(Hoboken Mayor Ravi Bhalla at the Northwest Park – photo via Senator Bob Menendez)
Nearly a month ago, the revelation came to light that the City of Hoboken will be facing a significant budget shortfall this year. In conjunction with that shortfall, the City’s surplus fund has also diminished, stoking fears that there would be not only a tax increase but municipal layoffs.
Earlier this week, Hudson County View reported that a letter was sent out over the weekend from Hoboken Director of Operations Jason Freeman, indicating to recipients that “for reasons of economy, efficiency or other related reason, it is possible that you will be laid off or demoted from your permanent or probationary positions.”
The letter goes on to state that layoffs will be effective as of May 7, 2020—thereby giving sufficient legal notice to recipients of the pending layoff.
With what is sure to be a highly charged City Council meeting set for tonight, Hoboken Mayor Ravi Bhalla has today offered his first statements on the budget situation.
“As Mayor, I take my responsibility to oversee the financial operations of the City very seriously. In my first year in office, we produced a budget that was passed by the City Council with no municipal tax increase, and last year we once again held the line on taxes with a 1.7% increase, below the cost of living adjustment,” says Bhalla. “To be upfront with you – while we’ve made progress in rightsizing government and reducing spending over the past two years, the unfortunate reality is that projected fixed costs impacting the 2020 fiscal year have produced some substantial challenges.”
In a December 17, 2019 memo obtained by hMAG from the City’s Business Administrator Stephen Marks, the outlook for Hoboken’s financial position is outlined—highlighting a combination of healthcare costs ($1,513,450), elevated pension costs ($578,345), and anticipated annual salary increases in the face of collective bargaining negotiations with the City’s six municipal labor unions ($3,200,000).
Those increases are being met by anticipated revenue shortfalls on court fines, investments, debt service increase (bond repayments), departmental budget increases, higher waste disposal fees, and an increase in New Jersey’s Joint Insurance Fund premiums.
According to Marks, “The grand total for anticipated increases for personnel costs and other expenses is $7,420,795,” adding “which does not include the impact of the projected decrease in the municipal surplus regeneration.”
Marks has since vacated his position as Hoboken’s Business Administrator, taking a similar job in Kearny, where he resides.
“To be clear, the majority of the increases stem from fixed costs that do not involve discretionary spending by my administration,” says Bhalla. “In fact, since I came into office, I’ve made an effort to reduce spending in departments like Corporation Counsel by reducing the hiring of outside law firms. We’ve conducted more legal work in house, which has resulted in a net reduction in the legal budget by nearly $500,000 in just a two-year span. We also hired an engineer in-house for work that was previously conducted by outside engineering firms, which has resulted in six figure savings for the City. And, we’ve reduced the Mayor’s office to two full-time employees, the same staffing level as during Mayor Zimmer’s administration. In short, where we’ve had the ability to reduce spending, the large majority of the time, we’ve done so,” he maintains.
In the midst of ongoing negotiations with Hoboken’s six municipal labor unions, Bhalla still sees some opportunity for a more favorable outcome. “We’ve been conducting good faith negotiations with the leaders of the unions to potentially negotiate contracts and health care plans that provide the necessary benefits that City employees deserve, while also being mindful to the taxpayer going forward.”
Regarding morale at City Hall, the Mayor makes the point of saying, “a false rumor has been disseminated is that there is a so-called “gag-order” or non-disclosure agreement that is in effect for municipal employees and unions. To be clear – no such clause exists in union contracts. As has been the policy during my administration, any employee is welcome to speak out on any issue of importance, without restriction. Any directive that may indicate otherwise from previous administrations has not been, and will not be in effect. It’s unfortunate that this rumor would be spread without first checking with my office, which unnecessarily spreads misinformation to the public.”
Regarding the myriad of public works projects currently underway, Bhalla reasserts the statement that none of the parks or infrastructure initiatives will be impacted by the City’s budget situation.
“I want to also stress to residents, that for a number of our major initiatives and projects, we’ve utilized as much grant money and independent funding as possible that has little, or no impact on the municipal budget.”
Nevertheless, the City should brace itself for the possibility of some significant impacts to come.
“My highest priority is to the taxpayers of Hoboken, and I will continue to explore each and every measure to produce a balanced budget that does not jeopardize the fiscal health of the City. Unfortunately, that may involve some difficult decisions, including the possibility of layoffs,” says the Mayor.
At risk is the City’s bond Rating, which has been improved and maintained over the past few years after a period of economic volatility in the last decade. In 2008, Moody’s gave Hoboken a rating just above junk bonds, citing, “significant deferred charges, annual cash flow borrowing, and a history of financial mismanagement,” in its assessment of the Mile Square City’s finances. Since then, City Hall (the Administrations and City Council) have worked to achieve a AA+ rating from Standard & Poors—that firm’s second highest rating. In order to maintain such a rating, the City must in turn maintain a substantial surplus of cash on hand.
Says Bhalla, “Our ultimate goal is to balance the budget this year, and ensure that the City is on sound financial footing for years to come.”
CLICK HERE to view the Mayor’s full statement…