Sunday, November 22, 2009

Plainfield's budget - part three

Or what I learned at the NJ League of Municipalities Convention

The last post, part two, explained how the state has capped the annual increase in municipal expenditures (the annual cost of living cap on expenditures is usually 2.5 % with significant exceptions allowed for pension, health benefit, capital and other costs). I also covered how this affects Plainfield.

Now to the all important revenue side of the budget. Municipal revenues are heavily dependent on property taxes to pay for local services. Important miscellaneous revenues in Plainfield are state aid and local user fees, both of which are not increasing along with our personnel expenditures. In fact the economy is taking its toll on these revenues and they are going down.

So property taxes have to increase more than expenditures on a percentage basis to compensate for the poor revenue picture. In other words, a 2.5% increase in Plainfield's annual budget (and allowing for all the cap exceptions mentioned above) may require a 10% property tax increase! That is, in fact, the situation facing Plainfield right now.

That's what motivated me to take a trip to Atlantic City to the League of Municipalities Convention (at no cost to the city), to learn about strategies used around the state to cope with our fiscal dilemma.

In one workshop Robert Casey outlined five ways cities can cope:
1. increase miscellaneous revenues - Mr Casey said that there are limited opportunities here and in fact, Plainfield has already done some of the things suggested in this category.

2. reduce expense - he said cities have to operate as businesses and seriously reduce ongoing expenses and not just use one time fixes

3. transfer costs to another entity - Plainfield has used this approach - can anyone guess what it is - the answer is at the bottom of this post.

4. shared services agreements - to get economies of scale. An example shared was a town that split the cost of an IT Manager so each paid $50,000 towards the salary.

5. advocacy - lobbying the state legislature to take action on binding arbitration and unfunded mandates.

The take home lesson for me is that in the near term, while Plainfield needs to pursue each of the five general categories above, the most important way to control property taxes is to reduce local expenses.

In the next blog post, I will share details from three towns that are working hard to get a handle on the difficulties we all face. Here is a sneak preview - layoffs, furloughs and increased user fees.

- Answer from question about transfer of services - Plainfield Municipal Utilities Authority
- Bonus question - who is Robert Casey? Winner gets mentioned on my blog. Awesome prize, right!


stevekilduff said...

Presumably not Robert Casey, the jr senator from PA, but Robert Casey, Executive Director, NJ Municipal Managers Association.

Cory Storch said...

You are right Steve. And as Bernice Paglia pointed out earlier today, he was interim finance director in Plainfield a few mayoral terms back.

Anonymous said...

Cory, I was gonna mention Casey as interim finance director--wasn't he working in Plainfield more recently than as interim under McW admin? Since I didn't win, I will mention my own name.


Anonymous said...

Let's see if we can cut some expenses and the waste. There is some fat in the budget in terms of the "perks" to the administration. It's the similar fat of the land that the other governmental entities in the city live off of: Plainfield Board of Ed. and PMUA. We can't keep spinning off to additional entities b/c all you keep doing is placing a larger burden on the property owner. The taxpayer gets the shaft while each entity feels they can continue their waste.

olddoc said...

PMUA was not created to reduce municipal expenses, but to provide a "more efficent and effective" city wide garbage and trash collection aand to prevent dumping by those who would not use private carters.

Included in the deal would be the needed upgrading of the transfer station property.

The transfer of the responsibility for the sewers was in part to shift their maintenance from the tax roles to a more expensive authority.

The most interesting portion of the deal was the transfer of the entire upper echelon of the Public Works Division to become the administrative core for PMUA.