Slight increase coming in O.B. municipal taxes State aid helps, but rising, mandated costs have town in bind BY JESSICA SMITH Staff Writer Thanks to state aid, residents will see a smaller tax increase than anticipated in the new Old Bridge municipal budget, approved Monday. Township Finance Director Himanshu Shah said at a Dec. 10 Township Council meeting that there would be a 2-cent increase in the tax rate, mostly due to the bill for pensions coming in higher than anticipated and an increase in mandated funding to the public library. However, officials got word later in the week that the township will receive $150,000 in extraordinary aid from the state. Now the tax rate increase will be 1.5 cents per $100 of assessed valuation, Shah said. At a special meeting Monday, the council voted to adopt the fiscal year 2007 budget, including an amendment to accept the state aid. For the taxpayer with a home assessed at the township average of $144,000, a 1-cent increase amounts to about $14 more per year, while a 2-cent increase would have meant paying $28, according to Mayor Jim Phillips. With the increase at 1.5 cents, the cost for the average homeowner in town will fall somewhere between those two numbers, resulting in an increase of between $1 and $2 per month. "In this day and age, it's not bad," Phillips said. The township's pension bill exceeded what administrators projected by $740,000, Shah said, noting that state officials did not inform them of this until sometime in August. "We wish we would know that early enough so we could project those ... but we can't," he said. Shah said he felt that projecting a 25 percent increase was prudent, as the phasing law provides for a 20 percent increase in pension funding per year. In actuality, the increase turned out to be 68.79 percent, he said. "The 20 percent phase-in is what I call the state pension fiasco," Shah said. In the 1990s, the market was abundant, creating a feeling of security that led to the state and its municipalities ending contributions to pensions for some time, according to Shah. The false feeling of security resulted in $80 billion less in values, he said. To avoid hitting towns with a huge bill all at once, state legislators decided to phase in the pension bill at 20 percent per year for five years. Due to an increase in police benefits and differing numbers after conducting actual analyses on employee packages, the 20 percent ballooned this year, Shah said. Last year, the state Public Employees Retirement System (PERS) pension bill was $370,151; this year, it is over $800,000. The Police and Firemen's Retirement System (PFRS) was at about $1 million last year, and it is now approximately $2 million. "These are budget busters," said Township Auditor Bob Morrison, of Highland Park-based Morrison & Hodulik. The good news is, this year will be the last for the phasing in of the PFRS bill. In terms of the library, the town is mandated by the state to pay an additional $300,000 to fund the program this year. Last year, the township allocated $2,109,000 to the library, Township Business Administrator Mike Jacobs said. "One cent [of the tax rate increase] is really attributable to the library," Shah said. Morrison said that, with the township administration working hard to tighten spending and the state mandating a 4 percent budget cap, it could become more difficult for Old Bridge to build up its surplus funds. "I'm afraid, statewide, that this legislation is the immoveable object that municipalities are pushing against," Morrison said. "Obviously, I have concerns about the environment you're operating in right now. My fear is that, as well as you are attempting to manage your finances, it is way out of control." According to Morrison, although the township has budgeted and regenerated most of its surplus, if it decreases, not only would the tax rate go up, but the town might also need to seek out loans. Though Shah later told the Suburban that the town's surplus is stable, he said there is only about one month's worth in reserve, or about $1.5 million. He recommends increasing it to a higher number, but said the town is not in a position to do so while it is trying to cut taxes. "The state mandates are now taking a real stranglehold on municipalities," Shah said. In light of the economic downturn, township officials are projecting a 98- percent tax collection rate for this year, Shah said. Last year, the town collected 99 percent of property taxes. "When you're at 99 percent collections, there's really only one place you can go, and that's down, unfortunately," Township Council President Patrick Gillespie said. Republican council members Richard Greene and Lucille Panos recommended $447,788 in budget cuts, which would have reduced the tax increase by more than one cent, but council Democrats did not think their suggestions were viable, and voted them down. On Monday, Democratic Councilman Bob Volkert also shared recommendations to decrease budgetary spending, but his suggestions were also rejected by the council. The recommendations on the part of the three council members largely involved leaving certain municipal positions vacant for an additional six months, or eliminating them entirely. Seven positions in the township remained vacant for the past six months after Phillips decided to freeze hiring until the municipal budget was complete.