Bayonne will be under increased state oversight after the city ended two consecutive fiscal years with a budgetary shortfall.
Until June 2009, Bayonne must seek approval from the New Jersey Local Finance Board, a division of the Department of Community Affairs, for all borrowing and issuance of debt.
Typically, local governments do not need to receive LFB approval for new-money general obligation bonding. In addition, Bayonne will need the board’s authorization for purchases and contracts exceeding $50,000 and must now submit monthly revenue and expenditure reports to the board.
Current DCA commissioner Joseph Doria served as Bayonne’s mayor for nine years before Gov. Jon Corzine in October picked him to run the department. He was sworn into the position in January.
“Bayonne had a five-year plan to deal with their financial issues, however, that plan was interrupted because of actions by the U.S. Army, which impacted upon potential revenues,” DCA spokesman Chris Donnelly said via e-mail. “Based on [director Susan Jacobucci’s] recommendations, the board voted to impose certain financial requirements on the city for a period of one year effective immediately.”
In the past, the Bayonne Local Redevelopment Authority has given the city funds it receives from real estate development projects to help Bayonne balance its budget. In return, the city has sold bonds to finance infrastructure improvements at the BLRA’s Peninsula project, a 430-acre, former military site that the Army sold to the authority in 2001 for $1.
City officials refer to the exchange of funds and bond proceeds between Bayonne and the authority as “swapping” while the Army has raised its eyebrows to the arrangement and is in contact with city and BLRA officials regarding the issue. Under the land agreement with the Army, the city cannot receive land-sale proceeds until July 21, 2008.
Exactly how much earlier swap arrangements total and when they took place is unclear. The city sold approximately $20 million of debt to help balance the fiscal 2005 budget and officials approved another $25 million of debt to help fill the budget gap for fiscal 2006, but that amount decreased due to changes in land sales, according to Bayonne spokesman Joe Ryan.
Mayor Terrence Malloy said the board’s decision to monitor the city’s finances will help Bayonne get back on track.
“Since I became mayor last October, the city of Bayonne has taken several hard steps to put our finances aright. There have been layoffs of staff, cutbacks in programs, new charges for services, and cost-sharing of health care premiums by city employees and elected officials,” Malloy said in a prepared statement. “We have also removed inactive employees from health insurance benefits and tightened procedures for municipal employees’ access to gasoline. I will continue to explore other ways of economizing. The state’s plan is another important step on the road to solving our financial problems.”
Bayonne has a population of roughly 58,844, according to U.S. Census data, and lies along the New York Harbor, seven miles from Manhattan. The city and the BLRA have $112 million and $30 million of outstanding debt, respectively. Moody’s Investors Service rates Bayonne Baa3. Fitch Ratings and Standard & Poor’s do not rate the city. The BLRA does not carry a credit rating.