CAPE MAY – Concerned that city taxpayers are at times subsidizing services to other towns, an advisory committee has recommended changes in the shared services system.

The recommendations were included in a presentation by the Cape May Municipal Taxation and Revenue Advisory Committee to the City Council on Tuesday, Feb. 6.

Cape May City engages in a wide range of shared services with municipalities on Cape Island. It supplies law enforcement and dispatch services to Cape May Point and West Cape May. There are agreements concerning fire rescue, emergency medical response, construction code services and shared activity related to municipal court.

Another large area of sharing is the wholesale agreement for water and sewer services. The city’s desalination plant supplies fresh water to Cape May Point and West Cape May as well as to the Coast Guard training facility in East Cape May.

While recognizing that sharing agreements are an economically efficient way of suppling municipal services, one of the difficulties identified in the presentation occurs when a long, multiyear agreement with fixed costs and a fixed annual escalator fails to keep cost recovery in line with sudden and unexpected increases in expenses.

One example used in the presentation was the one-year 20%-plus increase by the state in the cost for health insurance premiums for employees in the state health benefits plan. Other examples are the dramatic increase in inflation following the pandemic or new laws or mandates that affect the delivery of services.

In cases like those the escalation in real costs can run ahead of any contracted escalator in fees. When that happens, the Revenue Advisory Committee says, the result is the services provided to other municipalities end up being subsidized by city taxpayers.

The advisory committee’s presentation, by committee member and city resident Martin Van Walsum, looked at existing and potential shared services. The aim of the analysis was to review past charging for shared services, ascertain complete costs and assess the existing agreements.

The emphasis was on methodologies for arriving at reasonable agreements that economically benefit all parties while allowing Cape May City, which provides most of the services, to adequately recover the real costs associated with providing them.

The presentation made three recommendations for future contracting and for appropriate cost recovery.

It suggested that the city look to shorter contract periods, saying that an ideal time frame might be three to five years. In a relatively short time period, there is a greater likelihood that fees reasonably represent the current value of supplying the services. Van Walsum said long contracts are the most vulnerable to changes in real costs, meaning those costs could get out of sync with contracted fees.

A second recommendation focused on collecting and sharing data on the factors that most affect costs. All parties need to see an open accounting to feel the discussions are fair, the presentation said.

The third recommendation had to do with the framework for cost sharing. That framework should include both fixed and variable components and not rely solely on an annual fixed-rate escalator.

Looking to the future, the presentation suggested that the city consider enhanced fire protection services with West Cape May, an emergency response arrangement with Lower Township and the possible consolidation of the municipal court with West Cape May.

The Lower Township recommendation arises because the small portion of Lower Township that is on Cape Island often depends on emergency response from Cape May, but there is not an underlying agreement for cost recovery.

Advisory committee Chair Dennis Crowley urged the council to begin moving on the committee’s recommendations, as renewal dates are approaching for construction code and municipal court services provided to Cape May Point.

Contact the author, Vince Conti, at vconti@cmcherald.com.