We Are Taking a Conservative Approach to the Potential COVID-19 Financial Impacts
These are uncharted waters. So, I wanted to take this opportunity to explain to the residents some of the financial concerns that the Council and I are contemplating during this tumultuous time.
Typically, the Township has a 98.76% tax collection rate, which provides a guide by which the governing body can plan for services and paying salaries. Given the pandemic and the economic havoc that COVID-19 has placed on residents, small businesses, corporations and those who are self-employed, the Township is operating with great uncertainty as what our rate of tax collection may be. Further, the Township collects tax funds on behalf of:
- the Board of Education, which makes up of 56.68% of your tax bill
- County, which makes up 23.89%
- Our public library, which makes up 1.5%, by statue
The Township pays the school on a monthly basis and the County quarterly; the next payment coming due is on May 1st. While we do budget a small percentage for uncollected taxes, a shortfall in tax collection funds risks the liquidity (or cash flow) of the town’s ability to pay for salaries, goods and services or even taxes to other entities.
Moreover, there is no doubt we will witness a deficit in revenues. The State of New Jersey allows municipalities with hotels to levy a hotel occupancy tax. The Embassy Suites generated $250,000 for the Township in its first full year of operation in 2019. A loss of those staying at the hotel in 2020 due to COVID-19 therefore impacts Berkeley Heights. Further, the Township also projects losses this year, based on what we know right now, to include the following:
- Municipal courts - now closed, resulting in a loss of $50,000; these are court fees and fines that the State allows municipalities to keep
- Uniform fire revenue - loss of $12,500; these are fees charged for fire inspections
- Hotel tax (Embassy Suites)-$100,000
- Anticipated delinquent taxes - $30,000
- Interest on investments on Township money we have in the bank - $75,000; the Federal Reserve recently lowered interest rates to zero
At this time, the town government must proceed with caution in its spending. I understand that there are programs and services expected by residents, but these are extraordinary times with great uncertainty. These early expenditures must be considered in light of the risk of laying off essential personnel or cutting needed equipment to help fight COVID-19 due to a shortage of tax dollars for our police, fire, rescue squad, DPW or sewer department. Because we simply do not know our financial future.
While the state Legislature passed a bill that allows the Town to delay its budget introduction to April 28th, reality is that we simply will not have any information about how many dollars there will be to spend on services prior to introduction and an amendment may be required before final adoption.
Federal legislators, on Friday, passed a $2 trillion emergency aid bill; the President signed the bill Friday afternoon. The legislation provides $1,200 checks to many Americans and makes available hundreds of billions of dollars for companies to maintain their payrolls through the public health crisis. They also provided for emergency aid to States and Counties.
A small town like Berkeley Heights will be in a position of competing with larger municipalities with more cases, more businesses, and more residents impacted by COVID-19. Again, the reality is we do not have guidance on how much emergency aid will be available for public entities like Berkeley Heights.
Personally, I have requested that state pension funds and county tax payment funds be deferred until a time Berkeley Heights can better understand its economic picture. We are pushing hard to streamline the process for our redevelopment projects so that we can start generating revenue in the future. Meanwhile, we are looking at cuts in both the operating and capital portions of our budget, yet we need to ensure we have enough money to continue basic services, such as taking care of our roads and protecting our community. We are also planning for a “worst-case scenario” in terms of revenue and costs. Because we must be honest, this recovery may be extended over a period of time.
I ask for your patience and understanding as we are working under conditions that are unknown as we balance services, with loss of revenue and taxes and awaiting guidance on what we hope to be emergency aid imminently.