Township Manager Presents Proposed 2012 Budget, Recommends Referendum to Exceed Tax Increase Cap

The news was not good.

Members of Lawrence Township Council sat grim-faced at their meeting last night (Jan. 17) as they listened to Township Manager Richard Krawczun offer his recommendations for the 2012 municipal budget and explain the difficult financial decisions the township faces.

In short, in order to raise the $42.35 million needed to fund township operations and services during 2012 and still comply with the state’s 2 percent tax increase cap, the municipal tax rate would need to be increased by 5 cents and 97 percent of the township’s available cash surplus – or $4,870,000 – would need to be used as revenue for the year, Krawczun said.

The problem, according to the township manager, is that doing so would leave only $154,000 left in the surplus fund and pose even more significant financial problems for the township budget in 2013 and beyond.

As such, Krawczun recommended to council that a public referendum be held asking township voters to approve a tax rate increase above the state’s 2 percent cap. More money raised through taxation would allow the township to use a smaller amount of surplus as revenue in 2012 and, in turn, maintain a larger balance in the surplus fund for future needs.

Such a referendum – if approved by council – would be held in conjunction with the annual school district election and school budget vote in April.

Krawczun last night said it was too early to tell how much of an increase to the municipal tax rate would be needed in order to not reduce the surplus balance to a dangerously low level, but he promised to have that information at the next council meeting on Feb. 7.

“At the next meeting, I’ll have objective data that will show people what happens if you approve the referendum and what happens if you don’t approve the referendum. It will be that straightforward,” he told reporters after last night’s meeting. “I want everybody to understand why and what the choices are between a ‘yes’ vote and a ‘no’ note. I think it’s very important for everyone to hold their opinion until they get all the information.” 

(A copy of Krawczun's 2012 written budget recommendations can by found in PDF format from the media box above, along with other Lawrence Township tax and budget documents from years past.) 

Such a referendum would be decided by a simple majority of votes cast, he said.

“This is a very somber budget message,” Councilman Greg Puliti said after Krawczun offered his recommendations.

Councilman Michael Powers was particularly alarmed about what would happened if the township’s surplus was reduced so low. “That would be very dangerous in terms of our ability to address any unforeseeable event in the future,” Powers said, noting how costs to the township resulting from Hurricane Irene alone exceeded $30,000 last year.

Councilwoman Cathleen Lewis, acknowledging that she and Councilman David Maffei are less than a month into their council terms following last year’s election, said, “As one of two new kids on the block, I think it would be helpful as we look at this somber picture to look at any suggested cuts that the administration might think of or anything that the council has looked at in the past that we may want to reconsider.”

To help council members make a decision whether or not to authorize a voter referendum, heads of the township’s various departments will appear at the Feb. 7 meeting to suggests what cuts can be made and what impacts those cuts will have on the delivery of township services.

Accounting in large part for the township’s financial hardship, Krawczun explained, is the loss of $38,349,816 in ratables during the last year and the total loss of over $167 million to the township’s tax base in the last five years as the result of successful commercial and residential property tax appeals.  

The $38.3 million loss is worse than the estimated for 2012. (While the process of drafting the 2012-2013 school year budget is still underway, Lawrence Township school district Business Administrator Thomas Eldridge said today that despite that additional $8.3 million loss in ratables, the proposed school tax rate increase for 2012 thus far remains at 3 cents.)

The loss of $167 million in ratables, going by last year’s municipal tax rate of $0.84, represents a loss of $1.4 million in tax-generated revenue for township operations in 2012 alone, Krawczun pointed out.

“The taxable value of property in Lawrence Township for 2012 is $2,527,842,792. A decrease in taxable value simultaneously reduces the value of one penny on the tax rate to $252,784 from the 2011 level of $256,619. At the same time, this decrease in the value of a penny forces up the tax rate even if there were absolutely no other changes in the budget,” Krawczun stated in the 2012 Municipal Budget Recommendation packet he both distributed and read into the public record at last night’s meeting.

If the municipal tax rate was to be increased by 5 cents to $0.89 per $100 of assessed property value, 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.   

Lawrence Township’s municipal tax rate increased by 6 cents in 2010 and by another 6 cents in 2011.

