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We Deserve Accountability Over Accounting Gimmicks

Opinion article seeking a new order in local politics where accountability is given priority over accounting gimmicks regardless of the political consequences.

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.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Anthony Cooper October 02, 2012 at 05:17 PM
Thanks to Mr. Luttrell for his eye-opening and well-documented article. As a life-long Republican in the spirit of Barry Goldwater and Ronald Reagan, I highly value fiscal prudence, financial responsibility and integrity at all levels of government. Hence I am most disappointed with the accounting gimmicks and excessive spending increases in Holmdel's 2012 municipal budget due to actions by the phoney “Republicans” now controlling our Township Committee. I do take some solace in the sterling 2012 budgetary performances of Monmouth County, led by Republican Freeholder Director John Curley, and of New Jersey, led by Republican Governor Christie. Thanks to these real Republicans, both our County and our State have successfully held the line against 2012 budget increases. Mr. Luttrell's article reveals that the April 26, 2012 bonding approval for over $3 million was done at special, early morning meeting (7:30 AM to 7:35 AM). Evidently these phoney “Republicans” know when to hide their unsavory actions from the public eye. Holmdel has previously had decent and financially responsible government from real Republican Township Committeemen like Art Davey, Russell Dronne and Gary Aumiller. A heavily Republican town like Holmdel deserves better than the phoney “Republicans” now controlling our Township Committee. Anthony Cooper
Robert Way October 02, 2012 at 06:43 PM
Mr. Luttrell, you indicated you "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". Can you elaborate on how you would identify that more appropriate time because it seems like taxes go up every year with the only difference being some years less than others. The current administration cut "under the cap" spending by 3% and would have had to find about 13% "under the cap" to absorb the debt payment. That deep of an "under the cap" reduction doesn't seem possible in any economic climate so I am not sure what would be considered a better time to do it. I would hope it was done now because it will be worth it in the long run to offset the increase we are seeing as a result of it. I had posted some other comments but retracted them because I didn't give enough thought to the $1.57M pay down nor the authorization for new bonds passed on 4/26/12 as you mention above. Is there any insight into why the TC felt the $1.57M pay down was beneficial to do now as opposed to waiting on it? Any further insight into the reasoning behind authorizing another $3M worth of bonds? I noticed the bond issuance vote was unanimous and the original motion was seconded by Mr. Fink so I am not looking for a partisan answer because both sides are vested in the vote, just an answer as to why the resolution was passed in the first place. Thanks in advance for any further insight.
LarryLuttrell October 02, 2012 at 09:54 PM
Hi Robert. Thank you for taking the time to read my article and comment. In regards to your inquiry in your post, I would have at least deferred the bond refinancing until after the budget was submitted without the $1.57 million dollar buy down. This would have likely triggered a referendum election and allowed the voters to decide whether now was the time to dig into their pockets to do it. Towns are permitted under the law to amend their budgets. Had the voters approved the tax hike, we could have simply amended the budget accordingly. Had they refused, then we would have to wait until additional revenue came in such as an increase in State aid or additional taxes that we have been told are expected from the increased ratable of the Alcatel-Lucent property. As for the bonds, although the issuance of up to $3.15 million is authorized under the resolution, the entire amount is not required. The bonds appear to have been for the purpose of capital improvements (roads). In the 2012 Budget, we are issuing $1.04 million of bond debt toward such improvements (Budget, Sheet 40B).
LarryLuttrell October 02, 2012 at 10:11 PM
Thanks for reading my article and I hope I can win your support. I must respectfully disagree with you on one point however. In my heart, I do not believe the members of the TC did anything wrong with approving the bond issuance resolution. It simply enabled the town to issue new bonds at lower rates. My point of contention is HOW the new bonds were used in connection with the presentation of the budget. Ultimately, it allowed the referendum on spending over the 2% cap to be circumvented. The voters should have been given a choice, not clever accounting.
Robert Way October 02, 2012 at 10:27 PM
Thanks for the quick follow up Larry. Because I am not too familiar with the budget amendment process, being that the budget item is "outside the cap", would it still go to a referendum if the buy down were amended later on? As for Lucent contributing some extra cash, I believe that would only be the case if its assessment were to be significantly increased in the middle of a tax year which introduced "unexpected" property tax revenue for one year windfall of sorts. Once the Lucent ratable is re-established it simply shifts some of the tax burden off the residents, it doesn't necessarily increase the town's revenue it just means the Lucent Tract would shoulder a larger percentage of the burden than it has and the residents burden would decrease, but revenue would remain the same. The taxy levy gets divided into the town's overall assessed value and then the tax rate is established and applied against our home's assessed values to see what portion we are responsible for and the same holds true for the Commercial ratables in town. I am sure you are aware of this but some readers may not which is why I mention it. I did quite a lengthy piece on the Lucent Ratable posted here on The Patch back in February of this year which tried to measure the impact a declining Lucent Ratable has had on the residential tax burden so I tend to perk up when it is mentioned; http://holmdel-hazlet.patch.com/articles/opinion-the-alcatel-lucent-tract-tax-ratable-is-not-the-golden-goose
