Montgomery ends use of surplus to control municipal tax hikes

Period of big school-tax increases has ended

By: Greg Forester
   MONTGOMERY — The 2007-2008 municipal budget introduced by Montgomery on Thursday ends a six-year-old policy of using the municipal surplus to offset school tax increases.
   The result is a three-cent hike in the municipal tax rate, which, translates into a tax increase of $150 for the average Montgomery residence, assessed at about $509,000, down from around $535,000 last year.
   Citing a smaller than previous rise in school taxes —an average of $235 this year — and slower growth in revenue-generating development, township officials said it was no longer appropriate to draw down the municipal surplus to neutralize school tax hikes.
   "The township tried to hold down the tax rate as long as possible during the last few years, but we feel this was the time to end that policy," said Deputy Mayor Louise Wilson, speaking of municipal taxes. "With less school taxes, the tax impact on the residents will still be lower than usual, and we won’t completely drain our surplus."
   Although the surplus revenues generated from development have slowed, Ms. Wilson said the township is in no way built out.
   Major developments are coming in the future, including the redevelopment of the former North Princeton Developmental Center, a 250-acre former state institution purchased from the state in December where cleanup work is already taking place to make way for redevelopment.
   Township officials said they are satisfied with the budget despite the increase — which was actually reduced from four cents to three — because it maintains the current level of services the township provides to the citizens.
   "There’s was lots of talk about cutting services, jobs and other things, but in the end we maintained the services we already provide," said Mayor Cecilia Birge. "We raised the axe and cut capital expenditures instead."
   Although they are keeping some improvements projects in the 2007-2008 budget, such as crucial road improvements, township officials did cut a large piece of capital expenditures.
   Monies budgeted for capital expenditures were reduced by more than 85 percent, from $3 million down to $415,000.
   Township officials said the road improvements projects remain in the capital budget because of their necessity and the way they save more expenditures down the road.
   "The township had gone through a period in the 1990s where it had neglected the roads, and we ended up paying for it later," said Ms. Wilson.
   Township officials said the shift from the tax neutral policy also comes at a time when townships like Montgomery are facing increased pressure from recent state mandates, the result of new legislation.
   The legislation’s main effect was a four-percent cap on property tax increases. Property taxes represent the major source of funding in towns like Montgomery.
   The legislation harms municipalities like Montgomery that are faced with less financial flexibility and the prospect of reduced credit ratings, Ms. Wilson said.
   "The legislation will also force townships like Montgomery to accept the new budget environment, and search for new ways to deal with it," Mayor Birge said.
   The same legislation already created a situation with the 2007-2008 school budget where the Board of Education was forced to seek out new revenue sources that proved controversial to some residents during this year’s budget process.
   Mayor Birge said the township would continue to examine ways to keep tax increases down and operate efficiently, including periodic reorganization and hiring freezes.
   The township could also raise fees charged by the township for construction and other purposes.
   These fees have not been raised for nearly 14 years, Mayor Birge said.
   With Thursday’s introduction, the Montgomery Township Committee will have to wait about a month for adoption while state officials review the document.
   Once that process is complete, Montgomery officials said they hope to adopt the budget sometime in the beginning of June.