Business Administrator: ‘We Will Meet The Two Percent Tax Levy Cap’
Mayor’s advisory panel suggests it is possible to reduce actual raise in 2012 tax rate
Mahwah will likely meet the state mandated two percent tax levy cap, Mahwah Business Administrator Brian Campion said at a meeting of the Mayor’s Blue Ribbon Budget Advisory Panel Tuesday night. Campion said over the next week, he and township Chief Finance Officer Ken Sesholtz will be working to chip away about $200K in operating expenses tentatively budgeted for the new year in order to meet the cap.
At the first meeting of the group at the close of last year, Campion said about $800K needed to be cut from the budget in order to meet the state cap. He said Tuesday that several “year-end expenditure figures” were lower than anticipated, which helped close the gap.
Campion said he is confident “we will be able to deliver a budget that is within the state statute.” The delivery will be to the town council, who will then hold a series of work sessions going over line items in the budget before it is adopted, which likely won’t be until March or April.
The Blue Ribbon Panel, which is comprised of over a dozen township residents who have no political power, has been advising the township’s mayor and administration team since late last year. Coming from business backgrounds, the members of the panel have been providing suggestions on how to save money, or bring in more revenue to the town.
At Tuesday night’s meeting, members questioned whether merely meeting the state-mandated cap was good enough.
According to Campion, coming in at the two percent cap would actually mean municipal taxes would go up for residents about three percent over last year’s, because of certain exemptions that are allowed in the “two percent cap.” The consent among the panel was to “make the realized tax increase lower.”
According to Mayor Bill Laforet, the last time residents actually paid less than a two percent tax increase was a decade ago. To do that again this year, an additional $450K, approximately, would need to be cut fro the budget, Sesholtz said.
Campion cautioned the board that lowering the actual tax levy too much might compromise the town’s surplus funds, which help determine Mahwah’s bond rating, and its reserve fund for tax appeals. “These are concerns we have to remember and be aware of,” he said.
Whether municipal taxes go up two or three percent for residents, the budget must be delivered to the township council by February 3. According to Campion, this budget determines only the municipal portion of the taxes residents pay, which amounts to “about 22 cents of your tax dollar.”
Lower Taxes
6:57 am on Wednesday, January 18, 2012
Why don't we reduce the real estate taxes in this town by 5%---a lofty goal.
JP
9:33 am on Wednesday, January 18, 2012
They mentioned Mahwah has surplus funds. How much are we talking about here and is increasing those funds part of the new budget? Where has this fund gotten it's revenue from?
Jessica Mazzola
10:37 am on Wednesday, January 18, 2012
Hi JP -- I am actually working on a story about the township's surplus, which will go into more detail on your questions. But, as a preliminary answer, my understanding is that surplus is generated due to discrepancies in money that is budgeted, and money that is actually spent. So, if the township estimates that it will collect X amount of money from a construction project, but ends up collecting more, the extra will go into the town's surplus. Also, if the town budgets a certain amount for an expense, and it ends up costing less, that difference goes into the surplus. The money is used in bond rating calculations, but also as sort of a "rainy day" fund. Here's an example of how the town council utilized some surplus money last year http://mahwah.patch.com/articles/township-to-dip-into-surplus-to-pay-for-gas
Andy Schmidt
11:02 am on Wednesday, January 18, 2012
Another big reason is that every township allows for the possibility that not everyone will be paying their real estate taxes. To avoid being out of funds, the budget doesn't assume 100% of real estate tax collections - but only 9x%. When the actual tax payments are in they (hopefully) will at least cover the budgeted amount, any access goes into the "surplus".
That surplus is important, because it tells the bond rating agencies, if the township will be able to deal with unexpected disasters and other expenses that it couldn't budget for (let's say a fire or flood destroys a major piece of infrastructure, etc.) As long as the township maintains a decent balance in that "savings account" to fall back to it demonstrates to the bond agencies that it has a solid financial structure this is managed conservatively. When the bond rating agencies are confident about the township's fiscal management and that it will be able to meet its financial obligations, they will let the township finance/refinance at BETTER interest rates than if it was pushing its means. Lower interest rates are of course criticical, because those are significant tax savings.
In the past decade, the surplus has been used by previous mayors and councils to give raises and fund other expenses while keeping the tax rate artificially low, so that residents thought we were doing well. Now we've reached a level where that purse is too low and we actually have to pay our bills!
JP
1:55 pm on Wednesday, January 18, 2012
I'm just concerned that this surplus money doesn't end up as someone's pet project in town, or as they call it in Washington DC... "pork" barrel money. I'd much rather see our town adapt a balanced budget policy and 90% of any surplus left over is used to offset the next year's budget or given back immediately to the residents as a credit on their property tax or water bill. What's the scale of this roughly? Thousands, tens of thousands, hundreds? I'm sure it's not millions, is it?
Andy Schmidt
2:53 pm on Wednesday, January 18, 2012
As you know from prior discussions, last year the council used $3.825 million to keep the tax increase "low". The councils and mayors have been drawing down that reserve over the last decade (taking out more than was put back by the end of the year), claiming that they do a great job in keeping Mahwah taxes low, when all they've been doing is simply dip into the savings.
Another "trick" was to adjust the "collection rate" - the percent of taxes that the town can collect vs. non-payers. It used to be conservative/lower - resulting in additions to the surplus. By increasing the percent value, the town basically assumes more people will be paying their taxes - which means that there is more paper-money available for the budget, but it also means there is no (or very little) money to replenish the reserve.
The end result: Now there's no more dipping. Suddenly everyone's eyes open widely because the residents finally seeing what it REALLY costs (and should have cost all these years) to run the town and the things it offers.
No it's not some bork-barrel money. It's use goes through the council it's part of Mahwah's financial reporting that is public record. It's a "floating" reserve that the town needs to keep in case things go wrong - and to satisfy lenders that the town has liquidity. It's like a business, if you can't show "cash" then your business is in trouble.
MahwahF.F
2:54 pm on Wednesday, January 18, 2012
Jp.... You are an idiot. The surplus is used as emergency funds ....bond ratings....and yes, sometimes In the past to keep taxes low.... I know Andy gave you a lot of great info.....but I guess it was hard for you to understand.....tell you what....pay your bills next month and whatever you have left over.....GIVE BACK TO YOUR BOSS.
JP
10:05 pm on Friday, January 20, 2012
I'm AN idiot?!? Looks who's talking. You hand over your tax money and don't question what it's being used for and why there's a surplus? You have GOT to be kidding me, right? The difference in your example above is that a boss is not paying you with his own money, but we ARE paying the town with ours. Don't be stupid.
resident
6:51 pm on Wednesday, January 18, 2012
There is no need to get nasty and start name calling.
Pete Malvasi
6:56 am on Monday, January 23, 2012
JP raises a very valid point regarding surplus, and this is one of those very cleverly arcane areas towns and cities can use to do exactly what JP about funding a pet project OR pet contract with a law firm, engineering company etc. Im certainly not alleging this has happened in Mahwah but it can and only when questions are asked an people STAY involved can you weed out the snakes. And with local government especially in NJ there are MANY SNAKES. Nothing more exotic than muni finance budget transactions. Just read the auditors statement sometime - they cannot certify because munic budget practice under the NJ state law does NOT conform to GAAP. !