Mayor Cohen has made several assertions and misrepresentations in his May 21 letter to you.
1. He should read the pension deferral law and not rely on verbal statements to a third party. If he wanted something in writing, why didn't he ask the State directly and/or simply read the law.
2. A copy of the law was obtained, and I did read it.
Here are the citations:
a. Fiscal Note Senate, No. 21, 213th Legislature dated March 30, 2009 says in part "i) or provide a description of relevant anticipated circumstances that could have an impact on revenues or expenditures, ii) the unfunded liability will be paid by the employer in level annual payments BEGINNING with the payments due in the State fiscal year ending June 30, 2012—iii) the payments when they start will be ex-cap. iv) the payments when they start in three years, i.e. 2012 will be at an interest rate of 8.25 % over the 15 year period NOT 8.5%."
b. P.L. 1954, Section 24, c.84 (C.43: 15A-24 amended to read--- 24.c. "The actuaries for the retirement system shall determine the unfunded liability of the retirement system, by employer, for the reduced normal and accrued liability contribution provided under P.L. 2009, c.19. This unfunded liability shall be paid by the employer in level annual payments over a period of 15 years beginning with the payments due in the State fiscal year ending June 30, 2012 and shall be adjusted by the rate of return on the actuarial value of the assets."
c. I don't believe one has to be a genius to see that if 15 years starts after June 30 2012 (which is 3 years from now) that the three years from 2009 to 2012 are interest free or cost free or at no charge, whatever one wishes to call it.
3. When Mayor Cohen previously referred to 8.5% as an interest rate, he should know that the only place 8.5% is written in the public law is with respect to the members (i.e. employees of the Town) and their personal contribution to the pension plan calculated on their pay.
4. It sounds to me like Mayor Cohen is currently careless so why should anyone believe him for any of his statements attributed to events of his past 10 or so years in office?
5. Mr. Delia called me at about 2:00 p.m. on the date of the League candidate's night and asked if I knew if the total deferral could be taken by reducing the surplus draw. He asked this because he correctly observed that the Auditors had calculated for us that $301,000 could be taken as direct current year property tax relief and the remaining $90,000 taken as surplus reduction. I checked it out for him based on i) my knowledge of that past calculation, ii) the CFO's statement and iii) the Auditor Mr. Korecky's statement in phone calls between 2 and 4 p.m. on May 13, 2009. Thus, Mr. Delia made a perfectly valid statement as to "checking out" which he did sufficiently for the political campaign purposes of that evening. There are various ways one can check things out and Mr. Delia's was certainly proper. Mr. Delia made no issue of special accounts. I know that an "escrow" type account is not allowed. The Council sub-committee and the Mayor and Council also had copies of budget drafts which show a partial use of deferral in the surplus line as "calculated" by the Auditor Korecky and his assistant Bill Swisher.
6. Mr. Delia's suggestion to place all the deferral in surplus is not a loan and I don't recall he called it a loan. In any case, I will call it what it really is. The deferral of $391,000 is a reduction in the expenditure for calendar year 2009. As such, when we have a reduction in an expenditure, we have a concurrent reduction in the need for revenue since we must, by State law, have revenues equal to expenditures. There are two ways we can reduce the revenues to match the reduced expenditures. One is to reduce the direct or current tax levy and the other is to reduce the surplus "draw" which is primarily past taxes. Both methods provide property tax relief, one in the direct year involved and the other in problems averted in the direct year and flexibility in the subsequent three year period. Obviously, Mr. Delia is a bit more perceptive than either the Mayor or the two Republican opponents who make claims about fiscal responsibility.
7. Mayor Cohen should check with accounting experts. He will find out that the "surplus" is an account listing and not a separate bank account. Money moves in and out of this account listing. The actual money is in one cash account and we do get earnings on the cash. Look at the budget revenue details and you will see a line for interest. No one claims that interest is directly accrued on the specific $391,000 if it was placed in surplus although, in an approximate manner, Mr. Delia is certainly correct that we somehow get interest on this method of dealing with property tax relief. Certainly, however, surplus funds as they move in and out of cash can earn interest. It would take some doing to calculate the amount gained from this. So Mr. Delia is correct in a basic and qualitative way but any specific value would not be immediately apparent. His opponents were caught like deer looking into headlights and I guess the Mayor, even with a day and a half to think about it, was looking into the same headlights.
8. The surplus is indeed primarily past taxes paid by residents and commercial and industrial taxpayers. It is an important contingency type accounting item. It helps us in our cash flow management and is an important aspect of our budgeting process. When we draw a large (about 95%) amount from surplus and simultaneously budget closely, we are on the edge of fiscal problems. When looked at on a multi-year basis, I am convinced that Berkeley Heights needs property tax relief. It is an over simplification to state that as long as we are under the 4% levy cap, we are not eligible. Go and read the entire law cited above and you will see how one can claim the deferral legitimately even while we managed to get under the 4% property tax levy.
It does seem outrageous for Mayor Cohen and any other Council members or candidates for Council to call the State deferral law a gimmick. The legislature has obviously argued this out because the Governor's idea was first rejected and then accepted and then crafted into a written law. I hope Mayor Cohen can explain his definition of a "gimmick" to the Governor and the Legislative Houses. I hope he never gets in one of those positions either because we will not be served well by such name calling or labeling.
I believe now, that any careful reader or official will see that both Mr. Delia and Councilman Bonacci were accurate in their statements and have not misrepresented in any way. Elected officials and the public (especially those who write letters to editors) are certainly welcome to have ideological and philosophical beliefs about financial matters but they should be more careful in their analogies. It would also be wise for the elected officials to get all the facts on the table first before they start opting for their own fetishes. Usually when I played sports the rules were clear first before the competition started. We did not make them up as we went along. We also should try to make comparisons on an "apple to apple" basis not "apples to oranges" as often is said in street vernacular. The Mayor likes to compare the past "mandated" State pension effort with the current "optional" effort. Where is his logic?
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