By Audrey Levine, Staff Writer
With the knowledge that the township would have to pay back more money in interest costs than to cover the actual loan, officials are recommending that Hillsborough not participate in Gov. Jon Corzine’s recently approved pension deferral plan.
The plan allows municipalities to pay only half of pension payments in 2009, with 15 years to pay back the other half, beginning in 2012. In addition to the payment, the municipality would be required to pay interest on the payments, accrued each year from the original deferral in 2009.
”It’s an expensive program, and, based on the numbers we’ve run, the interest costs more than the actual loan,” Committeeman, and Finance Committee member, Carl Suraci said. “It goes against our philosophy of not borrowing for operating costs.”
Without taking advantage of the deferral plan, Hillsborough will be required to pay $1,209,662 for police pensions and $482,226 for civilian employee pensions. The total payment is due April 30.
According to Mr. Suraci, if the township were to take advantage of the deferral plan, Hillsborough would pay about $795,000 this year, but would accrue interest payments of about $800,000 at an 8.75 percent interest rate.
This is in addition to the remaining $795,000 that would have to be paid back.
In addition, according to information from the state about the plan, the amount to be paid back and the interest rate could fluctuate, based on pension system investment earnings on the deferred amount.
”The interest rate is not fixed,” Mr. Suraci said. “We don’t have any cost certainty. I think, for municipalities who take advantage of this, it will be a financial disaster.”
Committeewoman Gloria McCauley, who is also a member of the Finance Committee, said Hillsborough has been fiscally responsible in the past, and there is no need to be part of the deferral program.
”It would be borrowing money when we don’t have to,” she said. “Looking at the big picture, it doesn’t make sense to make more costs for the taxpayers.”
If there was a better interest rate for the deferral program, Ms. McCauley said, the township might have been more quick to consider joining in the plan. But with the costs set the way they are, it is not worth it for the township to take part because there will be no cost-savings in the future.
According to Mr. Suraci, a similar program was attempted prior to the current state administration, when municipalities were relieved of pension responsibilities. The Hillsborough administration at that time chose to take advantage of the program, he said.
”That program was never expected to last,” he said. “Soon the township had to make the contributions again at 20 percent interest.”
Currently, the Finance Committee is still working on putting together the township’s 2009 budget, and Mr. Suraci said he does not know when it will be introduced.
”We have asked departments to make reductions, and that is still evolving,” he said. “The introduction is not going to happen this month.”
Recently, the township learned it was going to lose another $271,000 in consolidated municipal property tax relief for 2009. This is on top of a $569,000 cut in 2008.
In total, the township is in line to receive $449,077 in municipal property tax relief this year.
”We are not sure where Trenton is going with municipal aid, and we don’t know what the legislation will do,” Mr. Suraci said, citing that the amount of aid could change in the coming months. “But the reduction in aid is affecting taxes, and that’s the shortfall we are trying to make up.”
The challenge now, Mr. Suraci said, is to maintain the services residents are accustomed to without raising taxes.
According to Ms. McCauley, the spending cap limit for this year’s budget is set at 4 percent, and the township is doing what it can to stay below that.
”To maintain the same level (of services) is an annual challenge,” Mr. Suraci said. “We have to make up (the money cut) somewhere. Maybe we can make cuts in the capital budget, which is no different from what every household is doing.”

