BELMAR, NJ — On the job for only 10 days, five members of Belmar’s recently appointed professional staff last night provided a sober picture of the borough’s financial health.
During a 1½-hour workshop session of the borough council, presentations on the “state of the borough” were given by bond counsel Meghan Bennett Clark, borough auditor Robert Allison, borough attorney Jerry Dasti, borough engineer Peter Avakian and insurance consultant Dominick Cinelli.
“It’s not going to be easy, there will be bumps in the road and people are going to throw tomatoes at me, but things need to be fixed. If we continued down this path for a couple more years, we’d be heading toward a state takeover."
— Belmar Mayor Mark Walsifer
The professionals were brought together for the public session on January 15 by Mayor Mark Walsifer — two weeks after he took office with two new GOP council members, giving the Republican Party control of the governing body.
Walsifer said that while this type of discussion usually occurs behind closed doors, he wanted to “see where we are. We need a starting point to move forward and start straightening some of these problems out,” he said, “This whole exercise is to get a baseline of where we’re at.”
Here are the highlights from each professional’s report:
Bond Counsel Meghan Bennett Clark: Time to Finance $27 Million in Debt
Since 2011, the borough has accumulated $27,395,000 in debt for projects that have already been completed, but have not been financed, according to Meghan Bennett Clark, an attorney with Red Bank-based GluckWalrath.
And for a town with a $15 million budget, “that’s a considerable note” that needs to be addressed immediately, she said, adding “It’s time to take the credit card to a mortgage.”
As a result, the borough will be conducting a bond sale to temporarily finance the debt — in the form of a bond anticipation note — until permanent financing can be secured.
As a result of ordinances for projects approved since 2011, the borough’s existing debt breaks down as follows: $13,040,000 for general obligation improvements in 14 ordinances; $7,455,000 for water and sewer improvements in eight ordinances; and $6,900,000 in beach improvements, including construction of the Taylor and Rowland Pavilions on Ocean Avenue.
Since the borough has been “rolling” the debt and only make minimum debt service payments as required by law, if financing is not secured the borough will be looking at a “large balloon” at the end of 2021, Clark said.
And while interest rates were less than 1 percent in 2011 — when the borough started accumulating the debt — that situation has now changed, with interest rates now reaching 2½ percent for this type of financing.
“It was a gamble and now the gamble is coming to fruition, and we need to permanently finance,” Clark said.
She also emphasized that the debt is for projects that already have been completed and does not include any projects that will need to be financed in the future.
Borough Auditor Robert Allison: Property Tax Increase ‘Almost Certain’
For the past six years, the borough has been spending more money than it has been taking in — to the tune of about $500,000 per year, according to auditor Robert Allison of Holman Frenia Allison, a Red Bank-based certified public accounting firm.
While the budget has increased more than 12 percent from 2012 to 2018, there has been no property tax increases to cover those costs, he explained.
“Previous budgets have been balanced on reserves and surplus funds,” said Allison, who has been working with Chief Financial Officer Christine Manolio, who joined the borough in December, on “getting their arms around” Belmar’s total fiscal situation.
But now that those reserves are depleted and the borough’s surplus needs to remain at 15 percent of the budget so not to negatively affect the borough’s bond rating, he foresees a tax increase of up to $1 million in the next budget.
“I doubt all of that will be needed, but some increase is almost certain,” he said, adding that the borough needs to close out its 2018 financials — a process that is expected to be completed in the next 30 days — before work on a 2019 budget can begin.
“We will be working with the governing body and the finance officer to offer the best suggestions for the town with the less shock possible,” he said.
Allison also agreed with bond counsel Meghan Bennett that the borough’s debt needs to be permanently financed — since it is now included in the budget’s current fund to be paid by property taxes.
Borough Attorney Jerry Dasti: Shared Services, Redevelopment Agreements in Limbo
The borough is on the fast track to renew shared services agreements that have expired and redevelopment agreements that have not been signed — two important streams of income, according to borough attorney Jerry Dasti of the Forked River-based law firm Dasti, Murphy, McGuckin, Ulaky, Koutsouris & Connors.
While he did not know why some shared service agreements with other municipalities were allowed to expire, they are currently being reviewed by Mayor Walsifer and borough officials to “see what’s in best interest of the town and see what it costs us.”
Regarding the redevelopment agreements for projects under way in the borough’s special improvement district, Dasti said that he has been contacted by developers who have been waiting for months to meet with borough officials to sign these agreements.
“This is something that’s clearly in the best interest of the borough, to get (the process) moving and get the money that’s due us,” he said, adding that meetings on seven pending redevelopment agreements will begin next week.
Dasti also said that his law firm will take over handling the $10 million federal lawsuit by bar owners Timothy and Matthew Harmon against Belmar — with those legal fees to be paid by the borough’s casualty insurance company.
Until now, the borough has retained the services of a private law firm — Gibbons PC of Newark — at a rate of $450 per hour, compared to the insurance company’s rate of between $150 and $150 per hour, Dasti explained.
“You’ve been paying three times what your insurance company would have paid for you,” he said.
