Tax-cap fallout: Local officials predict cuts, layoffs

Thursday, July 15, 2010

beth fand incollingo
SPECIAL TO THE TIMES

A new 2 percent cap on property tax hikes may give taxpayers a break they deserve, but it will likely lead to
cuts in staff and programs next year, area municipal and school leaders said yesterday.

A day after Gov. Chris Christie signed legislation decreasing the cap on tax increases from 4 to 2 percent for
all New Jersey governments and school districts, the region's officials were at the ready with their
predictions, questions and complaints about the decision.

In addition to one guess that local governments will end up passing along unfunded costs to taxpayers,
there were complaints that a toolkit of legislative changes meant to make the cap workable -- including
arbitration and contract reforms that could affect pension and health care payments -- should have been
completed before the measure was approved.

And several leaders were concerned about issues they said could affect the success of the plan -- levels of
state aid, inflation, and the costs of state-mandated programs.

In all the uncertainty, though, one thing was definite, said Ewing Township Mayor Jack Ball.

"It's not an easy time to be a mayor of any town in New Jersey," he said, "that's for sure."

Under the new legislation, five types of expenses can be exempted from the 2 percent hike limitation:
pensions, health benefits, increased school enrollment, debt service and emergencies.

Beyond that, towns or schools that want to raise taxes by more than 2 percent will have to ask voters, in
referendums, to approve specific expenditures.

The new rules will be in effect as towns and schools craft their budgets for 2011.

Hamilton Mayor John Bencivengo said he supports the change as much-needed "tax relief," and
Bordentown City Mayor James E. Lynch Jr. said he wishes it were an amendment to the state constitution,
so it couldn't be undone by a future administration.

"It's something that has to happen with property taxes. There's just no question that cities are going to have
to do more with less, and do things creatively," Lynch said. As examples, he mentioned that he and another
city commissioner operate snowplows when necessary, and that the community saves money by sharing
some services with nearby Bordentown Township.

Hopewell Township Mayor Michael Markulec agreed that the new property-tax limit is both needed and
deserved.

"I think the governor is taking the right steps to start to rein in both spending at the state level as well as the
escalating property taxes," he said.

Fixed-cost pressures

But what will happen in towns or school districts whose fixed costs -- including negotiated salaries and
funding of state-mandated programs -- make it difficult to stay below the 2 percent cap?

"When annual operating expenses increase at rates beyond 2 percent, a 2 percent cap will most definitely
complicate things," said Brian S. Falkowski, business administrator for the Ewing schools.
"There will be reductions in services, and getting to those reduced services may include a reduction in staff
hours for providing certain services, or less frequency," added Richard Krawczun, Lawrence Township
manager.

In Ewing, Ball sees the same writing on the wall.

"For us, a 2 percent cap on a tax increase would amount to about $400,000," he said. "As we look at salary
increases that are already in place, that $400,000 doesn't appear that it will cut it."

The Bordentown Regional School District might face staff cuts under the new rule, too -- particularly if the
state doesn't offer as much aid as it has in the past, said Peggy Ianoale, the district's business administrator.

With the 2 percent cap in place, the state is still expected to provide aid according to a formula in place since
2007, Ianoale said. But if it falls short of that, cutting aid as it did during this year's budget emergency, she
said, the district will expect to lay off staff.

Judith Wilson, superintendent of the Princeton Regional Schools, said another challenge is that special
education isn't being allowed as a cap exemption.

"We were very hopeful that that would change even in the 11th hour," she said. "It's a huge cost driver for
every public school district."

Taxpayers affected

The shortfalls will definitely affect the day-to-day lives of taxpayers, Krawczun predicted.

"There will be a need to shift costs to pay-as-you-go, or to implement user fees to offset some of the loss of
revenue," he said, "such as (charges for) health services, collection of waste from households, certain
recreation programs or researching information for taxpayers."

Things could get even worse during a period of severe inflation, added Thomas Eldridge, business
administrator for the Lawrence schools.

"If we see the cost of goods soar, will a 2 percent cap harm us disproportionately in terms of what's
happening around us?" he asked.

Eldridge further worried that the state might be planning to shift more employee pension costs to local
governments and school boards. The clue, he said, was the cap exemption for pension costs.

"What other motive could there be (for offering that exemption)?" he asked. "Pensions do increase in cost
every year, but if we're in a place where we're looking at freezes across the board, then that's the only
reason we'd see for what we're hearing."

A couple of officials criticized the philosophy behind the new tax cap.

Markulec, although he supports the reduced cap, mentioned that "it takes control away from local
municipalities."

And William J. Morelli, a township committee member in Bordentown Township, pointed a finger at
education funding as the main cause of high property taxes in New Jersey. In wholehearted agreement was
Robbinsville Schools Superintendent Steven Mayer.

"I'm profoundly disappointed that Gov. Christie has let that fall by the wayside, because all of the funding of
education needs to be re-examined," Morelli said. "Other states have figured out how to fund schools not
based on property taxes, and New Jersey should be smart enough to be able to do that. Until Gov. Christie
is willing to take on (the teachers' union), he's not my hero."
Toolkit necessary

Others, including East Windsor Mayor Janice Mironov and Robbinsville Mayor Dave Fried, found fault with
the way the new tax cap was approved -- well in advance of the proposed 33-bill toolkit designed to help it
succeed.

Princeton Township Mayor Bernie Miller called the 2 percent cap a "hollow promise" without the toolkit.

"Putting a line in the sand and telling us "you can't cross this' without giving us tools makes me concerned,"
agreed Diane Ciccone, West Windsor Council president.

"Unless the toolkit is executed, I think this is false hope that property taxes are going to go down
significantly," added Hightstown Councilman Walter Sikorski.

Staff Writers Matt Connolly, Carmen Cusido, Erin Duffy, David Karas and Meir Rinde contributed to this
story.

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