Newark fears $93M shortfall for 2014 and state takeover

By Naomi Nix/The Star-Ledger
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on May 01, 2014

Newark City Hall may come under state supervision.


NEWARK — Newark officials informed investors last week that the city may need more than $93 million dollars in additional revenue to pay its bills in 2014, and that a state takeover of the city's finances is a potential pathway to balancing the budget, records show.

In a public disclosure statement from Acting Director of Finance Danielle Smith, the city said it had about a $30 million dollar shortfall for 2013. The statement, which was dated last Thursday, said the deficit can be attributed, in part, to less revenue than expected being collected from property taxes.

On top of the 2013 operational deficit, the city anticipates an estimated $63.4 million dollars gap in the 2014 budget, bringing the total funds needed to balance the 2014 budget to more than $93 million dollars.

"Like the State, the City’s financial issue is largely due to significant reductions in anticipated tax revenues,” Business Administrator Julien X. Neals said in a statement.

Mayor Luis Quintana has not yet offered a 2014 budget, because city officials say the administration is in the process of preparing it. The budget would then have to be approved by the city council.

The city intends to explore ways of generating revenue including increasing property tax rates, escalating up tax collection efforts and selling city-owned properties, the statement said.

But even with additional revenue, the city said in its statement that it still expects a net gap equal to or exceeding $63.5 million dollars for 2014.

"Accordingly, the City now believes the most likely basis upon which a balanced 2014 cash basis budget, entails the placement of the City under State Supervision," the statement said.

Some city council members said they were surprised and disappointed about the city's financial position.

“I’m shocked," said central ward councilman Darrin Sharif. “I was left with a strong impression that we would be able to introduce a 2014 budget without state supervision”

North Ward councilman Anibal Ramos said in a statement that the council had worked hard in the past to reduce structural deficit in the city's budget.

"This is a major setback for the city’s financial health and undoes years of hard work," he said.

In early March, Thomas Neff, director of the state's Division of Local Government Services notified Quintana that his division would begin discussing “the level of financial stress in Newark and Newark’s lack of compliance with certain budget laws.”

Last September, the city adopted a $639.5 million budget for 2013 .

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