Committeeman: 2% Tax Cap 'Forces Fiscal Discipline'

With the stroke of a pen, Gov. Chris Christie affirmed legislation Tuesday that promises to slow the growth of residents' property tax bills by limiting the ability of local governments to increase spending.

Christie signed a bill lowering governments' property increase cap from the current 4 percent to 2 percent while also eliminating many exceptions to the budget ceiling. The legislation, a compromise from the constitutional amendment Christie had sought, offers taxpayers a bit more predictability and budget drafters perhaps a new challenge, as they will have to work within tighter and tighter fiscal confines.

"I understand what the governor is trying to do, but the state is punishing towns like Wyckoff that have been efficient," said Committeeman David Connolly, chairman of the governing body's Finance Committee.

The legislation caps increases at 2 percent but provides exceptions for pension payments, health-care costs, debt service and states of emergency. School districts would have the ability to go beyond the cap due to rising enrollment. Additionally, taxpayers would have greater control of their finances, as governments would have to win approval by referendum should they want to exceed the 2 percent budget cap.

"It returns control on spending to voters," said Committeeman Chris DePhillips, a fellow Finance Committee member who supports the legislation.

"We're well-positioned to handle it. I think Wyckoff is more than capable of meeting the requirements of this legislation," DePhillips said. "We have a very long history of fiscal restraint."

Both governing body members felt that the legislation should accomplish its overall goal: slowing the growth of property taxes. 

"If forces fiscal discipline on all of us," DePhillips said, as the law will impact counties and schools districts, as well.

"It's fair game for all units of government," he said.

But Connolly was a bit more skeptical of the legislation's impact locally, as Wyckoff has been producing lean budgets with relatively minimal tax increases the past few years.

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

For example, the $16,647,957 municipal 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. 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.

The losses were compounded by various fixed increases, including negotiated salaries, health benefits, and insurance and pension payments.

In response, the Township Committee kept funding flat across virtually all line items while continuing to seek shared services and other cost savings.

Essentially, there is little "fat" to be found in spending plans that township officials have termed "maintenance" budgets.

The Finance Committee, which also consists of Administrator Robert Shannon and CFO Diana McLeod, largely constructed the 2010 plan as a way to get ready for the prospect of a tighter 2011, as Christie's original proposal of a 2.5 percent cap via a constitutional amendment was being proposed this spring.

"The budget was built around the expectation that this would happen," DePhillips said. "We positioned the budget this year to be ready."

Connolly is concerned the 2 percent cap is "going to be a mess" when trying to fund services and township staff positions. He hopes to avoid any impact on municipal staff, as the township takes a "personal approach with our employees.

"They're good people ... we can't punish them because the governor has taken a blanket approach to this problem."

DePhillips is "comfortable" with the exceptions to the cap, as they "should be limited." As Wyckoff keeps debt low, he doesn't expect the township to have to seek exceptions for debt service payments, and both he and Connolly noted the unpredictability of health-care costs. Often, municipalities seeking to avoid a large increase would change employee plans for one that features a relatively smaller increase, although doing so can alter the coverage that employees come to expect.

The impact of the legislation largely will depend on whether Legislative Democrats succeed in drafting further exceptions to the 2 percent cap, as desired, and on the governor's so-called "toolkit," a package of 32 proposals designed to give local governments and school districts greater flexibility over their finances. Among the proposals are laws that would affect contract negotiations, the state pension system,  civil service protections, among many other measures.

DePhillips is curious about "toolkit" proposals that would reform employee arbitration, as such costs "can be substantial" should negotiations reach that point.

Connolly expressed concern about employee contracts, "binding agreements" that don't offer flexibility years down the road. Assembly Democrats want to except standing contracts from the 2 percent cap, although Christie has urged the Legislature to move to consider the "toolkit." Recently completed contracts with the PBA and Department of Public Works produced salary increases that were lower than many other towns, but still greater than 2 percent over the life of the deals.

"I don't know where we're going to go with it in Wyckoff," he said, saying the resolution of the governor's "toolkit" and possibilities of more exceptions to the cap would go a long way in deciding the law's impact on the township.

In the meantime, the township will continue to explore shared services with neighboring municipalities and will encourage more private/public partnerships, such as the recently formed Wyckoff Recreational Foundation, which seeks to raise funds for facility improvements.

"A lot of people will have to step up to the plate," Connolly said.