Webinar Addresses Municipal Shortfalls

TRENTON – The New Jersey League of Municipalities held an open webinar June 23, featuring a discussion about the growing problem of municipal revenue shortfalls in 2020 and beyond.
Moderated by League President James Perry Sr., of Hardwick Township, in Warren County, the panel for the discussion included Janice Kovach, mayor of Clinton, in Hunterdon County, Michael Venezia, mayor of Bloomfield, in Essex County, and Albert Kelly, mayor of Bridgeton.
The discussion focused on the devastation of municipal revenue streams caused by the pandemic and economic lockdown to combat it. Each of the mayors spoke of revenue losses that present major obstacles to providing service and maintaining municipal employment levels.
Kelly called the situation one of “revenue starvation,” especially for municipalities like Bridgeton, which, he said, was financially challenged before the pandemic. The mayors also spoke of unbudgeted expenses that came with providing health and safety during the peak months of the virus outbreak.
Venezia said that the cost of personal protective equipment (PPE), of maintaining sanitation routines, and of overtime for essential personnel presented his town with a $400,000 bill unanticipated as late as February. He spoke of police, fire and public works departments “stretched to the limits.”
What worried the mayors most was the uncertainty surrounding property tax collections for the third quarter. They agreed that the state needs to give them some flexibility regarding payments they are bound by law to pass on to county and school treasuries. In effect, they don’t want to be bound by law to pay the school district what the taxpayer has not paid the municipality.
They agreed that many municipalities are going to have to bond for the lost revenue. Two plans are floating in Trenton.
One would have the state engage in multibillion-dollar borrowing through bonds and federal loans. The municipalities would then be borrowing from the state. New debt would create new debt.
The other model, with support in Trenton, is one in which the municipalities would be free to issue bonds themselves. For Perry, this puts each town in charge of its own future.
“I pay back the bond funds I borrowed without concern for what another town of the state does,” he said. Perry also argued that this second model would allow communities with excellent bond ratings to borrow at better rates than the state can.
In the end, the panel agreed that municipalities are in uncharted waters, that the economic body blow they have absorbed is not the end of the pain, and that help from the state and federal government will be critical as towns dig out of the hole they are in.
Kovach said, “We have already cut nonessential spending,” meaning the next round of cuts gets closer to the bone. Less for police and other emergency and public safety personnel is a real possibility without outside help and new authorities for borrowing.
Uncertainty about the viability of their business communities, facing high unemployment, and fearing potential declines in their tax collection rates, the mayors admitted they were struggling with problems they never expected to encounter.
“No one wrote the playbook for a pandemic,” Kovach said.