Hoboken City Council Votes on 5% Tax Levy Increase Tonight — What You Need to Know

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In the wake of the Hoboken’s multi-million dollar budget defecit, controversial layoffs, and the City Council introducing three ordinances that would eliminate the office of constituent services and the in-house engineer from Mayor Ravi S. Bhalla’s administration, tonight’s online agenda for the May 20th City Council meeting includes a resolution to enact a 5% tax increase.

Hours before the Council Meeting, scheduled for 7PM tonight, 2nd Ward Councilwoman Tiffanie Fisher emailed a newsletter notifying residents of the 5% tax increase. In the newsletter, Fisher also claims that Mayor Bhalla’s administration has not explained why the increase is warranted.

“Did you know there is a 5% tax increase on tonight’s City Council agenda?” Fisher writes. “So, your total tax bill in August would be increased 5%? Did you read about it any communications from the mayor’s office?”

This 5% tax increase is called a tax levy, which NerdWallet defines as a “legal seizure of your property to satisfy a debt.” In most cases, tax levies come after a tax lein is put on your account or house. In the instance of the City of Hoboken, The Hudson Reporter reports that the City is recommending the adoption of an estimated $196.6 million tax levy.

As a result, the residents of Hoboken would pay 5% more in taxes come their August 2020 bill.

The Introduction

The memo was introduced on May 20th by the current business administrator, Jason Freeman, and can be viewed below:

 hoboken tax increase 2020

hoboken tax increase 2020

 

What’s the resolution?

The Resolution entitled “Resolution Authorizing Estimated Tax Billing Per N.J.S.A. 54:4-66.3” — can be found online at the City Council’s online agenda. Scroll to resolutions and under Section 8, “Tax Collector,” it’s the third one listed. According to the resolution:

WHEREAS, the ongoing COVID-19 pandemic has disrupted municipal, county, and state governments, the 2020 budget process and property tax billing process may not be as timely and certain as they have been in past years; and,
WHEREAS, the City of Hoboken (“the City”) has not introduced its 2020 Municipal Budget and the New Jersey Division of Local Government Services may be delayed in reviewing the City’s 2020 Municipal Budget prior to adoption due to the current fiscal uncertainties, and the Hudson County Board of Taxation may be delayed in certifying the City’s 2020 tax rate once the City’s 2020 budget is adopted; and,
WHEREAS, without a certified 2020 tax rate, City of Hoboken Tax Collector will be unable to prepare and mail property tax bills in accordance with statutory deadlines for the third quarter installment of 2020 taxes; and,
WHEREAS, because of these above-mentioned uncertainties, the New Jersey Division of Local Government Services issued Local Finance Notice LFN-2020-07 which strongly recommends that municipalities issue estimated property tax bills for the third quarter installment of 2020 taxes, and,
WHEREAS, the Tax Collector, in consultation with the Chief Financial Officer and Finance Director, computed an estimated tax levy in accordance with NJSA 54:4-66.3, and each signed a certification showing the tax rate and tax levy for 2019 and the range of permitted estimated tax rates and levies for 2020; and,
WHEREAS, the 2020 estimated tax rate and estimated tax levy are within the permitted range, the Director of the Division of Local Government Services does not need to approve the estimated tax levy;
WHEREAS, the City seeks to authorize the Tax Collector, if she deems necessary, to prepare and issue estimated tax bills for the third quarter installment of 2020 taxes.
NOW, THEREFORE, BE IT RESOLVED, by the City Council, City of Hoboken, County of Hudson, State of New Jersey as follows:
1.  The Tax Collector is hereby authorized and, if she deems necessary, directed to prepare and issue estimated tax bills for the third quarter installment of 2020 taxes.
2. The estimated tax levy for 2020 is hereby set at $196,600,000.

As Fisher notes, no explicit mention of a 5% tax increase is made in the language.

Fisher continues in the newsletter, “Our tax bills come four times per year. The first two tax bills are based off of last year’s budget. Typically our budget is approved by May, so the August and November tax bills reflect the new budget.”

