NJ’s Troubled Cities: Shrinking Tax Bases, Growing Need for Basic Services

Trenton’s story is not unusual, say the authors of “The Cost of Poverty: The Perpetuating Cycle of Concentrated Poverty in New Jersey Cities,” a report issued by The John S. Watson Institute for Public Policy at the Thomas Edison State University Jackson. The report was written in partnership with the New Jersey Urban Mayors Association and the Anti-Poverty Network of New Jersey.

The report, released Thursday, looked at four moderate-size New Jersey cities -- Bridgeton in Cumberland County, Passaic in Passaic County, Perth Amboy in Middlesex County, and Trenton in Mercer County -- in an effort to explain the “practical, budgetary consequences faced by urban centers that are characterized by high poverty levels.” What the report found is that residents in New Jersey cities pay more for fewer services, especially those that are best at addressing poverty. It calls for tax reforms to redirect money back to cities and an expansion of social service and quality-of-life programs to provide direct aid to the poor to address decades of public policy that turned cities into places of entrenched poverty, such as development incentives and highway construction.

The report recognizes that all New Jersey residents have been facing soaring local property tax bills, but it says the “burden is even greater” in urban areas.

“Because an ever-increasing reliance on property taxes is layered over a diminishing tax base, a counterintuitive scenario has resulted, whereby the most impoverished municipalities shoulder an unmanageable municipal tax burden – a greater burden than even their wealthy neighbors,” the report says.

In Passaic, for instance, a household at the median income level (meaning that half of all households earn more and half earn less) pays 17 percent of its income in municipal property taxes, the highest figure in the state. Neighboring Wayne pays just 3 percent. The figure Perth Amboy is 9 percent; Trenton, 7 percent; and Bridgeton, 5 percent -- all in excess of their suburban counterparts, the report said.

In addition, the report says, the ability of urban areas to spend on what the authors call “vital services that can alleviate poverty” -- physical and mental-health programs, social-support services, and youth programs, libraries, housing, and economic development -- is constrained, and most cities are spending less per capita than neighboring suburbs on these programs.

The bulk of urban budgets, said Evan Weiss, a principal researcher on the report, is tied to public safety and essential services, along with legacy costs -- pension, benefits, and debt. Perth Amboy, for instance, spends about 48 percent of its budget on these legacy costs and another 37 percent on public safety and public works -- leaving just 15 percent of its budget for all other spending, including on programs to address poverty. Just 14 percent of funding is available after public safety and legacy costs in Passaic and Trenton and 20 percent in Bridgeton.

“That leaves an ever smaller amount of money for social services,” he said.

As the report points out, “budgetary pressures only allow a municipality to run in place,” and “as long as this basic relationship remains true it will be incredibly difficult for municipalities to escape structural budget distress and, thus, to deliver services that meet the needs of residents, which extend beyond police protection, fire suppression, and sanitation.”

This structural failure, Weiss said, is tied in part to the way we pay for government in New Jersey. The bulk of local government is paid for by local property taxes, which favors those communities that are rich in taxable property. At one time that was the cities. But as major employers moved from the cities to the suburbs, as the cities de-industrialized and the suburbs converted farmland into taxable properties, the tax dollars followed.

“This is a structural issue that was built up over time and it will take a structural fix,” Weiss said, because revenues continue to fall even as necessary expenses rise.

Jackson, who was part of a panel discussion that accompanied the report’s release, agreed.

“There is a need for structural changes in the way our budgets are done,” he said. They could include new revenues and the sharing of costs. New Jersey’s cities have “shrinking tax bases and higher taxes because of need. We’re seeing reducing revenues, but the demand grows.”

Perth Amboy Mayor Wilda Diaz said the structural issues are tied to the state’s tax system.

“The state of New Jersey has to take a look at how we tax so we will be able to provide the services our communities deserve,” she said.

She said cities already rely to a great degree on targeted programs offered by the federal and state governments, such as the Supplemental Nutrition Assistance Program, Section 8 housing vouchers, and others, as well as the nonprofit sector to provide services the city cannot afford to provide.

“We really do count on the programs that the state and federal government provide and it would hurt our city if they were cut,” she said.

Jackson, speaking after the presentation, said that cities like Trenton have been forced to reach out to nonprofit groups and other agencies to plug gaps. Doing so has allowed the city to replace more than a third of the officers that were laid off.

“In order to have effective redevelopment, we have to have security and safety in the city, so public safety is a priority,” he said. “But that meant cuts to other areas and having nonprofits pick up some of the social services work.”

The city has a strong social-services network, but relying on nonprofits to provide services puts pressure on nongovernmental organizations that may not have steady funding.

The solution, according to the report, is a stronger safety net, higher wages, more accessible sick and family leave, childcare, reentry services, and housing. More importantly, the report says, a new approach to taxation is needed so that more revenue is placed in the hands of urban communities. Among its recommendations are a greater level of need-based distribution of municipal aid, alternate forms of local taxation (such as local income, sales and use taxes) and usage fees that would place some of the cost of local government on those doing business and visiting in urban areas.

These efforts would start “resetting what has been a multi-year process of moving resources out of the cities,” Weiss said, and begin directing money back to those who need it most.

Do you like this post?

Be the first to comment