Fairness In Taxes

Open Letter to Jeff Van Drew, Nelson Albino, and Matthew Milam

March 20, 2008

The Honorable Dr. Jeff Van Drew, Senator The Honorable Nelson Albino, Assemblyman The Honorable Matthew W. Milam, Assemblyman
21 North Main Street
Cape May Court House, NJ 08210

Gentlemen:

Your recent March 11, 2008 was most appreciated. Your 7-point plan is a small beginning to addressing the root cause of the continuing budget deficit. In itself it is not the answer, a beginning perhaps but not the solution.

I offer the following comments on your seven initiatives which it seems from your letter you believe will lead the state in the right and prudent direction to fiscal responsiblity:

• Regarding the Constitutional amendment SCR79, while it would end using non recurring revenues it does nothing to reduce the massive deficit.

• Again, it appears that all you are doing with Constitutional amendment SCR78, is prohibiting the State from borrowing money and incurring debt – without voter approval. What is needed is a moratorium on financing such as this; until the state has a fiscal plan that makes sense.

• With SCR50, you are amending the state Constitution by placing a cap on spending. What good is the cap when you still have not addressed the core issue – pension reform?

• S421, legislation introduced, would reduce the Trenton bureaucracy by 10 percent. This is a great idea, the problem is for this reduction to be meaningful it has to reach all levels of government – state, county, authorities and municipalities, otherwise it is self defeating.

• Constitutional amendment, SCR49, would create a “rainy day” fund. At this point in time it is a bad idea. Once you have a balanced budget; then perhaps you can put funds aside for a rainy day.

• Bill, S1388, for a new state Comptroller -- a good idea, however, it is too late to attempt to rein in a runaway budget. All this new cabinet position will do is create more jobs and increase the cost of government.

• Bill, S230, to reduce unnecessary printing costs – a reasonable attempt, but, the end result in the state budget is a savings of pennies.

Unfortunately, fiscal stability can not be accomplished with piece meal legislation. You are right it will take courage on the part of the Legislature and the Governor, however, until the Legislature and the Governor addresses the root cause of the problem all you will continue to do is dig a deeper hole and find the state further in debt.

If there ever was a time for immediate action, the time is now.

The Governor and the Legislature must accept the fact that what is needed is a complete reform of the pension system. No matter what the pain the state must do away with double dipping, a massive reduction in the number of political appointments at all levels of government – state, county and local and at the same time a major reduction in the work force.

The Governor and the Legislature can no longer continue to dance around the real issue confronting all our citizens. Simply put, the issue is an excess of public employees collecting salaries, fringe benefits and pensions that the ordinary citizen and taxpayer never in their lifetime will collect.

It is painfully obvious that what we have here in New Jersey are two groups of citizens. The ordinary citizen who receives a modest pension and health program at retirement and at the other end of the spectrum we have the government employee, the elected officials and appointed officials who retire with excessive five and six figure pensions and health benefits adding an additional five figures to the retirement salary. This alone puts all government employees above the private sector employees; yet they still have a trump card. They have “colas” which increase their benefits every year.

The mission of the Legislature should be to recommend to the Governor that tolls should be increased a nominal amount. These funds should be dedicated to the toll roads to maintain their infrastructure. The funds should not be diverted to any other use.

The Legislature should recommend an increase in the gasoline tax. These funds should be dedicated to the Transportation Trust Fund. They should be used only for the secondary road system.

Finally, all pensions should be placed on the table and the Legislature should bring the pension and benefit system into the 21st century. What the legislature gave; the legislature can take away no matter how painful.

The retirement ages should be reconsidered along with programs such as the 401K type. If corporations can layoff tens of thousands of employees and adjust benefits and pensions; so too can the state take such drastic actions.

We can no longer wait. The time for action is now.

Very truly yours,

Louis C. Ripa, J.D., B.S.C.E.