However, as with most things, the coronavirus pandemic has affected the timeline.

“Because of COVID, all deadlines have been extended and Hoboken will not approve its budget before the August tax bill, so the laws allow municipalities to estimate taxes,” Fisher adds. “The allowable range is 95% to 105% of last year’s TOTAL taxes {so 5% decrease in taxes to a 5% increase in taxes}. By total tax, meaning the 5% is applied to the total levy which includes county, school, municipal, library and open space taxes.”

With the City of Hoboken now allowed to estimate its taxes, the City is looking to estimate it with the highest available rate of increase. That’s 5%.

“So the city, because of the significant shortfall, is recommending that we use the highest available rate increase of 5%,” Fisher continues. “The rationale is that if the anticipated rate increase is going to be 5% or greater, if the highest rate isn’t selected now, then the financial impact will be even greater in the November, February, and May billings.”

What you need to know about the financial climate

This resolution comes on the heels of Hoboken’s multi-million dollar budget deficit. Of course, the budget was in trouble prior to the coronavirus pandemic, but COVID-19 has put even more of a financial strain on the City. Soon after the pandemic demanded newly-established self-isolation, social distancing, and quarantine practices, 11 City employees were notified they were being laid off by a mailed letter signed by the Mayor. Another 15 employees retired with benefits, including terminal leave.

Now, members of City Council have a proposal: three ordinances that seek to reduce municipal costs by either cutting back on employees’ salaries or eliminating positions within Bhalla’s cabinet altogether. Specifically, City Council is looking to eliminate the in-house engineer position as well as the office of constituent services. According to HMag, one of these ordinances would temporarily lower the salaries of all City Council members, as well as the salaries of Mayor Bhalla and City Directors by 10% for the rest of 2020.

“All we are doing is simply asking the mayor to better allocate the funds within his own office,” Councilwoman-at-Large Vanessa Falco, a sponsor of the ordinance that would cut the city engineer, told Hudson County View.

In a letter to Council President Giattiano and the rest of City Council, the Office of the Business Administrator defended the Engineering Division, alleging that eliminating the position would do the opposite of its budget-saving intent: “… Should this ordinance pass, it will in fact create just the opposite: the City will not recognize any savings in the 2020 budget, a myriad of costs will increase, and services will be reduced.”

According to a separate memorandum released by the Office of the Business Administrator on behalf of Mayor Bhalla, Director of Operations Jason Freeman, and Assistant Business Administrator Caleb Stratton, AICP, the recommendation is to increase the total tax levy by the highest percentage now in order to “mitigate” financial impact later.

“The Administration recommends that the City Council approve an increased estimated third-quarter tax bill based on a 5% increase in the total levy to mitigate the possibility of an outsized bill for taxpayers in November 2020,” the memorandum reads. “By passing this resolution, the City Council allows for flexibility and less pressure to be put on the taxpayer come November 2020.”

Essentially, recommending the approval of a 5% increase now assures that the tax estimate isn’t too low. If the estimate is too low and the real numbers come back higher, taxpayers would see a significant spike in their November 2020 bill to retroactively make up for the missed funds.

What’s the alternative to the tax levy?

If the City Council approves the 5% tax levy increase, residents will see the increase reflected on their next bill in August. Councilwoman Fisher says it’s a matter of weighing out the better option.

“Even if this was the $5 million equal to our revenue loss, and although we will still try to find additional cost savings, especially in unnecessary overhead, I am confident that the tax increase for this year will be much greater than 5 percent,” Fisher says. “So, the question is, do we take this 5 percent increase now to lessen the pain later in the year, or kick this one more quarter with the potential for a greater impact later?”

How to join the City Council Meeting

There are a few ways you can either join or watch tonight’s City Council Meeting. The event — which starts at 7PM tonight will be streaming online throught the city’s website, as well as on Facebook Live.

You can also join the Zoom Meeting or use a direct phone line to connect to the meeting using +1 646 876 9923 US {New York} and Meeting ID: 830 2521 9057.

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