MUNICIPAL FINANCE 101

Fehrenbach: City Fiscally On Life-Support (Reprinted from Amboy Beacon, Sept. 8, 2010)

PERTH AMBOY — At the City Council’s Special Meeting last week, advertised as being “a session on budgeting in New Jersey local government,” former Acting Business Administrator Gregory Fehrenbach — who may be back at his old job before this month is out — was the professor.Council members — none of them in-office for more than 26 months — were the students, and what they heard probably was enough to make some of them privately have second-thoughts about whether they should have run for their positions.
Business Administrator Jane Feigenbaum and Chief Financial Officer (CFO) Jill Goldy — the people whom local officials depend-upon for their financial advice — did not attend the two-hour afternoon session, nor did City Law Director Mark Blunda.In their stead, Fehrenbach — who has enough experience under his belt with much-larger municipalities to know of what he speaks — dominated the meeting, painting a somber picture of city finances.At one point, Fehrenbach stated, “The city is in horrific financial condition” because “you’re about 2.6- to 2.7-percent in debt in your current fund alone.”He also raised more than a few eyebrows and caused some audible gasps when he declared, “The city is in critical condition. If the city were a patient in a hospital, it would be in ICU (Intensive Care Unit).”On the bright side, if there was one, Fehrenbach noted that “Camden may be worse, but there aren’t very-many like you.”As Perth Amboy prepares to return to calendar-year budgeting in 2011, local officials “are looking-at a $5.7 million deficit,” and taxpayers can look-forward to a certain tax-increase which the Administration and the Council, working-together, may be able to “temper” but not eliminate altogether “so you don’t nail people in subsequent years,” he said.“You essentially have no surplus, and the state is not going to be able to provide an annual transfusion,” Fehrenbach told Mayor Wilda Diaz and Council members, who listened intently and held-off asking questions or making comments as the session proceeded.Newly-seated Councilman William Petrick gingerly ventured-forth with a personnel question, which Fehrenbach quickly brushed-aside with the reply, “That’s something for closed-session.”City Clerk Elaine Jasko confirmed that the Public Notice for the meeting contained no provision for a closed-session discussion.Fehrenbach went-on to advise local officials that they must “anticipate the revenues conservatively” in-order to lead the city out of its fiscal crisis. “$7.5 or $8 million used to fund the previous year’s (2008) Budget is non-recurring revenues,” he added.Fehrenbach explained that what got Perth Amboy into its financial bind was the philosophy of the previous Administration (led by indicted former Mayor Joseph Vas) that tax-increases of any size should be avoided at-all-costs.
“There was constantly a desire to generate revenues from other sources to keep the tax-rate down,” he said. “A portion of everybody’s water-bill today is paying for costs incurred between 1998 and 2007, and you’re going to continue paying those costs from years ago.”“We’re still paying eight-percent interest to Middlesex Water (Co., the city’s private partner in operating the Water/Wastewater Utility),” Council President Kenneth Balut said. “That’s in the agreement, but the city has to reopen that agreement,” Fehrenbach said. “If we go-bankrupt, they don’t get-paid.” In fairness, he said, “they (Middlesex Water) took it on-the-chin, too.” But “we need to go back to them,” Fehrenbach said. “Many banks are renegotiating agreements.”He urged city officials to “creatively think-about ways in which to appropriately come-up with new alternative revenue-sources,” not by increasing homeowners’ property taxes, because “they’re already paying enough.”
Turning to labor costs — the topic brought-up by Petrick, but in the abstract — Fehrenbach cautioned that reducing the city’s workforce any further is not the answer to improving its finances.“There really aren’t a lot of people here,” he said. “The city is now at or near a bare-minimum. The Fire Department has just-enough people to staff its equipment, so I don’t know if the city can afford-to drop its rolls by one firefighter.
“The Police Department is tight, too, and the Sanitation Department is taking people from other units to pick-up garbage,” Fehrenbach said. “People are retiring from Public Works, and these positions must be filled or you can’t continue to service the community.”The city is running “a very-shallow operation” in many of its departments, he noted. “For example, in the Fire Department, the lowest number of firefighters-per-population and the lowest number of firefighters-per-square-mile is Perth Amboy.“There’s not a lot of ‘fat’ left,” Fehrenbach declared. “You can’t assume in the future that you can save money by reducing the number of city employees.”One way of enhancing revenues is “to increase fees-for-services where it seems appropriate,” he said.Councilman Fernando Gonzalez proposed that a fee be established for removing newspaper-boxes which have been turned-onto their sides and dumped-into the roadways, thereby creating a safety-hazard.“It’s costing us money,” Gonzalez declared.Fehrenbach noted that cases involving newspaper-boxes have been thrown-out in court as infringements upon the First Amendment.“Maybe we can approach it as a recycling-fee.” Petrick suggested. “It’s a quality-of-life issue.”Fehrenbach countered that with finding ways of “reducing the cost- per-employee,” to be discussed privately in the near-future.
“The Mayor is going to enunciate a series of budgetary priorities in the next two to three weeks,” he said. “The primary objective is that she doesn’t want to see the (tax) levy increased during the 2010 Transitional Budget (which runs from July 1 through Dec. 31, 2010).” “A lot of things have been cleaned-up in the last two years, but a lot of things still need to be cleaned-up,” Fehrenbach said. He closed his presentation by raising the spectre of continued collapses of the city’s infrastructure — particularly its combined sewer and sanitary-sewer lines, many of which date-back centuries, and are made of clay or brick.“When you look at a Budget, you don’t want to focus-on paper-clips; you want to focus-on policy,” Fehrenbach said. “The best public officials are those who don’t give two-hoots about what’s going to happen in the next election.”At the same time, he warned that local officials “have to comply with those regulations issued by the (state) Division of Local Government Services and also the Office of the Comptroller.“The last Administration didn’t,” Fehrenbach declared.