Surplus Could Ease 2012 Boro Taxes

Madison property taxes could rise by as much as 3.79 percent this year — or not at all, depending on how the 2012 budget process progresses.

The Borough Council were presented with a number of options by Chief Financial Officer Robert Kalafut at a lightly attended budget hearing held Monday night at , the first of three hearings scheduled in the coming weeks. Mayor Robert Conley urged residents to attend the next hearing, slated for Feb. 4 at 9 a.m., also at Hartley Dodge.

Before Kalafut’s presentation, Council President Jeannie Tsukamoto reiterated her call from December for no tax hike or at worst, 2 percent.

“Costs are rising,” Tsukamoto said. “NJTransit fares are up, fuel and food prices are rising. We need to do our best in these discussions not to raise taxes as well as not to raise electricity or water rates this year.”

The four budget proposals include a number of assumptions about the borough’s revenue and spending in 2012:

Spending:
— A 1.5% freeze on salaries and wages across the board;
— A hiring freeze for non-emergency positions;
— A combined savings of more than $600,000 in health and pension benefits for borough employees;
— A 5.33% decrease in total salaries and wages;
— Appropriation of $250,000 for the Capital Improvement Fund from the sale of borough property.

Revenue:
— Transfer of $3 million from municipal surplus;
— Transfer of $3.4 million in surplus from the Electric Department, bringing surplus balances to $4.8 million.

Total municipal spending is estimated at approximately $24.5 million, an increase of 1.45 percent from the previous year. The budget figures are preliminary and subject to change before they are due to be voted on and submitted to the state in April.

Two of the four budget options formulated by Kalafut and borough officials would apply the Fund Balance, a pot of surplus money from the cancelled balances of capital improvement ordinances that were fully funded by selling debt, to eliminate any property tax increase in 2012.

The Fund Balance is different from the Capital Improvement Fund, but in any case would not be used to cover operating costs.

The other two budget options have increases in the tax levy of 2.68 percent and 3.79 percent. The latter includes an increase in the Capital Improvement Fund from $250,000 to $750,000 to cover , although that number could go even higher.

“If we want to fix the sewers this year, we need an additional $875,000 in capital this year,” warned Council member Robert Catalanello.

Another budget proposal also raises capital improvements from $250,000 to $750,000, but with a $500,000 infusion from the Fund Balance instead of a tax hike.

The state provides for some exceptions to the 2% tax levy cap, including for capital improvements and some debt-related costs.

“We can go to 2.68 percent and still stay within the state guidelines,” said Kalafut.

The budget assumes revenue from state aid unchanged of about $800,000, although Kalafut said that number is expected to shrink to zero in light of Gov. Christie’s proposed 10 percent reduction in the state income tax.

Kalafut also warned that the decrease in municipal salaries and wages is a one-time based in part on a shift due by more employees to a less expensive state healthcare plan.

“We’re not going to see anything like that next year, and that is a big concern,” he said, adding that healthcare and other savings helped pay for the clean-up after last year’s storms without emergency appropriations — making Madison one of the few towns in the region able to do so.

Amid discussion of fund transfers and surpluses, Catalanello insisted that “we should budget based on defined revenue streams, not on projected fund balances or surpluses.”

Tsukamoto observed that, “We always overbudget our appropriations by about $1.2 million.”