We Deserve Accountability Over Accounting Gimmicks

By the time of 2012 budget presentation this past May, the budget deficit for Holmdel Township came in at $1.2 million as opposed to the $3 million originally estimated at the budget workshop held on January 19, 2012. While it is not uncommon for governments to over estimate a problem so as to appear successful when averting it, there is simply no evidence that this was the case here. In fact, I am convinced that the Township Committee believed the deficit to be almost $2 million dollars higher since it would not have risked the political backlash it received when residents opposed its proposal to sell township land currently used as open space. If elected, this will be the first thing that I fight to do differently. Due to the limited time to submit budgets to the State, we need to know an accurate estimate budget deficit and we need to know it early. To do so, we obviously need to have a better idea of our revenue and expenses much sooner than the time we are presented the budget. This requires work throughout the year. A difference of $2 million dollars is a lot of money. In the context of our municipal budget, such a deficit is huge and would have a drastic impact. Our surplus reserves have been eroded and property values have continued to drop over the years. Reduced revenue is the new normal. Having an accurate estimate of any budget deficit would avoid placing us into crisis management and having to make hasty decisions like considering the sale of open space to developers. The consideration of layoffs, spending reductions and borrowing (things that are now done in Holmdel only once a year) should be examined every fiscal quarter just like any other business with a $20 million dollar budget.

In addition to reviewing the budget on a regular basis throughout the year, there is also one particular item that I would have elected to do differently in regards to the 2012 municipal budget adopted by the Township. Specifically, I would have deferred the appropriation for the $1.57 million dollar bond pay down to time that we could accomplish it without imposing another tax increase. Although paying off debt always sounds like a great idea, in reality we really just refinanced our bond debt since the Township Committee borrowed money when it authorized the issuance of new bonds on April 26, 2012 before it presented the budget. Granted, we saved some money since the interest being paid on the redeemed bonds was apparently higher than the interest payable on the new bonds we issued. However, the savings to Holmdel for interest on bonds in 2012 was only $33,451.57 (2012 Budget, Sheet 27). Despite the popular perception from the outside, many Holmdel residents are struggling to get by just like everyone else in this economy. Most residents are working on reduced or fixed incomes. Many are at risk of foreclosure. While it is great we saved that money on bond interest this year, I would not have had residents dig deeper into their pockets for the tax hike to accomplish this without first securing their permission.

I am not alone with my line of thinking above. In fact, this proposal is what our state legislature and Governor Christie had in mind when it enacted bi-partisan legislation in 2010 limiting annual tax levy increases by towns to no more than 2%. (N.J.S.A. 40A:4-45.45, et seq.). Under the statute, towns starved for revenue that want to raise taxes higher than 2% from the prior year are required to hold a special referendum election asking voters for permission. In other words, as the governor put it, “They've got to come and get permission from the people who pay the bills."  In Holmdel, the tax levy was increased in 2012 to about $21.1 million. (2012 Budget, Sheet 30). This is almost a 5% increase from the $20.2 million levy in 2011. However, as we all know, there was no referendum election. In fairness to Holmdel Township, it did comply with the law. Specifically, the law exempts payments made for debt service from counting against the 2% spending cap. Therefore, the bond payment was not considered when calculating the percentage increase in the tax levy. As such, Holmdel was not required to obtain our permission to raise taxes more than 2% this year because of the debt refinance. However, did that still make it the right thing to do? Although technically lawful, do such workarounds comply with the spirit of the law?

Had Holmdel omitted the $1.57 million dollar bond expenditure from the 2012 budget and deferred it to a better time, we could have avoided yet another tax increase or, at the very least, been given the opportunity of a special referendum election asking for our permission to do so. For me, that was the better choice for the people albeit against political best interests. As Americans, we cherish freedom. That freedom is fostered through democracy. A referendum election is democracy in its purest form. When confronted with the option of either offering citizens democracy or hiding behind clever accounting, I will always choose democracy. 

Lawrence W. Luttrell, Esq. is a 2012 candidate for Holmdel Township Committee and an attorney with the Law Offices of Lawrence W. Luttrell, PC located at 2137 State Route 35 in Holmdel, New Jersey. He can be reached at larryluttrell@lwlpc.com.