Delay in passing the county budget means area town’s can’t send out their tax bills.
By: Jeff Milgram
Municipal and school officials may have to dip into the piggy bank to replace tax revenues that are being held up by the failure of the Mercer County Board of Chosen Freeholders to adopt its budget.
The freeholders are expected to adopt the budget at a special meeting scheduled to begin at 5 p.m. today, five months after the Feb. 25 deadline set by state statute. The $157 million budget contains no county tax increase, Freeholder Brian Hughes said Monday.
On July 13, Princeton Borough Mayor Marvin R. Reed sent letters to the freeholders, complaining that tax collection will be slowed by the delay and municipalities will lose interest on revenues that should have been collected, Freeholder Brian Hughes said.
Princeton Borough also will lose interest on the money it has to use to pay its current bills, Mayor Reed said Monday.
The county faces a $25 fine for each day the budget is late, according to E.J. Miranda, a spokesman for the state Department of Community Affairs.
But, Mr. Miranda said, the state is more interested in compliance, than with penalizing the county.
"We hope this matter will be resolved shortly," Mr. Miranda said.
The failure of the county to adopt its budget has a ripple effect, and could, if it were to continue much longer, force municipalities to use up all their cash on hand, delay payment of some bills and delay making their quarterly payments to schools and the county itself, several officials said.
In a worst-case scenario, municipalities might have to issue tax anticipatory notes – in effect borrow money from a bank – to pay their bills, said Tim Roberts, chief financial officer of Montgomery Township, which faced a revenue problem three years ago when Somerset County was late in adopting its budget.
Municipalities have been unable to send out quarterly property tax bills – the first is normally due Aug. 1 – because the county has yet to formally set its tax rate.
Quarterly tax bills contain municipal, school, county and fire district taxes, if there are any, Mr. Roberts said. Municipalities collect the taxes and then pay the school district, county and fire districts, he said.
Princeton Borough and Princeton Township property owners have already been granted a one-month delay in the payment of their tax bills, to Sept. 1.
Mayor Reed said another taxpayer reprieve might be necessary if the borough doesn’t get the tax information soon.
"If you don’t set a rate and we don’t get our bills out soon, we’ll have to grant a second month’s grace period,’ Mayor Reed wrote to the freeholders. "We have big institutions that are used to paying us big chunks of money as soon as they get their bills. We immediately bank these payments. If we don’t, we (the municipality) not you (the county) lose interest we would otherwise earn."
One of the institutions Mayor Reed was referring to is Princeton University.
Sandy Wells, Princeton Borough’s assistant business administrator, said the county delay "could cause problems for us. We’re still obligated to pay the school district."
She said the borough may ask the school district for permission to delay a payment if it runs into a cash-flow problem.
The borough is getting some tax revenues from people who have paid what they estimate their bill will be, Ms. Webb said. But that will not be enough.
"It can be a cash flow problem. Hopefully, it won’t," she said.
John Clawson, chief financial officer for Princeton Township, said he has enough money on hand to cover August and September bills, including the municipality’s payment to the Princeton Regional School District.
"We’re not in a bind yet," Mr. Clawson said Monday. "It can’t go on indefinitely."
But the school district will get its payment from Princeton Township, he said.
"We’re required to pay the schools regardless of what happens," Mr. Clawson said.
Mr. Clawson said the township may delay its tax payment to the county.
West Windsor Township officials are discussing the problem with the business staff of the West Windsor-Plainsboro School District, according to the district’s press officer, Gerri Hutner.
"It will effect our cash flow," she said.
"On the upside, our financial need is not as great in the summer," Ms. Hutner said. "It’s still a difficult situation."
County Treasurer Steven Zielinski acknowledged that the county is habitually late in adopting its budget.
"We’ve never complied with the statute, and this isn’t the latest the county has adopted its budget," he said. Normally, the county adopts its budget in late May or early June, but several years ago, it adopted the spending plan in September, Mr. Zielinski said.
He said the state Department of Community Affairs Division of Local Government Services was reviewing the county budget and supporting documents as of Monday. He also said there’s a chance the state division may not complete its review in time for the freeholders to adopt the budget today.
"They may ask for additional information," Mr. Zielinski said. "I don’t expect there to be a holdup." If the budget is adopted today, tax information will be in the hands of municipal officials by the end of this week, Mr. Zielinski said.
And if Princeton Township gets that information by the end of the week, tax bills – due Sept. 1 – will be in the mail next week, Mr. Clawson said.
Freeholder Hughes said he was optimistic the budget will be adopted today.
He said the last budget meeting was held April 18, but the county administration did not submit the budget for certification by the state Department of Community Affairs until July 1.
Adding to what Freeholder Hughes called "a comedy of errors," the state discovered a $1 million shortfall in the county’s public assistance accounts. The freeholders closed that shortfall by deciding not to fill 30 vacancies in the county Board of Social Services, Freeholder Hughes said.
Last week, another "technical" error was found in the budget and corrected and today was the earliest the freeholders could take their final vote, Freeholder Hughes said.
In a letter Mayor Reed and Princeton Borough Council President Roger Martindell plan to send out with the tax bills, the municipal officials will explain that while the county tax levy will not increase, borough property owners will see a 9-percent increase in the county tax rate, from 53 cents to 58 cents per $100 of assessed valuation.
"The market for homes in the center of town has never been stronger," the letter will say. "But, since county taxes are automatically ‘equalized,’ Princeton Borough’s assessed valuation get adjusted to reflect our ratio to the total Mercer County market. We in the borough are a victim of our own success. Since comparable homes in the borough sell for so much more here than anywhere else in the county, we end up paying a greater share of the county bill."
Mayor Reed said borough taxpayers will accept higher taxes "if that’s really our ‘fair share.’ But, it’s hard to accept higher county taxes when they simply represent bungling by officials that work for you."
He cited cost overruns on Waterfront Park and the Sovereign Bank Arena in Trenton.
"Those operations are hardly a benefit to Princeton," Mayor Reed said.