BY JANE MEGGITT
Staff Writer
MILLSTONE – A former township official has alleged that the current governing body has increased municipal operating expenses and masked the true municipal tax rate by using interest on money coming in from several different sources.
Current township officials deny the claim former Committeeman John Pfefferkorn made at the May 8 Board of Education meeting.
The Township Committee unanimously voted to adopt a $7.1 million 2006 spending plan on May 4. The budget keeps the municipal portion of the overall tax rate at 9 cents, which is what it was last year.
At the board meeting, Pfefferkorn alleged that the Township Committee is using higher interest on prepaid school taxes as one of the sources to mask the true municipal tax rate.
According to Pfefferkorn, the Federal Reserve has increased the interest rate on school prepaid taxes by 3 percent in the past 16 periods. He alleged that the township is reaping huge interest benefits from that windfall.
Pfefferkorn also said the township gets to keep school taxes paid by new homeowners during their first year in the municipality. He alleged that the township is not passing those taxes on to the school district to reduce overall property taxes.
Another source Pfefferkorn claims the township is using to mask increased operating expenses is rollback taxes on farmland that has been converted to subdivisions.
“The rollback tax is applied at the subdivision value for the past two years for newly approved projects,” he said, “and the school tax rate is fully applied and the municipality, not the school, gets that portion.”
Pfefferkorn also said that the municipality is consuming huge surpluses to mask its operating expense increases.
According to Pfefferkorn, Mayor Nancy Grbelja said at the May 3 Township Committee meeting that if the township gave the school money, the school would spend it rather than reduce taxes with it.
“The Board of Education spent 30 minutes arguing over whether a $10,000 gas pipe change should be installed,” Pfefferkorn said, “but spent two minutes on spending increases of $250,000 for a concrete veneer change. What’s wrong with this picture?”
Pfefferkorn said taxation is out of control in Millstone. He said the Board of Education and the Township Committee “both better wake up.”
“The public is demanding change in tax policies,” Pfefferkorn said.
Citing the defeat of the school budget in the April 18 election, Pfefferkorn said there will be huge tax increases next year when the township’s new middle school opens.
Pfefferkorn also noted that a new teachers’ contract will have “an additional upward push on taxes next year.”
He said the Board of Education and the Township Committee can no longer be complacent and blame others for their revenue flow problem. He said tax growth is a converse to not having a steady flow of high-quality ratables that offset spiraling cost increases.
He said municipal officials are acting like “deer in headlights,” unsure what to do other than to pass higher taxes on to residents.
Referring to Board of Education member Thomas Foley’s statement at the May 8 meeting that the township’s handling of rollback taxes is a fraud, Deputy Mayor Robert Kinsey said, “That’s a very strong word.”
“The township has always, to my knowledge, followed state protocols when it comes to handling amounts it is obligated to pay over to the school district,” Kinsey continued. “Where is the fraud in that?”
In response to Pfefferkorn’s comments, Kinsey said that 74 percent of every tax dollar the township levies goes to the school district to fund operating and capital costs.
Kinsey said delinquent taxes went up $200,000 last year. He said the township does not get any relief from having to forward $148,000 of related money over to the school district.
Kinsey asked if it was Pfefferkorn’s or Foley’s contention to suggest that the board refund those uncollected funds to the township until a later time when they are collected.
“Are they suggesting that the board should take on the credit risk of uncollected school taxes?” Kinsey asked.
“It’s hard to comment on the type of financial nonsense, fabricated math, pure conjecture and unsubstantiated rhetoric that Mr. Pfefferkorn likes to toss around carelessly,” Kinsey said.
Kinsey said that these are tough financial times for residents across the state, and that these times require “sound financial decisions, not fuzzy math and accounting shenanigans like Mr. Pfefferkorn likes to play around with.”
He asked Pfefferkorn to back up his statements with hard, documented facts.
Kinsey also noted that the Department of Community Affairs examined the township’s 2006 budget and signed off on it without exception.
Pfefferkorn claims that the operating expenses increase for the budget submitted indicates major increases over last year’s actual budget.
However, Kinsey said Pfefferkorn is incorrect and that the 2006 budget shows an overall increase from 2005 of approximately $417,000. He said that increase is related primarily to contractual salary obligations and debt service.
While Pfefferkorn contends that the tax rate is being masked with significant interest being earned on prepaid school taxes, Kinsey said the tax rate is not masked by anything.
Kinsey said the Township Committee is stabilizing the tax rate by applying long-term planning initiatives and best practices for the benefit of township residents.
As an example, Kinsey said the Township Committee has entered into multiple interlocal agreements with the Board of Education to reduce waste and maximize residents’ tax dollars.
Kinsey called Pfefferkorn’s assertion that the township is keeping money from the board “ridiculous.”
“The township transfers all moneys it owes to the school district in accordance with state law,” Kinsey said. “To suggest otherwise is just wrong.”
Committeeman Elias Abilheira said Pfefferkorn will never deal with the real financial issues facing the township, but instead engages in political nonsense and spin.
“If you take $125,000 from the municipal accounts and move it to the school accounts,” Abilheira said, “all you do is lower the school budget one penny and raise the municipal budget one penny.”
“Mr. Pfefferkorn has never understood that, and that is why the taxpayers lost several million dollars in revenue on his watch,” Abilheira added.
Abilheira claimed that Pfefferkorn failed to recommend moving millions to market-rate secure accounts during his term in office.
“This would have brought in new revenue, not shuffled numbers around in an accounting trick,” he said.
Abilheira said the only way to lower the property-tax rate is through properly managing township finances, making developers pay their fair share of development costs and finding interlocal opportunities to perform projects that reduce the overall cost.