STONE HARBOR – The borough will be able to get its 2025 budget under the state appropriations cap limit without seeking a waiver from the state Department of Community Affairs, a goal the borough chased for months.

The Borough Council got that news at its April 1 meeting from Administrative and Finance Committee Chair Jennifer Gensemer.

In August 2024 the borough’s external auditor, Michael Garcia of Ford-Scott & Associates, talked to the council about potentially serious issues looming in the municipality’s finances. It came down to a problem of very limited flexibility in its spending authority, which would make arriving at a 2025 budget difficult.

The state has two cap limits that it imposes on annual budgets. One is the 2% cap on increases in the local purpose tax. The other, the appropriations cap, is less well known and dates to 1977. It imposes an up to 3.5% limit on spending increases.

Not all budget items are calculated as being “in cap” – counting toward the cap limit – but almost all operations of the municipality are considered in-cap expenses. Garcia told the council that Stone Harbor had very limited additional spending authority as the borough moved into a new budget cycle.

Numbers vary with time, but the problem the borough faced did not. A town with one of the best ratables bases in the county could generate new funds with even slight increases in its local tax rate, but it would not have the ability, given the state cap, to spend any of it.

That is why the news from Gensemer was important. If the borough had failed to get itself under the cap, the only recourse would have been a request to the state for a waiver from the cap limit, a process with no guaranteed approval.

Gensemer mentioned some of the steps the borough has taken to move expenses so that a budget could be presented that is under the appropriations cap.

Among the steps was the charging of more areas of indirect costs to the water and sewer utility. She said the areas of pension contributions, liability insurance and workmen’s compensation for utility employees legitimately belonged in the utility budget rather than in the general fund budget.

Moving those charges placed them outside the cap, but the move contributed to a need to increase water and sewer fees by $125 per household per quarter for the remaining three quarters of 2025.

If the borough is successful in establishing its proposed shared services agreement with Wildwood Crest for Uniform Construction Code services, that step will also move certain expenses out from under the borough’s appropriations cap. The borough will now pay for service to Wildwood Crest, which will be the lead agency in the construction services.

These moves, plus what Gensemer called a reallocation of capital expenditures and the identification of stormwater and water pollution programs as outside of cap expenses, allowed her to announce that the new budget will not need a state waiver.

The formal budget will be introduced at the council meeting on April 15, with a public hearing and vote on final adoption scheduled for May 20.

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