After years of passing municipal budgets at, below or near the 2% state-mandated cap, Maplewood Township will be introducing a proposed $45.6M 2019 municipal budget on April 2 with a 6.8% tax levy increase.
Why the change from recent years?
According to Mayor Vic DeLuca, “The key drivers of this year’s increase are roughly $450,000 in salary increases for all employees as per the employee contracts; an increase of $1 million in long term debt repayment (which will save us money over the long term); and annual increases in our payments for employee health benefits and pension obligations.”
“To complicate matters,” continued the mayor, “we gave less surplus to carry over into 2019, generally because we have kept budgets and tax increases at a minimal the past few years. This practice, which in the past we did to keep tax increase low, has resulted in less surplus funds to carry over into 2019. Additionally, we are in agreement with the recommended (and more conservative) budgeting policies practices of the current CFO [Joseph Kolodziej]. This will help us stabilize Township finances and improve our bond ratings.”
At a preliminary budget hearing on March 20, Township Chief Financial Officer Joseph Kolodziej presented the TC with three scenarios, ranging from a projected tax levy increase of 3.2% to one of 13%. Kolodziej strenuously advised the TC to avoid the scenario that had the lowest tax impact due to his call for the Township to adopt ‘best practices” in accounting and to bring Maplewood’s budget process in line with “most towns.” DeLuca stressed the need to find a balance between getting the Township on a path to best practices while being mindful of the pain the increase would place on the pocketbooks of residents.
Ultimately, DeLuca and the TC members tasked Kolodziej with crafting a budget for introduction below a 7% tax levy increase.
“We charged the Administrator and Chief Finance Officer with the task of reducing the average home 2019 tax increase to less than $5 per week,” said DeLuca. “The budget we will introduce on Tuesday [April 2] uses these expense and revenue numbers and the tax increase will be less than $5 per week on average.”
During a 2-1/2 hour budget hearing on March 20, DeLuca and the four other members of the Maplewood Township Committee — Deputy Mayor Frank McGehee, Nancy Adams, Greg Lembrich and Dean Dafis — grappled with the budget issues presented by Kolodziej and Township Administrator Sonia Alves-Viveiros and tried to make sense of the situation.
After spending the first hour of the meeting discussing how the town was accounting for projects that would be covered by grants and then running through a list of capital projects, the TC got down to talking about the overall 2019 budget about one hour into the meeting (see the 1:02 mark in the video below).
DeLuca noted that the bond service was normally at $4M in the budget, but that this year, “it’s up to $5M.” Kolodziej explained that that was because the Township “wanted to lock in good interest rates.” He noted that one bond would retire in 2020 and another in 2021, so the town would see “a dip” then, but was “struggling along now.”
Elected officials and administrators discussed increases in health care (Kolodziej said the Township might look at a less expensive private health care plan for future), increased costs in recycling (Kolodziej noted that towns across the globe were dealing with changes in this market), and more than $400K in contractual salary increases.
Kolodziej told the TC that, although some factors couldn’t be controlled by the town — such as the global recycling market or the way the state “plays” the pension obligation — other items could be, such as the Township’s handling of its fund balance.
“Things didn’t get broken in a year, they can’t get fixed in a year, but we cannot continue on this path,” said Kolodziej, who urged the Township Committee “to right the ship” by replenishing its fund balance and not using most of it to keep taxes lower. Kolodzief explained that, in the Township’s cash management plan, there is a policy encouraging the use of no more than 50% of fund balance to close a budget gap. “We’ve been utilizing quite a bit more than over 50%,” said Kolodziej. He noted that bond rating agencies look at that number, and said that the practice of using most of the fund balance “has pretty much caught up to us.” Kolodziej said that the town should have been raising taxes higher in previous years.
DeLuca expressed frustration that “this is the one year that we hit a home run on increasing valuations. … All the big projects have come online [Avalon Bay, 1701 Springfield Avenue].” The mayor added that it was “very disappointing to see these kind of tax increases.”
Although Kolodziej darkly joked that he was “like the harbinger of death,” he said; “While we shouldn’t be putting together a structurally imbalanced budget, we have enough lights on the horizon that we can survive this.” He talked about the Township setting up a sewer authority in the future to move that cost out of the budget. DeLuca said that taxpayers would then just be “paying a higher sewer fee.” Lembrich called it “robbing Peter to pay Paul.” But Kolodziej said that it would be better for taxpayers because they can no longer deduct more than $10K in property taxes and “with a sewer utility, [that’s a] fee you can control” by flushing the toilet less or taking shorter showers.
Meanwhile in the present, DeLuca instructed Kolodziej to come back with a budget under a 7% increase — an option that would put the Township on the road to best practices but that would be more palatable as it amounted to a $5/week increase for the average household.
“Given what the school district is doing [referring to a $140M capital project that will need to be bonded], we need to be aware. What we do here may wind up impacting them there,” agreed Kolodziej.
“I understand but I also don’t want to be fiscally irresponsible,” said Dafis. “I want to be on the path to recovery so we’re not having this conversation next year.”