Many questions have come up about the referendum to increase the tax rate beyond the 2 percent limit mandated by state law. Despite efforts to mitigate the impact of declining revenues, implementation of many personnel and program cuts and other efficiencies made over the past four years Lawrence Township finds itself in a difficult fiscal situation.
This year's efforts are being done proactively so as to avoid a more severe budget problem beyond 2012. If we do not face this problem now, the Township will deplete its Surplus. In the past the Township has utilized this Surplus to fund emergency expenses - such as those that occurred during Hurricane Irene and to fund tax appeal refunds, which must include the County and School tax portions previously collected.
It is also important to note over the past few years the Township has also used the Surplus to offset the need to raise property taxes, unfortunately due to the factors outlined above we are no longer able to do so at the same level. The referendum would allow the Township to preserve a portion of the Surplus for future years and maintain basic services.
The fiscal challenge is the result of a number of factors that unfortunately have culminated this year, including:
• Loss of state aid. The state has a statutory obligation to provide municipalities with state aid. As the state does not have direct authority over property taxes this aid represents ··property tax relief' offered by Trenton. Included in this is the monies the state collects each year from the utilities that represent the tax receipts they owe to each municipality where these utilities operate. These funds, energy tax receipts, are supposed to be dispersed to the municipalities by the state. Lawrence and municipalities all over the state have not received the full amount of those funds since 2002. This has resulted in the loss $7.4 million since 2009.
• Depressed economy. As the economy continued to depress housing prices, more Lawrence residents and businesses appealed their real estate tax assessments to better reflect their property value in this economy. In total these adjustments resulted in a $1.4 million loss against anticipated revenue.
• Property tax appeals. Aside from the loss in revenue, the municipality also has to refund the full amount of School and County taxes of each appeal. Only the County tax rate is adjusted in the subsequent year to account for the refunds, but the outlay of cash by the town is not returned. In 2011 this resulted in $1,645,000 of additional costs or $6,673,000 over the last three years
Each of these factors contributed to the fiscal challenge we face this year. As required by law, the Township Manager has presented Council with a proposal to address this situation. That proposal would utilize the referendum option created by the same law that created the 2 percent cap. The Township is able to stay within the 2 percent cap and address this challenge by utilizing nearly the entire Surplus this year. The referendum would allow the Township to preserve a portion of the Surplus for future years and maintain basic services.
Before moving forward with such a drastic step, Council asked the Manager to present alternative cuts to close the budget hole, those included:
Option 1: Creating a Waste User Fee to charge a fee for residential garbage collection outside of the property tax.
Option 2: Force residents to contract with their own waste removal service.
Option 3: Eliminate Recreation programs, reduce the number of Police Officers, privatize ambulance services and additional personnel layoffs.
In the end, Council supported a referendum as the best option to preserve services with the least cost. Placing this on the ballot does not stop Council from continuing to seek cuts and to find ways to reduce costs but the fact is simply that there is no way to plug the hole made without either making drastic cuts that will impact every residents' quality of life or by generating more revenue to replace what has been lost.
The out of pocket cost to residents would be reduced through referendum by continuing to provide trash collection through the general budget which spreads the cost over the entire property base, including commercial ratables, rather than move to a Waste User Fee that would only collect fees from residents. For the average homeowner raising these funds through the property tax will save over $200 a year over the residential user fee option.
It is important that in looking at the options homeowners carefully assess how this decision will impact their household. For nearly 95 percent of houses in Lawrence the proposed property tax increase will result in a smaller increase than the alternative user fee. I hope you will reach out to a Township Council member to share your thoughts, ideas and concerns as we continue to debate this budget.
- James Kownacki, Mayor, Lawrence Township