TELL YOUR MAYOR AND CITY COUNCIL THAT WE WILL NOT ACCEPT THESE INCREASES

Spending increases 7.00%
Taxation increases 12.257%
Equivalent tax rate increase, excluding ratables is 12.11%

1ST WARD JODY ALESSANDRINE 391-8598 jodya3@comcast.net
AT-LARGE SCOTT PING 399-0413 scottping2006@yahoo.com
AT-LARGE MICHAEL ALLEGRETTO 432-8739 Michael.Allegretto@prufoxroach.com
2ND WARD GREGORY JOHNSON 457-4764
MAYOR SAL PERILLO 703-7675 sal6767@yahoo.com
AT-LARGE KEITH HARTZELL 399-5324 keithhartzell@hotmail.com
3RD WARD JACK THOMAS 399-9586 jackthomaocnj@comast.net
4TH WARD ROY WAGNER 399-4429 edwinaroyoc@yahoo.com

Below is an article that appeared in the January 18, 2008, edition of the Press of Atlantic City. Mr. Miller’s article is very informative and gives us some thought provoking comments about the presentation of the 2008 Ocean City Budget by Mayor Sal Perillo. There are several statements that need to be commented on prior to our members and taxpayers of Ocean City reading this article.

Because of information given to Michael Miller by the city, he states in the article

“… the city's payroll is increasing by just 4 percent.”

FACT: It is important that you understand that the increase in payroll for fulltime personnel increased more than 6%. This 6% includes pending salary increase of $400,000 that was erroneous listed as a FICA (Federal Insurance Contributions Act) figure rather than being listed as the full time salary number. The pending salary increases are associated with the ongoing contract negotiation with the firefighters union.

“The city plans to eliminate two (2) positions this year in addition to the nine (9) positions cut last year.”

FACT: These nine positions were funded but the positions were never filled. In reality, there were no cuts in personnel associated with those nine positions.

O.C. mayor calls for 12% tax hike

By MICHAEL MILLER
Staff Writer, 609-463-6712

OCEAN CITY — Mayor Sal Perillo spent most of his budget address Thursday touting last year's accomplishments, such as savings with trash contracts and an upcoming beach fill.

He saved the bad news for last — a proposed 12 percent tax hike in his spending plan.

"We already know that 2008 will be a difficult year, not only for Ocean City but for all communities in New Jersey," Perillo said.

Ocean City for the first time in many years saw a staggering drop in equalized property value from $14 billion last year to an estimated $12.5 billion in 2008.

In his eight-page speech, the mayor neglected to mention a few important figures — such as the total budget ($60.5 million) and the amount to be raised by taxation ($42.9 million).

And he fudged the tax impact, declaring in his speech an 8 percent tax-rate hike for 2008. (The tax rate is actually going down this year, thanks to the revaluation.)

The mayor is proposing a tax rate of 34 cents per $100 of assessed property value. This year's property revaluation makes a comparison with last year's tax rate unhelpful. But the tax levy—the total dollars city property owners must pay—will go up by an estimated 12.2 percent.

Perillo blamed several factors outside the city's control for the tax hike. City pension costs are increasing by $700,000 this year. The city must pay the library 15 percent or $500,000 more this year. All told, these factors alone increase the city's budget by more than $4 million, Perillo said.

The mayor touted the island's comparatively low tax rate—36th lowest of 39 towns in Atlantic and Cape May counties by his account. But many residents here pay significantly more in actual tax dollars because of the high value of their properties compared to those in neighboring towns. The city plans to cut two more full-time employees this year in addition to the nine cut last year. As a result, the city's payroll is increasing by just 4 percent.

The city plans to spend $20 million on capital improvements this year using $11 million in grants. One of those projects will provide solar power to four public buildings using $1.6 million in private funds.

The city plans to spend $5 million on roads and drainage and will replace equipment on three playgrounds.

The city will begin construction on a 7,000-square-foot senior center next to the public library. Ocean City also will benefit from an $8.8 million beach-replenishment project to begin in a matter of weeks.

As part of his budget message, Perillo announced several new initiatives. Soon, the city will offer a reverse 911 system to notify residents by phone, e-mail or text message about flooding or other emergencies.

The mayor is launching a tax-abatement program to encourage residents to rehabilitate historic buildings instead of demolishing them.

Cape May County plans to build a new 7,500-square-foot senior center next to the library, which also is expanding.

Under Ocean City's form of government, City Council may set the tax rate and simply let the administration determine how to meet it. But past councils have made specific recommendations about ways to cut taxes, and this year likely will be no different. Various budget meetings are scheduled for later this month.

