The issue of placing non sewer-related salaries from the sewer budget back into the current fund budget was the first topic of discussion at the capital budget workshop for the governing body on April 12th.
Chief Financial Officer (CFO) Ken Blum started the meeting by stating that consumption overall in the borough was down by 31,612 cu. ft. which, at the current rate of $3.00 per 100 cu. ft., meant a loss of almost $95,000 in revenue. Added to that was the news that Merck’s actual use bill was $236,003.35, almost $40,000 less than the amount estimated by the municipality of $275,000. Currently, revenue is down just under $165,000 for the first quarter of 2012.
Compounding to the issues was that the sewage authorities used by the Borough – the Joint Meeting of Essex and Union Counties (JMEUC) and the Rahway Valley Sewage Authority (RVSA) – both had increases in their billing of $62,373 and $49,660 respectively, for a total of $112,033. This loss in revenue in the two (2) sewage authority meant an increase of almost $277,000 in the sewer budget. The RVSA accounts for only about 25% of the borough’s use but was paid $584,711 by the municipality. The JMEUC – which accounts for the other 75% – was paid $479,000.
Ken Blum offered four (4) options that the governing body could decide upon regarding the current $1,740,000.07 sewer budget:
- Option 1: Raise the sewer rate from $3.00 to $3.62 and use $50,000 of the sewer budget surplus which would increase the minimum bill from $57 to $69. Based roughly on what has been used for average bills, this would mean an increase of $56.43 for a 2-person household, an increase of $75.02 for a 4-person household, and $101.06 for a 5-person household.
- Option 2: Raise the sewer rate from $3.00 to $3.50 and use $100,000 of the sewer budget surplus. This would increase the minimum bill from $57 to $67 and average an increase of $45.50 for a 2-person household, $60.50 for a 4-person household, and $81.50 for a 5-person household.
- Option 3: Keep the sewer rate at $3 and use $50,000 of the sewer budget surplus. $255,000 in appropriations would be moved out of the sewer budget and into the current fund budget. This would impact taxes by increasing taxes $57.85 for a house assessed at $65,000. The tax increase would go up from $67.60 up to $125.45.
- Option 4: Keep the sewer rate at $3 and use $100,000 in surplus. In this instance, $205,000 would be moved from the sewer budget into current fund budget, resulting in a tax increase of $46.80 for a house assessed at $65,000. This would raise this year’s tax increase by $114.40
Mr. Blum went onto explain that in the past several years, there was $50,000 anticipated in surplus but that last year it increased to $200,000 in order to set aside funds for the lawsuit from Occidental vs. DEP. Although options 3 or 4 would result in a higher property tax hike for residents, Mr. Blum stated that if it is in the property tax portion of the bill, it can be written off on income tax returns whereas sewer bills cannot.
Mayor Joseph Accardi then stated, “The argument has been over the years that there are items in the sewer tax that should be in our regular budget to make it clearer what the sewer rate is all about and I’ve been a proponent of pushing some things back into the budget over the years.”
During the budget workshop it was mentioned that in the sewer budget, there are six (6) full-time employees and one (1) part-time employee. there are two (2) additional full-time employees who have their salaries proportioned between the sewer budget and the current fund budget; making a total of nine (9) employees who have their salaries and benefits paid through the sewer budget instead of the operating budget.
Mayor Accardi stated that moving the salaries back to operating budget, the sewer bill would truly become a use-based fee.
“With regard to the employees that are on this sewer fee, some of them do have sewer-related business,” the mayor continued, “But I think that it’s no secret that with 6 full-time employees and 3 part-time employees those salaries cannot all be associated with sewer-related items and therefore there is some excess penalty perhaps if you’re putting it into the sewer budget.”
“Do either of the last two options address the problem?” 1st Ward Councilman Andrew Casais asked, “If we’re running the loss of revenue equivalent to $277,000 and we’re only going to move at the maximum $255,000 does that really help?”
The CFO responded that the governing body could look into moving more funds to help for future years or phasing something in for other years.
5th Ward Councilman Michael Yakubov asked the CFO which of the four options would prepare council best for the future, particularly looking at next year. He continued, “Number three and four – I’m looking at it – it looks like it’s a one-year fix.”
The CFO stated that once those salaries are brought into the current fund budget, they would stay there permanently. He added that the governing body has to introduce the sewer rate ordinance, if there is one, because the bills would be going out Memorial Day weekend.
The mayor explained that JMEUC had some capital projects that will eventually lead to some savings for the Roselle Park but in order to pay for those capital projects up front, which accounts for part of their increase.
A brief discussion regarding the four options started. The CFO stated, “If you’re asking me which one to go with, depending on how you want to move it, it’s either option 2 or option 4.”
The mayor also wanted council to consider that the sewer bill, including any increase, would need to be paid all at once, whereas if it is in the tax bill, the increase would get spread out into four quarters. The CFO stated that those with mortgages would have that increase placed into their escrow.
2nd Ward Councilman Marc Caswell said regarding the situation, “My concern, practically speaking, is that if the resident gets their sewer bill and their sewer bill goes up $100, they’re going to be angry at the sewer people. If we put it into our budget and it goes up $50 or $60 they’re going to be mad at us.”
Mr. Blum stated that both the property tax bill and sewer bill come from the municipality. He added, “They’re still angry at the same people.”
“I understand that,” councilman Caswell continued, “But there’s a connection. People differentiate where their anger is. It’s easier to say this is your sewer authorities that are doing this to you. Even though it’s our bill, they’ll direct their anger that way.”
He concluded, “This is another case of uncontrollable expenses on our part that these sewage authorities . . . their consumption is down but they increase the money that they need and it’s going to undo all the good work that we did.”
“It’s actually going to be painful no matter how you do it,” Mayor Accardi remarked, “The real thing that you accomplish is undoing some of the problems that have been caused over the years by putting things into the sewer fees that may not have been necessarily sewer-related.”
Mr. Blum stated that council has been trying to stabilize taxes as much as possible but that next year is going to have a lot of factors with 109 tax appeals with 17 state tax appeals pending.
“That could be very big,” Mr. Blum commented, “Net evaluation taxable can drop $2,000,000 this year.”
3rd Ward Councilwoman Tanya Torres offered her thoughts on the choices, “The difference is though, if you take option 1 and you increase it to $3.62, then the people that use more will pay more, whereas otherwise you take the $255,000 and you put it into the tax base everybody’s paying it based on their tax rate.”
The mayor stated, “I know that it’s not the politically popular thing to do to push it back into the regular budget . . . nobody’s going to like it, but if you’re honest about it you’ll realize that those positions was put in the sewer budget in order to avoid a tax increase years ago.”
“I don’t think anybody’s trying to be politically popular with the decision but either way it’s going to hurt,” the councilwoman said, “For me, I would be seeing the biggest increase. I’m a family of five. I’m just saying that perhaps I should be paying more than a senior citizen with one person in the house and with option 3, they’re paying as much as I’m paying.”
As the discussion was coming to an end, both councilmen Michael Yakubov and Modesto Mirnda (4th Ward) stated they were leaning towards option 2.
Councilman Caswell stated in conclusion, “I’m going to keep an open mind . . . It’s a bitter pill either way just trying to see which is worse and which one isn’t so bad.”