State board passes Newark budget with $10M in aid, tax hike

By Dan Ivers | NJ Advance Media for NJ.com
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on September 24, 2015

NEWARK – The state has given its stamp of approval for a new budget that will send $10 million in aid to the city and cause a significant hike to local taxes, according to officials.

Business Administrator Jack Kelly said that the Local Finance Board unanimously approved the $766.25 million plan on Tuesday, four months after it was initially submitted to the state's Division of Community Affairs.

Kelly stressed that despite a 9 percent hike for the city itself, most taxpayers would see an overall increase of only 6.7 percent once levies from the school district and Essex County had been accounted for.

He added said that the city increase would have been much lower had the state approved the use of $13.3 million in Redevelopment Area Bonds from a settlement with PSE&G that it had hoped to use as added revenue.

"The city, if it had its druthers, could have gotten considerably under that number," Kelly said.

Under the plan, the average taxpayer's annual bill to the city will increase from $5,338 to $5,696, Kelly said.

Department of Community Affairs spokeswoman Emike Omogbai confirmed the Local Finance Board's decision on Tuesday. Board Chairman Timothy Cunningham declined to comment.

The city had initially submitted its initial proposal in June. By Tuesday, the state had made various adjustments, including the slashing of nearly $1 million to add new staff for the city's municipal ID program - the major cut in an 8.2 percent overall reduction to the mayor's office budget. Other cuts included the proposed PSE&G revenue, three assistants from the business administrator's office and two planned hires for the city's TV studio, according to documents provided by the DCA.

The $10 million in transitional aid, which Newark receives in exchange for granting the state oversight of much of its spending, is equal to the amount it received in 2014. DCA standards dictate that municipalities should expect to receive only about 85 percent of the transitional aid they received in 2014, but Kelly said an exception was made due to the city's annual deficits and myriad of other financial challenges.

In order to close this year's shortfall of around $60 million, it will rely on several revenue sources that may not be there in the future, including the $10 million in transitional aid, $2.5 million from the sale of foreclosed properties, and $5.9 million in car rental taxes that are typically designated for use on development projects.

Kelly attributed the large deficits the city has faced since in each fiscal year since Mayor Ras Baraka took office in July 2014 to paltry allocations by his predecessor Cory Booker's administration – something he said he was working to correct.

"Our revenues aren't pie in the sky. I'm suggesting that we will not have an operating deficit this year," he said.

The budget also reduces city clerk and council spending, which the state insisted upon when it agreed to provide transitional aid – though not for the reason you might think.

This year's appropriation is just $9 million, a nearly $2 million reduction from 2014. However, Kelly said that the reduction is due to the lack of a municipal election in the city this year, and that the spending the state had been looking to cut, including access to city vehicles and between $18,000 and $20,000 in expenses for council members, remains intact.

"The state would still like to see a larger reduction," he said. "It's a work in progress."

The budget is also set slightly earlier than last year, when the state did not sign of on the city's plan until Oct. 14. The deadline for introducing a budget is March, but Newark has routinely been late in recent years.

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