To e-mail Michael Miller at The Press: Mmiller@pressofac.com

“What, me worry?”

FOR MANY YEARS FAIRNESS IN TAXES HAS SPOKEN AGAINST AND HAS WARNED OF THE DESTRUCTIVE IMPACT THAT THE UNREASONABLE BUDGET INCREASES WOULD HAVE ON OUR COMMUNITY. UNFORTUNATELY THOSE WARNINGS WERE MET WITH CYNICISM AND SARCASM YEAR AFTER YEAR. THE FOLLOWING IS A LETTER WRITTEN BY JIM TWEED, A FIT BOARD MEMBER, AND WAS PUBLISHED IN THE LOCAL NEWSPAPER.

“What, me worry?” I’m beginning to feel like the clueless face of Alfred E. Neuman smiling out from the cover of “Mad” magazine. At least that’s how the taxpayers of Ocean City must be seen by some. The millions of dollars in increases in pensions, health care costs, and contractual salary obligations are being treated as if it’s news. It’s only new if you have not been paying attention for the last 5 years. There have been voices warning us about this for at least that amount of time. They have routinely been dismissed as “pockets of negativity,” “angry,” or some other disparaging remark. After Ocean City’s auditor, Leon Costello’s presentation last Tuesday, those “weirdo’s” now look like biblical prophets.

I wonder if anything will really change. Some will look for people to blame. That’s much easier than finding a solution. It’s also a waste of time. The leader we elected under whose watch all those contracts were negotiated has been gone for more than a year. We even named a new Public Works building in his honor. We’re the ones that look stupid, not him.

It’s the choices we make in the future that will make a difference, not the ones we made in past. But who’s going to step up to make the “tough decisions” that Mr. Costello warned us about. It’s not the professionals’ jobs to do that. They just give us the facts. Our elected leaders decide what to do with them.

Here’s my prediction. No one from the Council or the Administration will step up. Councilmen have learned that those who try the hardest get burned the most. If you try to even talk about the roots of a problem Council chambers will fill with union members, testimony of tearful tales will be touted if meaningful efficiencies are proposed, and Councilmen will be inundated by phone calls from those who don’t want their rice bowls even looked at too closely, let alone touched. Why will this happen? Because it works. The easiest thing to manipulate is peoples’ fears. Of course Councilmen are going to be persuaded that the public doesn’t want any changes in public safety. They’re the ones who show up. The rest of Ocean City is too busy, too tired, too old, or too scared to attend Council meetings. They suffer quietly, maybe show up on Election Day, hope for the best, and go home. After the election they are the easiest ones to ignore.

It’s been over a quarter of a century since “defined benefit” pension systems began to be replaced with “defined contribution” systems. Yet government employees are still on a different playing field than those in the private sector. They still contribute a fraction towards their own health care plans compared with the rest of us. Why? Is it because they work harder than you? Where in the private sector do you ever see anyone stand around to watch someone else work? Is it because their job is more dangerous? Tell that to a soldier serving in Iraq for much less money.

If there’s someone out there, either on Council or the Administration, who’s willing to sacrifice their popularity in order to make tough choices please step forward.

Jim Tweed

Ho, ho, ho, Ocean City, start planning for a tax hike

Required spending forcing city budget to increase

By ERIC AVEDISSIAN, Ocean City Sentinel, 12/27/2007

OCEAN CITY - Increases in pension costs, health care and salaries will affect the 2008 budget and city's tax rate, auditor Leon Costello told city council Tuesday.

Costello gave a PowerPoint presentation on Ocean City's budget at council's workshop meeting, painting a picture of required pension increases and rising health care costs for city employees.

"A lot of this is stuff you didn't do or cause, but these are the facts that you're going to be dealing with as the budget season progresses," Costello said.

Costello said preliminary figures indicate the budget will increase $3.6 million with annual expenses such as health care, pensions and contractual salaries the city won't control. The tax rate will increase 4.7 cents per $100 of assessed valuation with 1 penny equaling $835,000.

Pensions for the Police and Firemen's Retirement System (PFRS) in 2008 will rise to $2.2 million from $1.4 million in 2007, an increase of $759,837.

