Mayor & Council Blog

4/13/2016 - Mayor’s Commentary on the Borough’s 2016 Budget and Taxes

From: William Muller, Mayor
Date: April 13, 2016

Mayor’s Commentary on the Borough’s 2016 Budget and Taxes

I’m sure many residents have read the front-page story about our 2016 budget in the Bernardsville News of March 31, 2016. The headline says that the tax rate is rising 4.1%, but this simple headline does not tell the whole budget story.

What is true is that the Municipal Tax Rate is indeed increasing by this amount, from 53.6 cents per $100 of assessed value to 55.8 cents. However, the overall tax rate, which included School, County, Library and Open Space is projected to decrease slightly from $1.884 per $100 of assessed value in 2015 to $1.883.

As your elected officials worked through the budget for 2016, a couple trends became very evident and much conversation took place to validate these trends and find a way to fix them if we were able to do so. As a result, the net amount of real municipal spending increased only $96,000, or 1.3% over the 2015 budget. Consider that our healthcare costs, both for current and legacy staff, increased 9% or about $52,000 over last year or that the Council wisely increased contributions to the Capital Improvement Fund of $20,000 over 2015 or that our debt service increased by $28,000 (primary for road refinishing projects) and it becomes clear that much effort was made to keep all other costs in line.

The question, therefore, is if Municipal costs were held to 1.3%, why did the paper report a Municipal Tax increase of 4.1%?

There are a few reasons for this. The largest one is that in the interest of full transparency, the 4.1% number factors in the increase in municipal assessments, or the values of our residential and business properties. Overall assessments went up an average of 1.78% with residential assessments up an average of 2.57%. Still, there are other reasons that affect the complex tax calculations.

The second reason is that the Council wisely decided to reduce the amount taken from our Fund Balance from $2.1Million to $1.95Million or a reduction of $150,000. Fund Balance (sometimes conveniently and incorrectly referred to as “surplus”) is akin to the funds you might keep in your savings account. It allows the Borough to operate without short-term borrowing or the use of credit lines. In years past, the Borough’s fund balance has been slowly shrinking. The Council, again wisely, decided to reduce the amount taken from our Fund Balance to what we can expect to replenish it with during the year, stopping the slow hemorrhage of the Borough’s reserves.

The last but perhaps most poignant reason is that growth in our Borough, after many years has nearly dried up. Although there is hope of a few projects that may increase the Borough’s taxable base in the future, current growth is minimal as the Borough is nearly “built-out.” As with any entity or individual for that matter, earning more tax revenue allows for more spending – this is a luxury we can no longer reliably count on.

Several Council members and I approached this budget session hoping to keep the amount you pay in taxes flat during 2016 like we have in the recent past, but it readily became apparent that this could not happen without a reduction in services to our residents. At the time of the financial meltdown that began in early 2008, the State Legislature created a "CAP" on spending that has severely constrained municipal spending. While this has been very effective in keeping real estate tax increases more reasonable as compared with the past, elected official are now faced with stark choices: raise taxes, trim services, or find a way to perform existing services at a lower cost.

You may have heard me state that "shared services" is a direction that we must continue to explore in the future. Our Borough presently contracts out or shares these services: schools, sewage processing, health and animal services, municipal court, and senior van services. In order to keep our Borough sustainable going forward for both current and future residents, your Council and I are compelled to continue to search for additional ways to reduce costs through shared services in the future. While not always a comfortable subject to discuss, it is one of the few options at our disposal to keep life in Peapack & Gladstone affordable.

Thanks for taking the time to read this. Municipal budgeting is incredibly complex and constrained by some arcane and difficult statutes that the State has imposed. It is not as simple or straightforward as you may be familiar with in the business world or in your own home. Any Borough Councilman, from our Finance Chairman Anthony Suriano to myself would be happy to walk you through our budget to give you further perspective on what our Borough now faces or will face in the future.

I offer my thanks to the entire Council, Staff and the Finance Committee in particular for their insightful work on the 2016 budget.

Yours truly,

William Muller
Mayor, Borough of Peapack & Gladstone