Officials: Toolkit Will Determine Property Taxes

As municipal and school governments across Northern New Jersey prepare to adapt to a new 2-percent property tax cap signed into law earlier this month, general uncertainty remains among officials as to the future of local budgets.

"The 2 percent is great … but ... the '32-bill toolkit' must come with it," Montclair Councilor Cary Africk said. "Towns have to have the power to change things."

There are actually now 34 bills in Gov. Chris Christie's so-called toolkit to change how local governments do business.

That includes the one measure that's already passed, albeit in a form somewhat different than the governor originally envisioned—the 2-percent cap on year-to-year tax growth for local governments and schools. It also includes a measure proposed after the package was first announced, to limit school superintendent salaries.

While not all local public officials share Africk's enthusiasm for Christie's planned overhaul of the property-tax system, most agree the debate over the 33 remaining bills will greatly affect tomorrow's landscape. 

In fact, local officials scattered throughout Northern New Jersey hold almost as many opinions as bills in the toolkit. However, as tempered responses as they may be from mayors, municipal administrators, school board members and superintendents, most officials sense the sea change and await the fate of the toolkit.

"Everyone is feeling the pinch financially," North Caldwell Mayor Mel Levine said. "Everyone's very concerned with these increases. But how are we supposed to keep it down if everything keeps going up? I'm very interested to see what's in the final toolkit, because it's going to determine a lot of things. Whatever it is, it's what we'll have to live by."

Montville Mayor Jim Sandham described the cap as a "line in the sand," but he would still like to see the state take further steps to limit spending.

"You know, you can say, 'I'm only going to spend $5,000,' and that's nice to say, but if you're still spending $8,000, you have to figure out how to get that back," he said. "We need to get there as a state. [The cap] doesn't change spending dynamics."

The line may be an apt comparison for the cap. Opponents say measures in the toolkit—like empowering county superintendents, instituting furloughs and controlling superintendent salaries—are overreaching. While others argue the toolkit is needed to continue the standard set by the cap.

Chatham Council President James Collander said the borough will have less free reign to raise taxes than it did in the past.

"The tax cap, as I see it, and I'm just an observer... is the beginning of the process. It's not the end of the process," Collander said. "There's a lot of policies and procedures in the state that have contributed to getting us to the point where we are."

Included in the cap are exceptions that allow towns and schools to raise property taxes above 2 percent in certain circumstances—such as when facing increased health insurance costs or increased school enrollment.

Madison Board of Education President Lisa Ellis said the cap doesn't address the problem as a whole, especially by leaving out health care and pensions as exemptions.

"I think that it's dishonest to taxpayers," Ellis said. "I think a 2 percent property tax cap is not possible if these things are placed outside of it. They put health care costs outside of it—we've been seeing 20 percent increases—how is that going to fly? That is going to eat up our entire cap."

Hopatcong School District Business Administrator Theresa Sierchio opposes the cap, since there are "so many exceptions in that 2 percent cap that you can go around it and increase your taxes by 4 percent if you need something."

Others credit some of Christie's proposal for fixing what they say is a broken system.

Westfield Mayor Andy Skibitsky rates the arbitration reform proposals as most important to him. As a part of the toolkit, Christie is proposing changes to the binding arbitration process utilized in negotiations between local governments and public employee unions.

The governor's proposals include limiting any new contract to no more than the cap and requiring arbitrators to consider the impact of new contract costs on property taxes before making the awards.

Millburn Township Administrator Tim Gordon said the arbitration reform was a necessity.

"If we have the cap [on arbitrators awards], it will help," he said. "If they don't pass it and we have the 2 percent cap, there will be more chaos."

Skibitsky noted that the current binding arbitration rules have hindered local governments by giving the arbitrators the ability to set contracts at rates higher than the rate of inflation. He said he hopes the governor's plan will be to deliver lower raises.

West Caldwell Mayor Joseph Tempesta agreed.

"These contracts with fire and police departments—and this is everywhere— are notoriously awarded at very high levels at 4 or 5 percent increases," Tempesta said.

According to Tempesta, West Caldwell's agreement with its police department in 2011 calls for a 4 percent salary increase, which would force the town to make up the 2 percent differential that exceeds the cap—equating to approximately $90,000.

"I have to trim $90,000," Tempesta said, "and that's something right off the bat that we're up against."

While Tempesta said the town was "very fortunate" to reduce the cost of medical benefits this year, the expense is a variable that officials are unable to control and a key component he believes to the toolkit.

"We don't know how much medical benefits to employees are going to increase. We had a very favorable reduction this year. On average, most towns around the state were facing a 22 percent increase and we were very fortunate to actually have a reduction," Tempesta said.

"We're going to comply with whatever is included in the toolkit and that could mean making some very difficult decisions once again in terms of employee services or costs. We'll make the changes that are necessary and will probably start taking a look at things in the next few months."

An opponent to many of the governor's reforms, Ridgewood Superintendent Daniel Fishbein does favor the ability for districts to impose a "last best offer" contract in the case of stalled union negotiations.

With such blanket reform emanating from Trenton, some officials feel the cap unfairly lumps efficient bodies with wasteful ones.

"It's a real tough thing for us to embrace because of how fiscally responsible we've been," Wyckoff Committeeman David Connolly said.

For example, the $16,647,957 Wyckoff budget, which raised property taxes by an average of $80.70 annually, increased spending by just 0.13 percent over the 2009 budget, although the township experienced rising costs and a steep cut in state aid—similar to many municipalities statewide. Other factors complicated the budget process, such as a loss in revenue from construction code fees, a drop in interest income and a loss of fund balance.

Ridgewood Village Manager Dr. Kenneth Gabbert is unsure of the direct impact in town, but hopes to avert layoffs—unlike the approximately 30 positions lost this year in his municipality.

"It is possible [to have further layoffs]; however, from January 2010 on we have sought to make decisions that will avoid or greatly limit layoffs in 2011," Gabbert said.

For towns to exceed the cap, residents must approve it in a vote.

"It returns control on spending to voters," Wyckoff Committeeman Chris DePhillips said.

Summit Councilwoman Ellen Dickson has been one of the most outspoken supporters of the tax cap since the idea surfaced earlier this year.

"I'm solidly behind the governor in the tax caps," said Dickson, who also emphasized that the cap isn't cutting taxes, it's slowing the rate of increase. "I think New Jersey is rapidly becoming unaffordable for many of its citizens."

Caldwell Councilman Joseph Norton, chairman of the borough's finance committee, said the cap might not be a permanent mandate, but one that helps with the current economic climate.

However, fiscal responsibility should be practiced regardless of the situation, he said.

"You need to be fiscally responsible even when things are going good," Norton said. "People need to be aggressive in reducing spending in good times and bad. You have to remember, this isn't a sprint—it's a marathon."

Patch editors Nate Adams, Rick Burchfield, John Celock, Heather Collura, Jen Connic, Shelley Emling, Kelly Feeney, Brendan Kuty, Nicholas Loffredo, Mary Mann, Mike Pignataro, Zach Subar and Marcia Worth contributed to this report.