Summit Taxpayers Association Mid-Year Report

The Summit Taxpayers Association (STA) is a non profit and non partisan organization representing Summit Taxpayers since 1943. Our purpose is to advocate for fiscally responsible government and our mission  is to reduce property tax increases to zero within three years, by 2014, through dialog and non partisan analysis regarding our City, School and County budgets. Thanks to each of you for your unselfish commitment of time and talent to the service of our City and Schools. Summit is a very special place to live due largely to many incredibly smart, dedicated and active volunteers like our council and school board members serving, without pay, the needs of our citizens young and old. I respect the fact we are all united in that effort.  Attached is the Summit Taxpayers Association (STA) mid year report which focuses Union County fiscal irresponsibility. Today's City and School report highlights a number of fiscal challenges heading into a new budget cycle for our City and Summit schools. 

Beautiful Summit, New Jersey 

I am not alone hearing family and friends refer to Summit as a beautiful place to live. This too is a lament heard from nostalgic Hilltoppers selling their home because they can no longer afford to live here. The New York Times reported on June 22, 2011 that New Jersey ranks #1 in the property tax increase of $2,475 required to fund existing pension obligations and #1 out of fifty states in median property taxes of $6,384. In Summit, like Lake Wobegon, everything is above average. Could our property taxes someday increase 39% ($2,475/$6,384) just to pay for existing state pension obligations? Summit complied with the state nominal property tax cap of 2% which Union County ignored making it difficult to continue starving parts of our City and School budgets to fund their stupid decisions (unanimous vote to gift 600+ non union employees lifetime health care) plus existing entitlement mandates. Summit's diversity is the big loser as home affordability forces both older and younger residents to move elsewhere. Only a little more than a quarter of Summit taxpayers have children in our schools and some argue property taxes make sense only if you do. 

The Budget Process 

Taxes spent by Union County feels exactly the same to Summit taxpayers as money spent in our own City or Schools. Union County spending is out of control and although we pay nearly 10% of the entire County tax burden no elected official in Summit appears to have any moderating influence over them. At a Council meeting on June 8 th, Councilman Murphy suggested several people, including me and the mayor, discuss next steps to advocate for greater fiscal responsibility from Union County Freeholders. I agree and renew Mr. Murphy's request that we schedule this meeting.  Because our School and City budgets have different fiscal dates, Summit taxpayers receive no consolidated municipal budget until July of each year. No city (any organization) with the serious intentions to manage a budget can be successful when half the year is over before they see the numbers. I requested that the Summit Council pass a resolution calling for a consolidated City, School and County "pro forma" budget submission before each year end. Numbers not yet available for the School or County should be plugged and accompanied by assumptions and critical guidance from Summit City Council and School Board to those accountable for budget results. "He who controls the numbers ... controls the debate." My request was graciously accepted and then ignored. I repeat this request.

Summit School Budget 

Excellent schools, transportation access, a safe & healthy downtown and gracious neighborhoods are the backbones of our beautiful City. Our new School Board President and leadership team will need our support to maintain both academic and fiscal discipline. Tax dollars spent by freeholders in Elizabeth have the same impact on taxpayers as money spent in our own schools. Something is wrong when Summit received $1.2MM in state aid and managed to keep our school budget of $62.7MM flat. Elizabeth, an Abbott district, received an increase of $85.2MM in state aid yet still increased their school budget by 31%. De leveraging, either voluntary or involuntary (see stock/bond markets) is underway in Washington, D.C. and in Trenton, N.J. The inevitable outcome will be less money coming from the state and federal level and more pressure on local municipalities to fund themselves or do without. 

Summit City budget 

While Summit stayed within the governor's 2% nominal property tax cap, spending of $36.6MM remained 6.5% higher than in the prior year budget of 34.4MM. Summit pension costs grew 25% last year and 400% from $845K to $3.4MM in the last five years. Almost eighty percent of the City budget is the cost of salaries, benefits and pensions for our municipal employees. Summit taxpayers need to know something is being done to control the pension cost curve. Our next budget should include a five year forecast and plans to control this exploding budget line item. Additionally, Summit's City and County tax levy's are $27.9MM and $28.8MM respectively. Hillside has the same size population but their tax levy's were $28.6 and $8.1MM respectively. One inference is that both Summit and Hillside manage City finances about the same but Summit is charged 350% more when Union County Freeholders vote to tax and spend our money? Regardless of Summit's higher property "ratables", taxpayers say no to "taxation without representation"!  The STA recommends Summit City Council propose to Union County Freeholders a limit on the County tax levy to be no greater than the City tax levy approved by each member town. Of the twenty one Union County municipalities, only four (Summit, Berkeley Heights, Scotch Plains & Westfield) now exceed this limit. None exceed this limit by much making this proposal financially realistic. This will also reward Union County towns who manage their own budgets aggressively. This would have a big positive impact on the STA mission (zero tax increase by 2014) and limit the County's open checkbook on Summit taxpayer's wallets.

Civility at City Hall & Current Topics of Debate 

Election season is here and similar to our national debate people want candidates to address their own ideas rather than talk about their opponent. Taxpayers also want candidates for Mayor, Council and County Freeholder to advocate for fiscal restraint and to recommend specific ways to limit or reduce property taxes. The candidate who distinguishes him or herself on this issue will capture the electorate. Additionally, losing a civil debate is okay if the problem statement is clear and all relevant information is available for discussion. City Council has not done a good enough job forging agreement on exactly what problems we are trying to solve.  The parking debate provides an example. I have yet to hear a Summit resident complain they can't find space to park in town. However, Summit merchants often do hear this from customers. Are we trying to create more parking space, improve downtown merchant's customer experience, reduce enforcement costs, take baby steps toward privatization? The mayor has recommended we build a costly new parking garage. City Council must first agree on what problem we are trying to solve. If the answer is all of the above, that's just another way of saying we really don't know. Don't spend more money until there is first agreement on the problem statement.  The safety debate is another example. Taxpayers strongly support public safety and feel safer when more police walk our streets, especially downtown and at night near our train station. We must also be especially vigilant of the growing risk of gang crime. The average cost per person for police in Summit is over $162K comprised of $110K in salary/overtime plus $50K in health care/pension. Pension costs have grown 400% in the past five years and some argue we should hire part time police (w/o costly benefits & pension). However, PBA work rules may not allow this under the current collective bargaining agreement. Some argue we should hire a new recruit at $48K but a recruit's salary, excluding benefits, will grow to $96K in roughly five years. (Parenthetically, part time teachers provide enormous benefit in our schools and new teachers with a masters degree start around $50K and in five years will make under $60K). Can the cost of a new recruit be offset by not replacing the Deputy Chief of Police position should it become open? Summit employs 46 police officers and also pays about $13MM or 10% of the taxes required to employ 900+ people in Union County law enforcement. Are we optimizing the potential of this shared resource? It is important to have the proper police deployment plan and to put numbers behind the issues before spending more money. 

Report Actionable Items 

Schedule meeting to discuss next steps regarding Union County tax levy Resolution for consolidated City, School & County pro forma budget (plus assumptions and guidance) before each year end, by December 1, 2011 for 2012.  City explanation, five year forecast and plan to control exploding pension costs School budget must anticipate exodus of future state aid Propose that Union County Freeholders cap Union County tax levy not to exceed the City tax levy Civility at City Hall - Focus on forging agreement on "problem statement" plus & supporting facts before spending more money  

Respectfully submitted, Thomas M. Garvey, President, Summit Taxpayers Association