Pensions for city employees through the Public Employees Retirement System (PERS) will increase in 2008 to $660,558 compared to $375,291 in 2007, a $285,266 increase.

The actual PERS pension costs for 2008 are $825,698. The PERS system factors a percentage of the three highest salary years, making today's pensions a lot more than in previous years. The city's debt service will also rise by $254,250, from $6.8 million in 2007 to $7.1 million in 2008.

Health insurance costs will rise to $5.9 million in 2008, compared to $5.1 million in 2007, a $794,000 increase.

Salaries will increase $1 million in 2008 to $26 million, compared to $25 million in 2007.

The public library will cost $4 million in 2008, a $533,121 increase from $3.5 million in 2007.

According to Costello, local tax levy countywide remained stable around $2.3 million from 1993 to 2003; after that, local purpose taxes spiked from $6.9 million in 2003 to $14.3 million in 2007. "Obviously, this is a trend that is a scary-looking picture," Costello said. "It's a pretty dramatic change that's been happening throughout the county for all the local budgets."

Costello attributed the local tax levy increases to municipalities making pension contributions. He said pension contributions are at 20 per-cent a year and the system s the pensions need for survival are under-funded.

Costello said he predicts $11 million in increases countywide for 2008. He said the range budget increases are now 3 to 5 cents in places where budgets have very little increases.

The city will have to cap spending at 4 percent due to a state budget cap law that goes into effect in 2008.

Costello said ratable increases the city used for tax relief and surplus will decrease in 2008. In 2007, the city had a ratable increase of $254 million, giving the city $1.1 million in tax relief and $1.5 million in surplus. For 2008, Costello projects the city will have a $95 million ratable increase with $444,586 in tax relief, a figure that will not cover the city's salaries and wages. The amount of surplus generated for 2008 is not known at this time, Costello said.

The city increased its health insurance appropriation for 2007, but it wasn't enough, Costello said.

City council will vote on an ordinance Dec. 20 for emergency appropriations for $350,000 to cover a shortfall with Insurance Group Health Insurance in the 2007 budget. He said health insurance will increase countywide by $11 million.

Costello said the more fund balance the city uses in 2008, the less the city will have in 2009.

"If you have less in 2009, you'll not fit into these caps at all and then you're have to make some real tough decisions," Costello said. "What you do with your fund balance is going to be crucial in future years."

Costello said the city can increase revenues to ease the taxpayer's burden.

"Any new revenues you come up with could offset those increases," Costello said.

Council President Keith Hartzell said the city "missed the boat" with new revenues to eliminate tax increases.

"I would challenge all of us and the administration to take a harder look at revenues because it seems revenues are the best way out," Hartzell said. "You don't want to lay people off, you don't want to do without services and the state's basically saying if you create a revenue you can spend it." Councilman Scott Ping said the public wants no changes to public safety expenditures, and echoed Hartzell's concerns with finding additional revenues.

"Year after year the public comes out and says they don't want to make a change with our public safety. I don't know where we can go to make these changes we have to make unless we push for revenues," Ping said. "We have to create a whole new way of thinking in order to keep what we have and still be able to afford it without, taxing our residents out the door."

Mayor Sal Perillo said all municipalities are facing higher pension costs courtesy, of the state Legislature.

"The pension number is as", a result of what the state has, done in the last 11 years. They've done some crazy things in terms of what they've done with the pension system," Perillo said. "I don't want to create an impression that the world is coming to an end in Ocean City. We've all got challenges to face. We all probably picked a bad time, economically to be in office."

FIT Supports Budget Task Force Report

Fairness In Taxes Executive Committee is in full support of the findings by the Budget Task Force. The Budget Task Force is comprised of six (6) volunteers who are residents of Ocean City and three (3) of those members are also members of Fairness In Taxes Budget Committee.