Also contributing to Lawrence Township’s financial woes are that over the past several years the township has not been able to regenerate surplus at a level equal to or greater than the amount of surplus used as budget revenue and that state aid has been cut. To illustrate this, Krawczun pointed out that in 2008 the township had a surplus balance around $9.5 million but that balance had shrunk to just over $5 million by the end of 2011, and that in 2009 state aid was $5,008,000 (and in previous years higher) but was just $3,982,000 last year.

It is not yet known what amount of aid the state will offer Lawrence Township in 2012. Also unclear is what affect rising operational costs by the Ewing Lawrence Sewerage Authority will have. “That increase [by ELSA] will necessitate the adjustment of sewer service fees but the apportionment to Lawrence Township users is not known at this time,” Krawczun stated in his 2012 Municipal Budget Recommendation.

“At this time I find that it is my fiduciary responsibility to recommend to the Lawrence Township Council that although the 2012 recommended budget complies with all statutory requirements, specifically the ‘cap’ on the municipal tax levy, the proposed 2012 budget contains surplus as revenue that cannot be regenerated to the same level. The inability to successfully regenerate $4,870,000 of surplus for use in the 2013 budget leads me to make a recommendation that a referendum be held in 2012 to exceed the state-imposed mandatory limit on the municipal levy,” Krawczun further stated.

While the 2012 recommended municipal budget includes some salary increases – the result of previously-negotiated labor agreements with township employees – it includes no layoffs and only one new position: a part-time plumbing inspector.    

“The recommended budget presented in this package contains an increase in 2012 appropriations over the 2011 adopted budget in an aggregate amount of $479,000 or 1.14 percent. This point is raised to reemphasize that the increase in taxation is not caused by spending but primarily by the decrease in ratables and declines in revenue,” Krawczun stated. “A thorough and thoughtful review of appropriation requests was conducted prior to any recommendations being presented for inclusion in the 2012 municipal budget. Many departmental expense budget appropriations remain at the same level as in prior years. The levels of recommended appropriations for some departments are at levels where service responses will be negatively affected.”

Excerpts from Lawrence Township Manager Richard Krawczun’s 2012 Municipal Budget Recommendation:

"The core principles that have been historically applied to the preparation of the Lawrence Township Municipal Budget were again employed in the development of the 2012 budget recommendations. Those principles focus on balancing the level of provided municipal services and the cost to taxpayers for support of those same operations. Negatively influencing the municipal budget is the economic condition of our times, the regressive form of taxation by which tax revenue is produced and a statutory environment that aggressively manages local government budgeting. The dichotomy of those principals and these external factors produce a struggle that heavily influences the management and fiscal operations of our township. The 2012 recommended budget continues consideration of future budget conditions as well. Consideration of budgets beyond 2012 will need to be aggressive."

"Lawrence Township municipal government provides essential services to over 33,000 residents and many tens of thousands of others who pass through our community on any given day. Many of these services operate around the clock, such as Police, Emergency Medical Services, Fire Protection, Public Works, Health, Animal Control and Construction. Other available services and operations are general health services, financial operations, recreation programs, senior citizen programs, planning and zoning functions, building inspections and permitting. Unlike the private sector where organizations are often restricted by what they cannot do, public agencies are in many areas mandated for what they have to do. The divide results in many public sector operations have a ‘floor’ at which a public organization cannot go below when providing for these mandated responsibilities. Simply, local government does not always have the same luxury as a private sector organization to sell or eliminate an unprofitable division. Nevertheless, we continually strive for the optimum level of economic efficiency in all municipal operations and programs."

"The internal, external and statutory matters that bear upon the 2012 recommended municipal budget are in some cases new and in others continuing trends that have been developing…."

"Surplus, Miscellaneous Revenue, Receipts from Delinquent Taxes and Current Taxes are the four categories of revenue available for anticipating in a New Jersey municipal budget. State statute regulates the amounts that may be anticipated from each of the individual categories. Working within the statutory parameters does not negate the need to carefully consider revenues in both the context of a current budget and future budgets simultaneously. Revenues should be considered with both a historical perspective on the amounts of revenues realized from specific sources and the likelihood those same levels can be maintained. Equally important is anticipating revenues at levels that may contribute to the regeneration of surplus and not too an aggressive approach that will eliminate sources prematurely from use in future budgets."