TAX NEWS - JUNE 2010

New Jersey Tax: Trenton council, at brink, approves city budget

TRENTON - With less than a month left in the fiscal year, last night City Council finally passed a budget it had repeatedly refused to approve in April, allowing members to avoid fines state officials had threatened to impose.

With Councilman Manuel Segura dissenting, the council voted 4-1 for a series of budget amendments and the final adoption of the $215 million spending plan. Milford Bethea, Gino Melone, Paul Pintella and Cordelia Staton voted yes. Annette Lartigue and George Muschal were absent.

The council had failed to muster enough votes for passage two months ago after members said they could not vote for a huge tax hike. The administration had asked for the tax increase after a delay in the proposed $80 million sale of Trenton Water Works infrastructure left a hole in the budget.

That earlier refusal eventually prompted the state Department of Community Affairs to cut the tax increase from 66 cents to 59 cents per $100 of assessed home value, and finally to order the tax rate set without council involvement. Property taxes rose 22 percent in one year as a result.

The DCA also said at the time that if the budget was not passed by June 10, council members who voted against it would be subject to fines of $25 a day, retroactive to April 16.

With Trenton also facing the prospect of a massive, $42 million cut in state aid in the next fiscal year, and after the city's bond rating fell one level last week because of its financial problems, acting business administrator Jerome Harris urged the council to finally approve the budget.

"The history of what happened here could spill over into our interactions with "¦ the governor's office," who could determine whether some state aid is restored, Harris said.

He said the vote was also significant to bond rating agencies for "what it says about the responsibility of the city to take care of its business." The rating drop, and possible additional downgrade that could follow, are expected to increase the city's borrowing costs.

Having already wrestled with the tax hike earlier this year, the council spent little time discussing the budget before voting.

In other action last night, the council approved an extension of a tax abatement for the Escher Street SRO, a residence for people who were formerly homeless.

Ron Brown, the developer of the 14-year-old residence, said he needed the abatement to qualify for new financing that will allow badly needed building upgrades. But at previous meetings council members said the city could ill afford to give up any tax revenue.

Brown and Harris presented data showing that, with the abatement, Escher Street will pay $400,000 a year in taxes over 10 years instead of the $480,000 it would have paid at full taxation. But it will also make a one-time, $1 million payment to the city as an early payoff of a city loan, rather than paying it off over several years.

The council also approved a measure changing some of its taxi regulations, including raising the minimum charge for passengers from $3 to $4 and decreasing the cab registration fee from $350 to $300. Melone said it was unfortunate that the higher fee -- raised several years ago from under $100 -- had not been used to fund a crackdown on gypsy cabs, as originally intended.