Can the City of Newark Close a $70 Million Budget Gap?
Mayor Booker called an emergency press conference to explain the consequences of a dire situation. Booker introduced his budget in June of 2010 with the previous council and re-introduced it to the new council on July 7, 2010 with the Municipal Utilities Authority (MUA) proposal. The mayor came up with the solution as he feels it could solve many problems, but that solution has been defeated by the council with a vote of 5-4. Booker's proposal fills a $70 million dollars gap filled with the creation of the MUA.
Michael Green, Acting Business Administrator, said that with the creation of the MUA, the MUA will pay $70 million in the first year, $30 million in the second year, and $5 million to the city for the first two years and $5 million a year for the remainder of the 30 year contract. He further said that right now, the water department is making $5 million a year in positive cash flow.
In reference to the budget, Green said that the total estimated revenue for 2010 is $542 million and the total proposed estimated expense is $722 dollars, which includes the revenue and expense from the property taxes of the county and the school board.
To fill the gap, the mayor proposed the MUA as an alternative. Now it is up to the council, who has to come up with a solution or idea to cover the $70 million gap, otherwise Booker will have no alternative but to make massive cuts in services. Services will include closing of the pools, Camp Watershed, more lay-offs, and a 4-day work week for all of the city departments, excluding the council and the city clerk, which the mayor does not have control, and the cycle will go on to affect many other services.
The discontinuing of many services may prevent large corporations form coming to Newark and in turn, future job creation will be in jeopardy.
The persons and the council who oppose the creation of the MUA have an argument that by creating the MUA, the city will lose control, and corruption will be there just like other independent agencies. There are 3,952 people currently employed by the city. The total number of non-uniformed employees affected by the 4-day workweek starting September 27 will be 1,451, if the City Clerk and Council participate in the additional eight days, 19 in total.
Green stated that police and fire workers will not be laid off in 2010, but the effect will be in 2011. The Police Director and Fire Director are working to find a solution, so that the service and safety of the residents will not be affected. If the MUA is not approved, there might be a possibility of 1,000 layoffs in 2011.
The following are excerpts heard from the mayor's press conference on Wednesday July 21, 2010.
Booker said, "We are in a global and national economic downturn. It is the greatest economic crisis in my life time, unemployment is high all over the United States...Foreclosure is high and Newark, there are 2,500 foreclosures. Families are struggling, and New Jersey is in an unprecedented government decline. During my administration's first term, we took significant steps to reduce spending and find ways to increase revenue. This year, we have new issues and a stunning impact on the decision our city had to make. We have lost $27.4 million dollars of state aid. We are at the top of New Jersey's cities in loss of state aid. We are not complaining about it and not pointing fingers...Additionally, we have lost pension deferral programs. What that means is that we have to make pension payment from nothing last year to 65 million dollars. In 2011, 40 million dollars from non-reoccurring revenue from the port authority will be lost. Payroll taxes, parking taxes and other taxes have been affected by this economy. These are the issues that are out of our control. In addition, the city's expenditure is outpacing revenue. Healthcare increased from $58 million in 2005 to $78 million in 2010. Prescriptions alone have increased from $13.2 million dollars to $20.5 million dollars. Statutory expenses increased...Cities all across our state have seen dramatic actions. Newark is not alone. Jersey City closed its police academy. Irvington our neighbor is laying off police and fire...In 2010, we presented a balanced budget. It did not rely on short term budget removals, and quick fixes...it includes the elimination of 600 non-uniformed positions, bi-weekly furlough days and service elimination. It included the creation of the Municipal Utilities Authority and a 7% tax increase. That was a very difficult budget to put together. It involves incredible sacrifice of every corner of our city. Seven of the nine council members have accepted the introduction. They are rejecting the MUA component of that budget...The MUA is not proposed simply to fill the budget hole...Our water system is in serious decline. The State Department of Environmental Protection stated that we are not fulfilling health and safety requirements for our water service. A specific example of that is we are not capping our reservoir. We have delayed the capital maintenance longer than I have been alive. The EPA is fining us $5,000 a day. It's going to need a half a billion dollars of investment...We proposed in the MUA the urgent need of health and safety of our water and what I believe is that we can go after new revenue sources, we can attain...Cities, counties, and businesses are taking water from us and we don't have a way of measuring it...We have included one hundred million dollars for the next two years.
"The budget I proposed is a budget of sacrifice, budget of cuts, budget of layoffs, budget of 7% tax increase. I accepted (all 9 council members) decisions, but we are in a $70 million dollar hole. There is no direction from the municipal council on how to fill it. We now need decisive action from all ten elected members of the city to meet in what I call a financial crisis. I will not allow a $70 million budget hole to be filled by taxes...That will devastate homeowners, we will put renters out of their apartments, we will significantly make a long-term hole in the city to create a business climate... Pitney Bowes...Standard Charter Bank and hotels we are working on will not come....no creation of thousands of jobs...businesses will begin to close their doors. This is an unacceptable reality for me...It will drive up our delinquency rate, as homeowners will not be able to pay the taxes. There are only 5 plus months left in the year... we have already mailed the 3rd quarter of our tax bill and every contract we will give has a thirty day notice. Clerk's office catering services are cut, so are stationary and printing services...no holiday decorations for the city. Programs precious to our families will be cut. On August 2nd we will close Camp Watershed, there will be no use of gasoline for any city employees not providing for the city's safety and welfare. I am taking back gas cards from council members, city directors. Everyone cannot use their city vehicles or pump themselves. One of the most difficult announcements I have today that effective September 27th the entire city of Newark will go on a four day work week...non uniformed employees, not police and fire, will go to a four day work week. For the last quarter of this year, including the mayor, everyone will have a 20% reduction in their salary. I have no power to do that to the city council and I have no power to do that to the city clerk. I beseech them to join us in the 20% reduction in salary. Every one million dollars saved is a penny saved to Newark taxpayers...the city council can come with a reliable budget plan. It's not a time for politics, but to find a solution. There are a lot of ideas on the table. Most of them we will able to pursue, but the challenge we have right now, most of the ideas do not have immediate impact on this year's budget. Third quarter tax bills are already gone out. If council chooses to rely on tax increase, our homeowners will receive year's worth of tax increase in the 4th quarter. People will receive tax increase into thousands that means massive foreclosure rates, massive deliquesces rate...The reality is that if we do not take now, the greater pain we face is yet to come."
The budget has been introduced, but not passed. The MUA is a part of the budget proposal. If the council do not pass or compromise, the mayor may be forced to raise the taxes or cut down the services and lay off employees, a fear everyone might have heard already. It is very important for the city and its residents. Everyone should attend the public hearing from next Monday to Thursday.
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