While the borough has paid Gibbon’s $400,000 since the lawsuit was filed in April 2017, Dasti said he plans on asking Belmar’s insurance company whether it would reimburse the borough for one-third of those costs, or $133,000, considering the circumstances.
We’re hoping to have some cooperation with the insurance company and they do the right thing and pay us a third,” he said.
The borough is also on the hook for another $135,000 in legal fees it must pay resulting from a lawsuit in which a state appeals panel ruled the borough acted improperly when drafting an interpretive statement to a public question that would be approved by voters to rebuild Taylor Pavilion after Superstorm Sandy.
While the ruling is under appeal and was argued last fall, “this is money we owe,” Dasti said.
Borough Engineer Peter Avakian: Road, Infrastructure Projects Top Priority
Improving borough roadways and alleviating flooding on Route 35 near L Street were among several key initiatives unveiled by borough engineer Peter Avakian of Neptune City.
With 20 miles of roadway in this one-square-mile community, he recommended the borough develop a 10-year road improvement plan based on prioritizing streets most in need of repairs.
“When you go year by year and only improve roadways when you have a grant, you can never make improvements to 20 miles of roadway,” he said.
In fact, he said, Belmar is in jeopardy of losing a $300,000 grant from the N.J.Transportation Trust Fund that it received in 2017 for improvements to 12th Avenue from D Street to Route 35.
No plans have been submitted to the state for the project, which needs to be started by this year for the borough to receive the grant for the total $650,000 project.
If the borough submits the plans and is granted an extension, Avakian sees the project, which is near the Belmar Elementary School, to begin this summer.
He reported that another stalled project that recently resumed is completion of lighting along Main Street from Fifth to 10th Avenue. Taller utility poles currently are being erected to ensure that the street lights do not interfere with existing wiring, under the project funded through a $972,000 Streetscape grant from the N.J. Economic Development Authority.
Regarding the chronic flooding along Route 35 during heavy rains, Avakian said is looking for the borough to partner with the Department of Transportation to improve the drainage system in that section of the state highway.
The borough also has authorized retaining H2M, a New York-based water and sewer consulting firm, that will work with the borough engineer and the Department of Public Works to design and oversee the borough’s water distributions system and sanitary sewer collection system — and to ensure “all structures are in compliance with state regulations,”Avakian said.
Another major priority is working to ensure all code violations and design deficiencies are corrected at the 10th Avenue Pavilion so that it can be fully operational this summer, he said.
The building, which was built after Superstorm Sandy, is the public safety hub along the beachfront for police, fire, fire aid and the beach patrol during the summer season. Although it was scheduled to be completed in 2017, the building has not opened for all services, as one major problem still needs to be resolved — stopping excessive water infiltration through door seals on the north and northeast sides of the building during heavy rains and high winds.
Insurance Broker Dominick Cinelli: Focus on Reducing Claims
Spending about $760,000 annually for property and casualty insurance, the borough needs to find ways to reduce claims in order to bring these costs down, according to insurance broker Dominick Cinelli of Roseland-based Brown and Brown Insurance.
With a 121 percent loss ratio, “We have to find out why these losses are occurring and what we can do to be proactive to reduce the frequency of claims, he said.
And this focus begins with safety training. Because Belmar is a member of the Central Jersey Joint Insurance Fund, most training classes are held in Piscataway, which requires a substantial time commitment from borough employees.
As a result, Cinelli said he is working to see whether borough employees can receive training through the Monmouth County Joint Insurance Fund and to take online courses as well. Conducting quarterly safety meetings for members of the police department, public works and recreation will also help the borough identify areas of improvement, he said.
In another area of risk, Cinelli said that the borough currently has no insurance policy in place for the Taylor and 10th Avenue Pavilions — even though it received a proposal 10 months ago that was not approved.
He recommends the borough purchase a $9,400 annual flood insurance policy that would provide $500,000 of coverage on the properties and $20,000 of coverage on the contents, with a $10,000 deductible.
Also with the recent rash of cyberattacks on municipal computer systems, Cinelli advised the borough to upgrade its cybersecurity system — an action that would result in a decline in its deductible from $10,000 to $2,500.
Former, Current Mayor Agree: Borough Was Heading toward State Takeover
Following the presentations during a public comment session, former Belmar Mayor Kenneth Pringle expressed his deep concerns about “what was going on” and the impact on the municipality financially and in terms of having faith in the governing body.
In specifically addressing the building of the pavilions since no change orders were issued during construction, he asked whether audits of the contractors will be conducted and whether performance bonds are still in place.
“The people have the right to know how that happened and to have a building (not used) in 18 months,” said Pringle, the attorney representing the plaintiffs in the public referendum lawsuit. While borough attorney Dasti said there will be discussions with the contractor, Walsifer said efforts will be made to go back and find out exactly what took place.
Commenting generally on the information shared during the workshop, Walsifer said that much work needs to be done. “It’s not going to be easy, there will be bumps in the road and people are going to throw tomatoes at me, but things need to be fixed,” he said. “If we continued down this path for a couple more years, we’d be heading toward a state takeover.”
Below is the video of the January 15 meeting of the Belmar Council:
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