Newark, the largest city in New Jersey, must now look towards additional spending cuts and tax increases to fill a $70 million shortfall in its $600 million fiscal 2010 budget as the municipal council last week tabled Mayor Cory Booker’s plan to create a new utility authority.
The proposed Municipal Utilities Authority would have given the city an initial payment of $100 million, raised through the issuance of tax-exempt bonds, to help Newark balance its fiscal 2010 and fiscal 2011 budgets. Fiscal 2010 began Jan. 1.
The council Wednesday evening voted unanimously to table the MUA initiative. The plan to shift the city’s water and sewer system operations onto a new bonding agency had met resistance from residents and council members concerned the move would increase water rates. Forming a new agency would enable new bonding to help make needed upgrades to the system and help meet state Department of Environmental Protection standards.
In June, the council opted to introduce Booker’s budget, including the MUA plan. Since then, the city has had municipal elections, with two new members joining the council.
Booker has said that without the MUA, Newark will need to raise taxes. That projected increase has changed during the past few weeks. The administration now expects the city will need to boost taxes by 27% to generate additional revenue to help balance the budget, according to Booker spokeswoman Esmeralda Cameron.
The mayor’s proposed budget includes tax hikes of 7%. That spending plan also calls for layoffs of more than 600 non-uniformed employees and proposes keeping police and firefighter headcounts within certain parameters.
Booker last month called for additional spending cuts on top of his proposed budget, which already includes reductions to libraries and cultural institutions. The administration aims to implement a four-day work week beginning in late September. Employees will take two furlough days in August, Cameron said.
After the council tabled the MUA initiative, the mayor expressed his frustration that members had not come forward with alternatives to fill the $70 million shortfall.
“Now the council has rejected [my] budget and my plan, but to my dismay has offered no viable plan at all for how to move our city forward other than by inflicting our residents with a significant and painful tax increase and more cuts in city services,” Booker said in a statement.
Moody’s Investors Service rates Newark’s $500 million of outstanding debt A2 with a negative outlook. The agency is watching how and when the city finalizes its budget, as it has five months left in the year.
“Failure to adopt the 2010 budget in time to mail fourth-quarter tax bills in early November would exacerbate the city’s fiscal pressure,” according to a Moody’s report released in early June.
Newark on June 9 sold $175.3 million of general obligation bonds, including $120.6 million of Series 2010A bonds that priced with a 3% coupon yielding 2.59% in 2015 and a 4.25% coupon yielding 4.55% in 2028.