LarryLuttrell October 03, 2012 at 03:13 AM
Robert, I made the comment about the tax revenue "tongue-in-cheek." I read your article and took a similar position in my article posted last week arguing that the Town cannot blame Lucent for the recent tax hike (link below). Lucent is at best a red herring. At worst it is a scape goat. Either way, it is neither the problem nor the answer. http://holmdel-hazlet.patch.com/blog_posts/the-case-for-common-sense-in-holmdel
LarryLuttrell October 03, 2012 at 03:52 AM
Robert, if Holmdel wanted to keep the same amount of spending in place, but omitted the bond refinancing, then the budget would need to set aside $1.24 million for capital improvements directly out of the tax levy as opposed to the $200k allocated in the current budget (with $1.04 borrowed). This would have triggered the referendum election since the tax levy would have increased by more than 2% from 2011.
LarryLuttrell October 04, 2012 at 01:09 PM
Correction Notice: in the article above I wrote "In Holmdel, the tax levy was increased in 2012 to about $21.1 million. (2012 Budget, Sheet 30)." Although the figures are true, they represent the total expenditures of the town and not the revenue raised from taxes. However, the tax levy (listed as item 6a on sheet 11 of the Budget) actually increased over 10% from $11.9M in 2011 to an expected $13.1M in 2012. Accordingly, the point remains the same. It took an accounting gimmick to avoid the referendum for a tax increase of $1.2 million (almost exactly the amount of money to be spent on capital improvements (roads) in 2012).
Carol Beckenstein October 04, 2012 at 04:25 PM
This administration has been using gimmicks all along...depleting Holmdel's surpluses to appear fiscally conservative. The chickens have come home to roost. Good luck, Mr. Luttrell, I hope you win. And, thanks for explaining everything so clearly.
Michael Rauchwerk October 04, 2012 at 04:45 PM
TC presented a budget in February, and this was reviewed in a budget workshop at town hall that I attended. This budget is significantly different from the April final budget that was submitted to the state. From February to April, the appropriations, or expenses increased by about 1.5M. Revenues have increased by about $4M. Of this, 2M appears to be from additional expected budget surplus from 2011 and increased taxes. The other 2M is from new, one time revenues that did not appear on the February budget. The individual line items are: Fema reimbursement for Hurricane 300000 sewer utility fund anticipated operating fund balance 536000 sale of assets (believed to be police barracks) 700000 sale of liquor license 300000 Board of Education repayment of Roggy Project 290000 The line item for the Roggy field is now 165,000, based on the recent agreement from the BOE adding a gap of $125,000. The other items have not been verified. There appears to be a gap of 2.5M between revenue and expense from year to year. The 2012 budget attempted to plug this gap with $2M in new one time income items (these need to be validated) and tax increases. For 2013, even with the tax increase, a 1.5M gap exists that needs to be addressed with additional 2013 revenue or 2013 expense cuts.
Michael Rauchwerk October 04, 2012 at 04:46 PM
The issues to be highlighted are: • From February to April, the TC came up with $4M in new revenue that did not appear in the February budget. Given that the budget is supposed to be submitted early in 2012, and should have been a major work item for the TC in 2011, it seems hard to believe that all of these items are real. It has been shown that the Roggy item is significantly less than the budget states. • The submission of the budget, and even the approval by the state, does not mean it is accurate. It only means that it was approved to the level that it was scrutinized. Any items that turn out to be less than expected will increase the gap for next year. • The budget has a significant gap (at least 1.5M) for 2013. There is no way for significant new ratables to come online for years. The TC should be working hard to solve this problem. One time fixes won’t cut it. The only way to solve it is to cut expenses or raise taxes. The TC has shown they know how to raise taxes, but based on the expenses of the last 5 years, they do not appear to know how to cut expenses. They are apparently not working very hard to solve this problem, as the last 2 TC meetings have only lasted 10 minutes and the upcoming October 4 meeting has been cancelled.
steve h October 05, 2012 at 02:37 AM
Re: Anthony Cooper Your candor and exceptionally well written comment concerning the current voting majority on the Holmdel Township Committee's voting policies is greatly appreciated. Thank you for this objective analysis on what should be a "financially responsible government" in Holmdel.
steve h October 05, 2012 at 03:00 AM
Re: Mike Rauchwerk Your explanation of the details regarding spending by the current Holmdel voting majority is greatly appreciated. The time you devoted to clarify many items is most helpful to the reader that is not familiar with the intricacies of a municipal budget. You obviously have been paying close attention to budgetary issues and problems in Holmdel. and did the work to bring this to the attention of the public. It would be beneficial to every taxpayer in Holmdel if our elected officials practiced the same due diligence and transparency as you have exhibited in the Patch comments. Maybe then we would not have a "claque of malcontents" as our Mayor refers to anyone that disagrees with him or objects to his standard operating procedures. "... ...the Mayor is on record calling Holmdel taxpayers "a claque of malcontents." My jaw hit the floor. Make no mistake, the hapless mayor and his party is trying to lay the Lucent fiasco at the feet of the public -- for the "impertinence" of wanting open proceedings and for speaking up in meetings and in the media. http://holmdel-hazlet.patch.com/articles/no-vote-on-proposed-alcatel-lucent-redevelopment-plan
steve h October 05, 2012 at 03:08 AM
Re: Anthony Cooper Your candor and exceptionally well written comment concerning the current voting majority on the Holmdel Township Committee's voting policies is enlightening. Thank you for this objective analysis on what should be a "financially responsible government" in Holmdel.

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