T.F. postpones budget adoption

T.F. postpones budget adoption
Finance director: Revenue decline may force tax hike
BY KENNY WALTER Staff Writer

TINTON FALLS — The borough's finance director again advised the Borough Council last week not to adopt the proposed budget but to consider raising taxes to offset revenue losses.

At the July 7 council meeting, Tinton Falls Director of Finance Stephen Pfeffer spoke to the council for the second time about the poor revenue outlook the borough is facing for the remainder of 2009 and beyond.

This time the council, which reorganized on July 1, opted, by a unanimous vote, to carry the budget to the July 21 meeting and to take a look at whether or not to amend it.

On May 5 the Borough Council introduced a $21.8 million spending plan that calls for a $10.6 million tax levy, but the decline in revenues throughout 2009 may put Tinton Falls in a difficult situation for future budgets, Pfeffer previously advised.

Pfeffer suggested at the June 16 meeting that the budget should increase to the maximum cap tax levy of a 4 percent annual increase, and repeated the recommendation at the council meeting last week.

"Basically it's the same recommendation that I made on June 16 along with the borough auditor about going to the maximum cap levy under the law," Pfeffer said.

Pfeffer said at the meeting that he expected to see a decline of $1.1 million in the borough's surplus.

However, last week Pfeffer said the situation might be a little worse than the original projections.

"If revenue stays no worse than flat, we can have a cap levy issue of $1.5 [million] to $2 million in the 2010 budget," he said.

One issue in the budget that remains uncertain, he said, is the possibility that the state will increase the cost of health benefits.

"The newspapers are reporting that the state health benefits may see an increase of upward of 20 percent. There is a provision in the law for a cap waiver when the state health benefits exceed 4 percent, so that will have some impact on my numbers," Pfeffer said. "At this point, we don't know where that's going."

As currently constituted, the tax rate is 35.3 cents per $100 of assessed valuation, which is the same as last year's budget. Pfeffer suggested raising that.

"The increase, going [up] 2.8 cents, is approximately $850,000," he said, adding, "which is approximately $98 on the average home."

One point Pfeffer wanted to get across is that overall taxes for Tinton Fall residents are down.

In April, Tinton Falls residents voted to pass the school budgets for both the Tinton Falls School District and the Monmouth Regional School District, which, according to Pfeffer, resulted in a school tax reduction of $206 a year for residents.

Under Pfeffer's proposal, municipal taxes would go up by about $98 per household.

"Going to the max allowed by the law, the average homeowner in Tinton Falls will receive a decrease of $108," he said. "Originally, they would have received a decrease of $206."

For Councilman Andy Mayer, cutting expenses is a better option than raising taxes.

According to Pfeffer, that is something that has been looked at but would not make a big change in the budget.

"We've gone through the budget on three different cycles with the departments, and they have made cuts every time," he said.

"But the bottom line for most of the departments [is that] their share of the budget is very small," he added. "We are talking only about things they have direct control over. They don't control salaries, they don't control health benefits, and they don't control the pensions.

"So, really, they have limited amount of control over the budget themselves."

Pfeffer said the departments might cut as much as they can and that they pretty much know how the rest of the year is going to play out.

"I feel that for the most part, we've taken care of them, and now we've gone through six months, so we have a pretty good idea of what we're going to spend for the rest of the year," he said.

Pfeffer said, basically, that no matter how much the budget is trimmed, declining revenues due to the recession are going to offset the borough's cuts.

"It's not anything that's going to offset where we stand right now," he said. "It's all revenue-driven."

At the June 16 meeting, Pfeffer said the majority of the revenues come in the summer months and that he did not have the numbers for June.

While the hope was for a strong June, the reality was that revenues did not improve.

"The revenue picture did not get any brighter in June," he told the council.

One item where Pfeffer hoped revenues would be up was from the hotel tax, but they are headed in the wrong direction, he said.

"Actually, the hotel tax was off more then I was hoping for," he said. "That's actually going backward."

Pfeffer has hoped that revenues would improve in the coming months, but realistically it does not look feasible, he said.

"The cap is really revenue-dependent, and if the revenues pick up for the last six months, then everything can change dramatically going into next year," he said. "But as we stand right now, nothing is indicating that's going to happen."

With the state-mandated cap on the tax levy, the options to save money without going over the cap are limited to furloughs and layoffs, he said.

"From the furlough standpoint, that's not going to generate anywhere close to that number [to offset raising taxes]," Pfeffer said.

Pfeffer also said there are two other options that would enable the borough to raise the levy over the 4 percent cap.

"The first option is a cap levy waiver with the local finance board," he said. "The second option is by referendum, and referendum requires a 60 percent approval in the voter turnout."

The likelihood of getting such a referendum is small, however, and the borough may have to rely on an unpredictable finance board.

"Last year the state granted a lot of waivers," he said. "This year, I think because it's an election year, they've tightened up the amount of waivers they've granted. Next year, who knows?

"If you can make a case for the health and public safety of the residents, then they are hard-pressed to deny a waiver."

As for the schedule for the budget, Pfeffer is looking for input from the council before the next meeting.

The next steps would be to amend the budget on July 21 and to adopt the budget on Aug. 4.

However, that is reliant on the state being able to review the amendment, which complicates the process.

"I just found out today that our budget reviewer is going on vacation the next two weeks," Pfeffer said. "So, I did send him everything, hoping that he would have a chance to look at it and ask any questions.

"I'm not sure how backed up he is or whether or not he's going to have a chance to look at it before he goes." Contact Kenny Walter at

kwalter@gmnews.com.


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