Linden faces ‘perfect storm … of financial disaster’ in budget prep

Photo By Cheryl Hehl Linden is facing a terrific struggle to bring their budget in under the 2-percent state-mandated cap, needing more than $5 million in additional revenue to achieve that goal, or face layoffs and budget cuts.
Photo By Cheryl Hehl
Linden is facing a terrific struggle to bring their budget in under the 2-percent state-mandated cap, needing more than $5 million in additional revenue to achieve that goal, or face layoffs and budget cuts.

LINDEN — The city is facing another budget storm, one that will require furloughs and layoffs in order to meet the state mandated 2-percent cap.

The problem, according to Personnel and Finance Chairman Peter Brown, is that since 2005 the city has dipped annually into a $45 million surplus in order to reduce the amount raised by taxes. While that reduced the budget and the increase taxpayers would have to pay, it only warded off the inevitable, the councilman said.

With just $5.3 million left in surplus coming into this year, the governing body needs to put $5 million of that amount towards the 2013 budget, but they are still $5.2 million over the state-mandated 2-percent cap. And now Linden is attempting to figure out how to meet their obligations and stay under the tax cap.

“This is a perfect storm, if you will, of financial disaster,” Brown said last week in an interview, adding that he warned the governing body that they could not continue to drain surplus funds without repercussions in the future.

“That day has come,” Brown said, explaining that unless there are furloughs, layoffs and cuts in services, the city will not be able to meet the budget requirements set by the state.

The “very preliminary” 2013 budget numbers show that with all the expenses Linden must factor in right now, the bottom line number comes to $58,185,988.28. The 2-percent state-mandated cap requires the city to cut $5.2 million more from the budget in order to bring that number down to $52,903,542.

“That means we have two options; cut expenses and services or find additional revenue,” the 3rd Ward councilman said.
Brown said that from his perspective the dilemma the city is in goes back to the council not planning ahead three to five years as municipalities should.

“The way things look now, we will be $2 million short by May and $13 million by June, so something has to give,” the councilman said.
Brown said that two years ago he talked to Mayor Rich Gerbounka about shared services but “that went no where.”
Gerbounka, however, disagreed.

“Two years ago Peter was not heading up the Personnel and Finance Committee, so he had no right to take it upon himself to set up meetings with other towns,” the mayor said, adding that now that Brown is the head of that committee, he can set up meetings with other towns, but he has not done so. Gerbounka also noted that while it is easy to say the city should be sharing services with other municipalities, that is easier said than done.
“Sharing any service has to be beneficial to Linden,” the mayor explained, but did note that he has been discussing with Roselle Mayor Jamel Holley the possibility of sharing staff and court services.

Gerbounka explained that with Linden having the second highest volume of court cases in Union County, Elizabeth being the first, sharing this service with Roselle could ease that burden and be financially beneficial to the city.

However, this would not even begin to chip away at the $5.2 million the city needs to cut from the 2013 budget. Both Gerbounka and Brown agree that the city will have to take some drastic steps in order to reduce the budget by this amount. With a 40 percent increase in fire department personnel salaries because of contractual obligations, Brown said there is little that can be done other than furlough all employees one day a week and layoff others. But even that will not do the job of bridging the $5.2 million budget gap, he said.

“We are in a perfect storm. Our revenue is down by $3 million and the assessed value of property has gone down,” Brown said, explaining, for instance, that there were more than 600 tax appeals this year by property owners who want tax reductions. “We also lost $8 million in our tax base,” he said.

Gerbounka, while very concerned about the budget, actually has little say when it comes to what council does in this particular instance.

Because Linden is a Faulkner Act municipality, one that opted for a strong council and a mayor that cannot have a say in budget issues, Gerbounka’s hands are tied.

“As the mayor I don’t propose, vote or even have the power to veto the budget,” said Gerbounka, explaining that “our form of government is antiquated.”

However, the mayor was concerned about furloughs, layoffs and cutting services to residents. Since Gerbounka became mayor in 2007, he has reduced staff by 86 full-time and 15 part-time workers. But while he did not want to comment on how furloughs and layoffs will be instituted this year, he did say services such as free trash pickup is being cut down.

“We pay the tipping fee which amounts to $480,000 a year to dump all that trash and we just can’t afford that anymore,”
the mayor said. Gerbounka did see a light at the end of the dismal budget occurring in Feb. 2014, when Spectra Energy will begin paying the city $2.5 million a year for a gas pipe that will run for a mile through Linden. But that is still a year away and budget woes are still looming for 2013.

Part of the problem, the mayor said, is that unionized worker contracts were set up to provide no salary increase the first two years, but in year three and four the city has to hand out 3.9 percent raises. That alone, said the mayor, was a huge hit this year on the budget.

Budget struggles are not new for Linden. Last year the city struggled to come up with a budget that passed muster with the state, eventually passing the municipal spending plan in August when threatened with daily fines by the state.