The difference is in the budget all taxpayers are paying for the service and in the utility only the recipients – the users of the service [residential property owners] – pay for it.”
The other option would see township homeowners shopping around for their own trash vendor – similar to how they would choose a cable television provider – and entering into individual contracts for trash service with that vendor.
If taxpayers were to pass the referendum option, the average homeowner would pay about $144 more per year or $12 more per month as a result of the 9-cent tax rate increase. Under the “solid waste utility” option, the average homeowner would pay about $336 more per year or $28 more per month, and under the individual trash subscription option the average homeowner would pay $360-plus more per year or $30-plus more per month. Another advantage of the referendum option, Krawczun noted, is that municipal taxes are deductable on individual income tax returns, representing further savings, whereas trash user fees are not deductible.
Krawczun noted that trash collection must take place regardless of whether it is paid for through municipal taxes or user fees. “As much as I would like to believe – and it would be naive to believe – that curbside trash collection is a nicety, it’s a function that we have to perform because its tentacles reach beyond just trash collection. You’re talking about litter; you’re talking about health issues; you’re talking about runoff if people were to just start dumping [illegally]; you’re talking about a lot of other concerns that would need to be addressed.”
Because of strict statutory requirements that would need to be met should township council opt to hold a referendum, council Tuesday night approved a non-binding resolution authorizing the advertisement of the availability of absentee ballots for the referendum. After listening to Krawczun’s three scenarios, council members asked him to report back at the next council meeting on Feb. 21 with one or two other ways – including possible layoffs and service cuts – to plug the $2.27 million budget gap that would result from not using the 97 percent of surplus this year.
Prior to Krawczun outlining the three scenarios, the heads of the municipal court, police, health, public works and recreation departments appeared before council to discuss their respective department’s operations during last year and how budgetary constraints will affect them this year. Without exception, each explained how his or her individual department is operating with bare-bones staffing and how any future staff reductions will negatively affect the level of service residents receive.
Municipal Court Judge Kevin Nerwinski spoke about how the court is staffed by two fewer people than an independent audit suggested there should be based on the volume of cases the court handles. To illustrate the court’s caseload, Nerwinski noted that the red light cameras that became operational on Route 1 in November generated 1,104 new tickets last month alone.
After offering statistics showing that burglaries in Lawrence Township in 2011 increased 41 percent in comparison to 2010, and overall crime in the township went up 24 percent last year over the previous year, Police Chief Daniel Posluszny told council that two new recruits will need to be sent to the police academy in March so that they will be available in time to replace two officers retiring this year to maintain a staffing level of 65. In 2008, the department had 71 officers. If police positions are cut, it is likely that certain less-serious crimes would not be investigated, the chief said. By way of example, he said police might not have resources available to look into a criminal mischief or vandalism like the destruction of a mailbox.
Public Works Director Greg Whitehead told council that the loss of any additional staff from his department would have an adverse effect on the department’s ability to safely plow and clear the roads in the event of a significant snow fall.
Following the presentations by the department heads, as a lead up to his offering of the three scenarios to council, Krawczun provided a painstaking overview of the events that have led to the township’s current financial situation.
Through the use of a PowerPoint presentation (a copy of which can be viewed from the media box above), Krawczun spoke about the loss of $167 million to the township’s tax base in the last five years as the result of successful commercial and residential property tax appeals, including the loss of over $78 million in commercial ratables during 2010 alone.
“There are towns in the state of New Jersey that don’t have $160 million in ratables, forget about losing $160 million,” he said.
He spoke in detail about the tax refunds the township has had to issue in recent years, the decrease in state aid the township has received, the township’s diminishing ability to regenerate surplus, the loss in tax revenue posed by preserved open space and affordable housing, the limited amount of land still available in the township for future development, and other factors.
“We heard tonight a lot about how we pay for service. And service is sometimes very tangible but we also pay for service from the intangibles. Please keep in mind that 26 percent of our town is preserved open space. There’s a value to that. Here in the state of New Jersey we raise our revenue through property taxation. We have reached a point of saturation where we do not have a lot of land left to develop. Without having a lot of land left to develop it is difficult to absorb additional growth against an existing tax base, but it’s even more difficult to absorb that growth against a declining tax base” Krawczun said.
“Declining assessed taxable values, being nearly built-out, no development, a bad economy, a high number of [tax] appeals, 26 percent of town as preserved open space, and the impact from affordable housing – though it may not be significant, it’s significant enough that it has an impact – all of those things start to come together in a proverbial perfect storm,” he said.
Krawczun also outlined the various steps the township has taken in recent years to reduce costs, such as eliminating staff (total municipal staffing was 213 in 2007, and down to 197 in 2011); increasing fees for various programs; refinancing debt; conducting phone and energy audits; bidding electrical and phone services; and reducing other expenses.
For his part, Krawczun views the approval of the referendum as the option that will have the least impact on taxpayers, both in terms of what they will pay and the services they will receive.
“If you do the referendum you will reduce the amount of surplus in the budget and create an opportunity to then regenerate surplus at a level that you can continue it in the municipal budget going forward,” he said. “The 2 percent cap forces you to put all of this into one budget year. Without the 2 percent cap, you could run this over two or three years… We don’t need a referendum to balance the 2012 budget. I can use all the surplus; I can meet the statutory requirements. There’s no problem this year. But no action this year creates catastrophe next year.”