SCOTCH PLAINS, NJ -- In addition to co-signing a letter spearheaded by Congressman Tom Malinowski earlier this week imploring Congress to financially help municipalities in states, such as New Jersey, that have been hit hard by the coronavirus pandemic, Scotch Plains Mayor Al Smith has fired off his own letter making the case for more federal aid.
Mayor Smith, in a phone interview with TAPintoSPF, explained his concern about the ability of Scotch Plains residents to continue to pay property taxes given the adverse effects of the coronavirus on the state and local economy.
"This year, the township has an obligation to fund the SPFK12 Schools and Union County at $69.5 million and $22.7 million, respectively, in addition to the municipal budget, which is $26 million," Mayor Smith said. "With tax payments delayed, I'm concerned whether we will be able to meet this obligations."
Here is the text of the mayor's letter to Speaker of the House Nancy Pelosi, Senate Majority Leader Mitch McConnell, House Minority Leader Kevin McCarthy, and Senate Minority Leader Chuck Schumer.
Dear Speaker Pelosi, Leader McCarthy, Leader McConnell, and Leader Schumer:
Scotch Plains is a 9 square mile town of about 24,000 people. It has a medium-sized downtown of about 200 small businesses with an additional 100 businesses spread throughout other commercial corridors of our town. The town is in the process of planning a revitalization of the downtown in conjunction with providing affordable housing. The town has a Aaa bond rating and the budget is lean.
The coronavirus has hit Scotch Plains hard. As a result of the States’ stay at home order, just about all the small businesses are closed, and the businesses that remain open for takeout/curbside pickup are barely surviving. Very few of the businesses received assistance from the first round of the CARES Act due to their small size and lack of credit history with banks.
A Scotch Plains Business Resource Group comprised of volunteers and concerned citizens has been formed to assist the small businesses community navigate the various federal and state assistance programs. Attached is my four-point plan to assist those businesses that can remain open during the stay at home executive orders.
Similarly, the town residents have been hit hard. Many of them have been furloughed from their jobs or forced to work at home at reduced hours. The closure of the schools has added additional difficulty for our residents to manage children as well as maintain employment. It is difficult to gage the percentage of residents who have been economically adversely affected, but it appears to be substantial.
The township budget has been introduced on April 21, 2020, with a reduction in forecasted non-property tax revenue and a reduction in expense. However, the big unknown is the ability of our residents to continue to pay property taxes given the adverse effects of the coronavirus on the economy.
Under State law, the township must first fund the schools, counties and then the municipality.
For 2020, the township has an obligation to fund the schools and the county at $69.5 million and $22.7 million, respectively. The municipal budget is $26 million.
With a total obligation to raise $109 million in property taxes, a 5 % loss in the collection of these taxes would be almost $5.5 million dollars with the responsibility of the municipality to pay the county and school taxes first. Therefore, the municipal budget would have a 21% deficit leading to a significant reduction of municipal services and municipal staff. A 10% loss in property tax revenue would lead to an $11 million loss or a 42% reduction in municipal funds, severely impacting the municipal government’s ability to deliver required town services.
Given the current economic situations, estimates of 5 to 10 percent loss in property tax collection are not only possible but unfortunately may be probable. In addition, state aid of approximately $2 million is potentially being deferred from August to as late as December of 2020.
The township’s ability to secure short term bonds to cover these types of potential revenue shortfalls would be non-existent. Only the federal government has the capacity to help states and local governments of all sizes from falling off the above described budgetary cliff. Therefore, I strongly urge you to include in any future Coronavirus relief package Congressman Malinowski’s bill, H.R. 6467, which would provide $250 billion in stabilization funds to localities with populations lower than 500,000.
You must help small towns survive the devastation caused by the coronavirus.
Thank you for your consideration of this critical request.
Alexander M. Smith
Mayor of Scotch Plains