Municipalities, school districts and counties have an opportunity to reduce the tax levies they will impose in 2011 by focusing on revenue control and creation. Base on the 2009 Abstracts of Ratables from the Division of Local Government Services, miscellaneous revenue on average offset 44 percent of the municipal budget. That leaves 56 percent of expenses to be paid through property taxes.
BUILDING REVENUES IS JUST AS IMPORTANT AS CONTROLLING AND CUTTING EXPENSES DURING THESE TOUGH TIMES. AND OFTEN THE REVENUE SIDE OF THE BUDGET PROVIDES MORE LONG TERM BENEFITS THAT CUTTING EXPENSES
Building revenues is just as important as controlling and cutting expenses during these tough times. And often the revenue side of the budget provides more long term benefits than cutting expenses. Cutting and/or controlling expenses can lead to decreased services if those expense reductions are not complimented with productivity enhancements. Revenue increases can provide new and/or enhanced services and increases in cash surpluses.
Miscellaneous revenues include surplus revenue, miscellaneous revenue anticipated and receipts from delinquent taxes. Surplus revenue on average in 2009 offset 7.6 percent of municipal expenses, receipts from delinquent taxes 2.9 percent, and miscellaneous revenue anticipated offset 34 percent. Opportunities for revenue creation exist in the area of miscellaneous revenues anticipated, which include fees, fines, licenses, permits, interest, anticipated utility operating surplus, uniform construction code, state aid and special items of general revenue.
On average, State Aid offset 8 percent of municipal expenses in 2009. I assume this percentage was lower in 2010 due to the reductions in CMPTRA and Energy Tax Reciepts. At the NJLM conference the State Treasurer stated that municipalities should baseline with the same level of State Aid in 2011 as they received in 2010 as a starting point. Uniform construction code revenues have felt the impact of the economy though many property owners are investing into their properties versus selling and buying new.
Municipalities should update their various fees and fines so they are in line with allowable state levels and competitive with surrounding communities. Police should be enforcing our state and local laws unwaveringly, and the court system should be operating as efficiently as possible.
Also consider renting or leasing municipal buildings and land. Selling municipal assets, such as unused equipment and land, can also be a revenue builder. Expanded recreational programs can offer residents lower cost alternatives to retail programs. Municipalities should be able to benefit from a profit center approach to shared services. The providing municipality can realize a net cash benefit, while the other municipality enjoys a cost savings.
Though building ratables through economic development and realizing cash from land/building sales provides a huge opportunity, these approaches face numerous hurdles, such as local approvals, state department approvals and mandates like COAH. At press time, COAH was still being debated and reviewed at the legislative level. Providing housing for those less fortunate is important; however, we must also prioritize our property owners and their right to lower taxes. The hurdles to economic development should be lowered not increased, especially at a time when revenues are sorely needed to offset property tax levies.
The expense of investing in revenue building initiatives can be offset by putting documented forecast revenues into your budget. The Division of Local Government Services offers the “Checklist for Inclusion of Special Items of Revenues in Municipal Budgets.” You can use this form to take credit for anticipated revenues and thereby offset same year expenses needed to invest into various revenue generating initiatives. There are multiple categories to choose from including a catch all miscellaneous category. You will need to provide detailed qualitative and quantitative information to support your forecasts.
I recently read an article by a New Jersey State Senator saying that the 2 percent cap will cause property taxes to increase because of the poor economy. I think he was trying to say that because of the economy, revenues will be down so taxes will need to be increased to offset revenue decreases. But, as we know, the cap will control tax increases, and compel taxing entities to reduce expenses—along with increasing productivity. On the other hand, there are sufficient level of opportunities for taxing entities to create and control revenues to further offset expenses, though it will take some creativity, hard work and investment.
Our legislators should not only focus on expense control, but also on helping municipalities build revenues by enacting laws and policies that support this focus. Municipalities should be able to execute economic development initiatives without impeding hurdles. At the end of the day, revenues will need to be considered by municipalities along with expense reduction in order to meet the cap in 2011 and going forward.
This chart shows how the budget is funded by the property tax levy and miscellaneous revenue, and that miscellaneous revenue is made up of surplus revenue, misc revenue anticipated and receipts from delinquent taxes. It also shows the contribution made by each toward the budget. The source of the data is from the DLGS website, under property tax information “Abstract of Ratables—2009” www.state.nj.us/dca/lgs/taxes/taxmenu.shtml.