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Fiscal Gloom and Doom: Falling Revenues Put Paterson $3.7 Million in the Red

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PATERSON, NJ – The city’s government finished the 2012 fiscal year with a $3.7 million deficit, a shortfall that’s three times larger than the gap that confronted municipal officials at the end of the previous year.

The deficit puts the city in an even deeper hole for the 2013 fiscal year than what officials previously had expected.

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Under state law, the city will have to cover the $3.7 million deficit in its 2013 budget. On top of that, the state already has said that Paterson faces a $10 million structural deficit for this year because of one-time financial maneuvers used to balance last year’s budget, like the use of money from an Urban Enterprise Zone fund that’s now almost depleted.

Altogether, city officials are looking at a gap of almost $14 million, and that doesn’t take into account other factors that could widen the shortfall, like the anticipated reduction in state transition aid.

“I’m flabbergasted,’’ said Councilman Andre Sayegh. “It seems like it’s Ground Hog’s Day,’’ he added, referring to the movie in which a character played by Bill Murray he keeps reliving the same day. “I just hope it’s not Doomsday.’’

PatersonPress.com learned that the city had a deficit at the end of the 2012 fiscal year from a report that municipal officials recently filed with the New Jersey Department of Community Affairs. The report said the 2012 deficit resulted from the loss of anticipated revenue, such as delinquent tax collections and non-payments on municipal court fines.

The three-page report is supposed to outline city officials’ plans for how they intend to wean Paterson off the state transition aid. But for the most part, it paints a sobering picture of Paterson’s finances and offers little in the way of specific proposals for replenishing the municipal coffers.

“The idea that the city of Paterson can achieve property tax stabilization when it faces a consistent decline in revenue streams with simultaneous cost increases (many of which are mandates) should come to a screeching halt,’’ the report says. “The balancing acts have used up all of the “one-time” solutions, such as the sale of City-owned properties. Even with one of the largest single layoffs in the City’s history, which occurred two years ago, the cost savings achieved bore little real budgetary savings but did create other negative ‘quality of life’ issues that have no real solutions.’’

The report described Paterson’s ongoing loss of property tax ratables and the ever-growing number of tax appeals filed by city property owners. The report calls the state transitional aid – of which Paterson received $21 million last year – a form of “life support.’’

“The City’s annual process of balancing the revenues and expenditures always comes up short,’’ says the report. 

Among the “fiscal recovery objectives” outlined in the report were the recent hiring of a new economic development director whose job will be to attract new businesses to the city and the fact that some savings will be achieved because of the retirements of senior members of the fire and police departments who were replaced by lower-paid employees.

Councilman Kenneth Morris, chairman of the finance committee, said the administration had not provided him a copy of its transition report.

“I don’t think the administration has gotten the concept of what transition aid means,’’ said Morris. “They look at the state transition aid as a permanent revenue, when it isn’t.’’

Morris said the administration has scheduled a series of budget hearings on various municipal departments between September 5 and October 10.

The 2013 fiscal year began on July 1.

 

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