BERKELEY HEIGHTS, NJ -- Preliminary budgets are just that -- a first look at how money will be allocated. Residents got a first look at the preliminary municipal budget when Township Council held a “working group meeting” on the 2021 municipal budget.
The municipality collects taxes for the Board of Education, County of Union, Library and the municipality itself. The local levy represents only 18 percent of the total amount of a property tax bill and is used to pay for the operation of the municipality -- from the sewage treatment system, to the roads, all the salaries and benefits paid to municipal employees, and more.
As presented Monday evening, the draft budget will increase 2.6 percent over last year’s, and the owner of an average home in the township will pay an additional $68 a year to fund the local government.
To learn more about the municipal budget process, visit the township’s website here.
The municipality is subject to two caps, a levy cap, which sets the amount by which the municipality can increase its local tax levy, and an appropriations cap, which caps the amount the municipality can increase its appropriations. Years ago, there were many items in a budget which were outside the cap, said CFO Eugenia Poulos, but the state has taken many of those away and now there are fewer items which lie outside the cap. Outside the cap are the Capital Improvement Fund, Debt Service, LOSAP, grants and shared service agreements, she said.
The regulations on caps also allow the municipality to bank unused funds from the levy cap, so if the municipality does not raise its local levy as much as is allowed, the excess can be put into a “cap bank” for three years and can be used to fund budgets that exceed the levy cap. Poulos said the township has banked funds from 2018, 2019 and 2020, but only plans to use the funds from 2019 to keep the proposed budget within the appropriation cap. Still, one of the early slides on the budget showed the calculated appropriation cap is $16,022,280.85, to which are added $889,684.36 -- the 2019 and 2020 cap banks, and new construction/assessor certification -- creating the maximum appropriation within “CAPS” Sheet 19 of $16,911,945.21. Poulos did say there was no intention at this time to use the 2020 cap bank.
Council members had copies of the draft budget, which were shown on the screen. What was not included on the screen were detailed line items, so following the discussion was, at times, difficult.
The proposed budget for operations, excluded from caps is $15,466,018, debt service comes in at $13,231,380 and the reserve for uncollected taxes at $1,243,810, bringing the total 2021 General Appropriations to $32,928,434. If this seems larger than usual, it is. This figure reflects the money received from the “sale of municipal assets” which will be used to make a principal payment on a “bond anticipation note,” said Poulos.
On Wednesday, in an email, Township Administrator Liza Viana explained the budget went up “because it includes the principal payment of the Bond Anticipation Note (BAN) of $10,500,000. This is the $10.5 million the Township was owed from Toll Brothers once the closing of the sale of the property on Hamilton Avenue went through. This will go to paying off municipal complex construction debt. On the revenue side, the money is coming from the sale of the asset.”
The official closing on the sale of that property took place on Tuesday, Feb. 23.
The budget for debt service is currently $13,231,3880, however if the $10.5 million is deducted, debt service would be $2,731,380, a decrease of $414,673.96 from last year’s figure of $3,146,054, Viana wrote. The decrease is mainly because of lower interest rates on two township BANs in July 2020 -- the $24 million Series 2020A(Non-Callable) and $10.5 million Series 2020B (Callable). In June, Moody’s assigned a MIG 1 rating to the township two BANs, and affirmed the township’s Aa1 general obligation unlimited tax rating.
The meeting covered 13 departments: Department of Wastewater Treatment; Rescue Squad; Fire Department; OEM; Fire Prevention; Department of Public Works; Police Department; Engineering; Building/Construction Department; Recreation; Clerk; Finance/Tax, and Administration.
Department heads spoke about why the allotment of funds was higher or lower than the previous year which, with the pandemic, was not a typical budget year. As it came time to finalize the 2020 budget, Coronavirus was beginning to disrupt businesses and lives, and the council made significant cuts to the budget.
The next working meeting on the budget will take place at 7 p.m. on Monday, March 1, on Zoom. Members of the public are welcome to attend and will be able to ask questions.