Newark Mayor Cory Booker Wednesday moved away from his proposal to create a new water utility authority to help close a $70 million current-year budget gap and instead announced that cuts would come from placing the city on a four-day work week and additional operating cuts.
The City Council has deferred a vote on the creation of the proposed Municipal Utilities Authority at this time. That decision places the budget for fiscal 2010, which began Jan. 1, in limbo, as that spending plan included a payment from the MUA. Booker called the situation a “fiscal crisis” and is now looking towards furloughs and deeper spending reductions as an alternative.
The administration estimates it can save $10 million to $15 million by implementing a four-day work week and suspending non-essential purchases, closing all public city pools, and slashing social programs.
“We are going to cut every city expenditure possible that does not go to the very provision of essential services, which to us is police services and fire services,” Booker said during a press conference.
If approved by New Jersey, the city would begin a four-day work week on Sept. 27.
The nearly $15 million of spending reductions would leave a roughly $55 million hole in the fiscal 2010 budget. Booker said the “draconian” cuts are needed to avoid a nearly 35% tax hike, far above the 7% tax increase already proposed in the budget.
Booker said that boosting tax rates to fill a $70 million deficit would threaten 2,500 homeowners that have already missed one mortgage payment in the past six months, raise the city’s unemployment rate, which was 15.5% in March, and choke business growth.
The mayor presented his $600 million fiscal 2010 budget in late June. That proposal includes roughly 600 layoffs of non-uniform city employees.
Booker yesterday ruled out selling deficit bonds to help fill the shortfall, as he is keen on raising the city’s credit rating. Moody’s Investors Service rates Newark’s $500 million of outstanding debt A2 with a negative outlook.
“Newark has got to improve its bond rating and the only way to do that I see is to work with my council to do even greater cuts in municipal spending,” Booker said during the press conference.
Booker Wednesday asked for the City Council to hold emergency meetings on the deficit issue and urged the council and the city clerk’s office to require portions of government that report to those offices to also go to a four-day work week.
Booker’s budget proposal had included a plan to move water and sewer operations under a new bonding authority, the MUA. That plan involved the new utility issuing about $233 million of bonds later this year to finance an initial $100 million payment to Newark and also begin much-needed infrastructure upgrades to the system, according to acting business administrator Michael Greene.
The MUA plan would have enabled the city to use $70 million of its $100 million payment in the fiscal 2010 budget and the remaining $30 million in next year’s budget. In addition, the utility would have paid the city $5 million annually over the life of the agreement, which could be 30 to 40 years.
Officials estimate the MUA would have a total $600 million of bonding capacity during the next few years based off of anticipated receipts. In addition, the city would place its pledge behind the authority’s bonds so Newark would still be responsible for those debt service payments if the authority were unable to meet principal and interest costs.
Creating the MUA is not off the table. The City Council will hold several public hearings on the proposal during the next few weeks. Booker stressed that at some point, the city must address its water and sewer systems and improve its infrastructure. The city has already received notices from the state Department of Environmental Protection in regard to combined sewer overflow and other issues.
