Franklin works to control budget

| 22 Feb 2012 | 08:14

    State aid plans vex borough’s financial advisors, By Mark J. Yablonsky FRANKLIN — Borough financial officials introduced Franklin’s proposed 2009 budget to the council and public last week. The budget is about $12,000 slimmer than last year. The good news, however, ends there. The proposed budget is $5,861,086. Last year’s budget came in at $5,873,004 If the new budget is approved tomorrow, homeowners will be asked to pay an additional 23.6 cents per every $100,000 of assessed value — or about $237 on a home assessed at $100,000. That’s due to a substantial loss of revenue from last year, borough officials said. “We’ve lost roughly $600,000 in revenue and it costs us about $25,000 for a tax point,” said Grant Rome, the borough’s chief financial officer. “Our biggest stumbling block this year was loss of revenues.” But, the borough administrator says the municipal budget will meet with more cuts. “This was only for introduction purposes,” emphasized borough administrator Richard R. Wolak. “There’s still a lot of revenue and cutting to be done.” The bigger problem concerns the state’s proposed pension deferral program. It would allow municipalities the option of deferring better than 50 percent of its pension obligations for the time being — but would likely end up costing each town close to 100 percent in interest over the 18 years it would take to repay the deferral. In short, if Franklin follows this plan, it would accrue mandatory interest of at least 8.25 percent from the state from 2009 through 2012, and would then be looking at about $116,000 in interest. Add that to the current $121,000 in pension obligations the borough has. Further exacerbating the problem is that if Franklin does not accept the pension deferral, it will almost certainly lose more than half of any possible “extraordinary aid” from Trenton. Last year, for example, a $220,000 state payment in extraordinary aid to Franklin was used to shave some nine cents off of the 2008 tax rate. But along with the loss of revenue this year, the pension deferral leaves the borough between a rock and a hard place. “Gentlemen, in the five years I’ve been here, this time I don’t know how to advise you,” Wolak told council last week. “You want to talk about a smoke-and-mirrors scenario? This is it. They (Trenton) have essentially pushed all of the municipalities into a corner. Either way, they’ve got you.” How to play the game The following morning, Wolak, who had told council he needs a “yes or a no” by the April 14 council meeting, further clarified the conundrum presented to the state’s municipalities. “When the extraordinary aid application comes to the state, if you have not taken advantage of the pension deferral, it (aid) will be automatically reduced by the amount of the deferral, had you taken that,” Wolak said. “A deferral is just that: they’re not giving you money; they’re just deferring it and shifting 100 percent repayment in interest directly back to the municipality. The opposite side is that the extraordinary aid must be used for property tax reduction, but you don’t have to pay it back. “The basic question the council must consider is whether we pass on these types of monies, or take them and incur a debt to the municipality extending 18 years into the future. And having been in government for 40 years, it never ceases to amaze me that all these Machiavellian activities concerning finances with the state only seem to occur in an election year,” added Wolak, referring to the fact that both the governor’s position and all 80 assembly seats are up for election this November. “The way they’re playing games down in’s amazing they keep their bond rating,” said Rome, who like the council and other borough officials, seemed befuddled by the state’s new plan. Do borough officials have any advice to give the council at this point? “We don’t,” responded borough auditor Kathryn L. Mandell. “There’s not enough information to make an intelligent decision at this point.” Borough officials explained that the onus of collecting tax payments rests squarely on the municipality, even though the town itself only receives about 25 percent of that money. And the other three entities — the local and regional school boards, and the county — must first receive their money before the municipality does, they added.