DCA's Transitional Aid Policy Sets Up Municipalities for Failure

Credit PatersonTimes.com

Credit PatersonTimes.com

Homeowners stormed the Paterson City Council chambers to protest a 6 percent property tax hike proposed by Mayor Joey Torres. The council voted against the budget and clamored for the mayor to propose a budget with meaningful cuts. There is just one problem. The New Jersey Department of Community Affairs said they would reduce Paterson's 25 million dollar transitional aid award proportional to every cut. That is, if Paterson introduces 5 million in cuts, the state would reduce the transitional aid amount by 5 million.

This short sighted policy hurts the potential for long term fiscal viability. The DCA encourages municipalities to tax the maximum amount possible, and in doing so ensures that the upcoming year will require yet another bailout. Instead, the DCA should work with the mayor and council to build consensus on meaningful, long term cuts. If taxes continually increase the city risks entering a budget revenue death spiral. The more taxes go up, the more people leave the city, forcing the budget to be spread among fewer amount of property owners, which increases per capita taxes and the cycle repeats itself. 

The DCA's motives are understandable. They do not want municipalities to temporarily reduce their budgets and expect the transitional aid to be just another source of revenue. Nevertheless, the DCA can use its carrot and stick in more useful ways. As stated earlier, sitting down with the mayor and council and building consensus on reasonable cuts is a start. DCA can then create per capita baselines for staffing levels and tie transitional aid to maintaining and not exceeding those numbers.

In addition, the DCA can encourage common sense steps to encourage revenue generation. As one story highlights, drama on the city's zoning board is jeopardizing approval of development projects and discouraging businesses. Aspiring small business owner Ann Marie Jackson has been waiting over two years for approval of her Park Avenue salon. When calculating transitional aid the DCA should take into account how long it takes projects to get an up or down vote on the zoning board, or how long it takes for city inspectors to submit their reports. These types of interventions are more necessary than ever with the average New Jersey property tax bill outpacing inflation and income growth, making it the nation's highest property tax burden.