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March 14, 2007

To: Mayor Sal Perillo

From: The Budget Task Force

Subject: Report of Findings

The Mayor’s Budget Task Force (BTF) recognizes that there are many diverse factors affecting the Ocean City Municipal Budget, including a declining real estate market which is reducing ratable growth, issues associated with funding of the local library, limits on costs which can be passed on to the tourism sector, etc. We also recognize that the administration has taken positive strides in driving increased operating efficiencies through its’ efforts in the areas of wireless communications, computerized time clocks, “P” cards for procurement, elimination of 7 positions from the prior year’s budget, intent to address operating losses at the Aquatic & Fitness Center, as well as several other initiatives.

In our analysis of the city budget, one fact stands out. That is, if any long term city spending optimization is to occur, the single largest contributing factor of salaries / wages and benefits (including the legacy costs of long term pension and healthcare which carry on post-employee retirement) must be at the top of the list for action. This is evidenced by the fact that 67% of the 2007 amount to be raised by local taxation is allocated to salaries & wages (excluding benefits) and this percentage remains fairly constant throughout the 2007-2010 period. Thus, salaries / wages, and benefits remain the primary focus of our studies. We are, therefore, respectfully requesting that the administration take immediate action on the following items:

• Initiate an immediate hiring freeze
• Immediate staffing reduction and elimination from the budget of all currently vacant positions on a numerical (versus positional) basis.
• Immediate reduction to the Community Development Department, consistent on a pro rata percentage basis, with the projected reduction in code revenue. It would seem implausible that the excess personnel in this area can generate sufficient new revenue to cover their total salary & wages, benefits, and legacy costs

In the immediate future, (due to the amount of work required for bid packages, RFP’s, etc.) we would also request that the Administration immediately undertake an investigation on the feasibility of outsourcing the following activities:

• Sanitation
• Grass Cutting / Landscaping
• Fleet Maintenance
• Traffic Maintenanc

Through our limited investigation and analysis of these departments, we have found that individual salaries are approximately $63,000 per year and total budget impact, including fringe benefits is approximately $85,000 per year. We identified these departments because they have, to varying degrees, already outsourced many of their tasks or responsibilities. The cumulative order of magnitude gross salary / wages & benefits (excluding legacy costs and supplies) for these areas is approximately $2 million. Thus, even a marginal percentage savings due to outsourcing would translate to significant tax dollar savings. As of this writing, the city has not identified cost of service expenses associated with facilities costs, building maintenance costs, equipment / equipment maintenance costs, administrative costs, supporting department costs, and costs of supplies. In addition, these departments are also influenced by weather, seasonal adjustments, contractual restrictions, and economies of scale. And it must be noted that legacy costs associated with health care and pensions compound the cost of services. We would request that the Administration’s cost / benefit analysis be fully completed by 8/1/07, and an interim discussion on the direction of this study be conducted with the BTF in the early June ’07 time frame.

Additionally it is our opinion that further budgetary inroads can be made via the following items (and would request that the Administration give due consideration to each of them):

• A consolidation of the Community Services, Public Works, and Planning & Engineering departments which should drive staffing reductions and allow for full utilization of the new Public Works Building.
• Sale of the city owned 46th Street lots
• Closure of the 46th Street Post Office
• Reduction in the number of city owned vehicles and the implementation of IRS rate mileage reimbursement for business driven use of personal vehicles
• Elimination of one fire platoon (Reference the September 2000 state audit entitled “Local Government Budget Review of Ocean City” cited below).
• Examination of city revenue centers (Aquatic & Fitness Center, Airport, Boat Ramp, Golf Course, Transportation Center) with action plans to bring them collectively to at least a “break even” operation. Balance sheet figures (most of which do not actually include all expenses associated with these operations and, therefore, understate the actual losses) received from the city on these operations indicate that they are currently operating at a significant loss.
• Establishment of “Cost Center” accounting for all revenue producing enterprises including those mentioned in the previous bullet, as well as city parking, beach fee collection, etc
• We would also recommend that the Administration re-visit the “Local Government Budget Review of Ocean City” (September 2000) completed by the State of New Jersey and which provides many recommendations for budget optimization, including specific recommendations for the police and fire / EMT departments.

As we have previously discussed, with your permission, we would like to remain as an active task force so that we may take a more detailed look at the above items as well as attempt to further examine and perhaps develop ideas on improving operating efficiencies, revenue streams, etc. We very much appreciate and thank you for your inclusion of this group of private citizens in the budget process.

The Budget Task Force