Mayor Fulop announced last week the hiring of a new communications director for Jersey City, 26-year old Ryan Jacobs, at a salary of $110,000. The current communications director, Jennifer Morrill, earns $100,614 and will remain as press secretary “to assist…with day to day operations.” Jersey City taxpayers are now paying over $200,000 for spokesperson duties.
A city spokesperson is a reasonable role to fill; it is in the public’s interest to have information regularly communicated from City Hall. But this $200,000 revelation should ring an alarm bell about what exactly taxpayers are paying for. To underscore this point, let’s look at a recent “taxes”-related press release from City Hall.
“Stabilizing Taxes”: Fact or Spin?
On July 28, 2015, Mayor Fulop announced via press release that:
- “The City’s tax base grew substantially increasing by $57 million in 2015”
- “…the Fulop Administration continues to stabilize taxes…”
Are these facts, or spin? Let’s get civic and break it down.
“The City’s tax base grew substantially increasing by $57 million in 2015”
The growth was not “substantial.” Let’s look at the facts:
- The assessed value of the ratable base – what’s used to compute the general tax rate – was just under $6 billion as of 2014 (per state data that you can find here).
- The $57 million added to the ratable base in 2015 represents a 0.95% increase to the existing $6 billion assessed value. But to gauge if 0.95% growth is meaningful, we should look at city spending because the entire purpose of the ratable base is to help fund the city budget.
- Total spending in this year’s city budget grew by 5%, from $516 million in 2014 to $540 million in 2015. This spending growth exceeds the current annual inflation rate of 0.1%.
- City spending grew by 5% yet the ratable base grew by only 0.95%. This is the same trend that, as I explained in my last Tax Bites post, will cause tax rates to rise over time.
“…the Fulop Administration continues to stabilize taxes…”
Mayor Fulop did avoid a municipal tax hike in 2015. But how did this happen if the ratable base growth was so anemic in comparison to city spending? Two revenue sources provide insight: abatements and surplus spending.
Abatements are the second largest source of revenue in Jersey City, comprising 22% of 2015’s budgeted $540 million in revenues. When Mayor Fulop took office in 2013, abatements comprised 21% of revenues. Abatements have been a blessing and a curse in Jersey City for over a decade. The blessing: they do incentivize developers to build here. The curse: the city seems unable or unwilling to ween itself from abatements in areas that are already built up (which are lower risk areas for a developer). Mayor Fulop is now advocating for abatements near Newport and Hamilton Park, two high-priced neighborhoods in Jersey City.
The surplus is an excess of revenues over expenses. The city has a surplus balance that rolls forward each year. And each year, money is taken from that account to fund the city budget. What’s noticeable in 2015 is that surplus revenue jumped 57%, from $16 million in 2014 to $25 million in 2015. From 2007 to 2014, the average surplus revenue was $15 million. As for the surplus account – the money that rolls forward each year – it started out in the beginning of the year at $35 million, $25 million is budgeted to be spent in 2015, and so by the end of the year the balance will be depleted down to $10 million*.
Mayor Fulop stabilized the tax rate in 2015, but he needed abatement revenue and two-thirds of the city surplus to do it.
The Value of Spin
The harsh reality is that “stabilizing taxes” in Jersey City is an extremely difficult task given the structural imbalance between city spending and the growth of the ratable base. This reality will only be worsened if the state continues to flatline, or worse, retract state education aid. Mr. Fulop could choose to be upfront about this problem and start to implement structural solutions. After all, he didn’t create this problem; he inherited it. Unfortunately for taxpayers, he’s not fixing the problem. He’s spinning it. And with the hiring of Mr. Jacobs, that spin just grew $110,000 more expensive for taxpayers.
* The ending surplus balance is not correctly represented in the 2015 approved budget online (there is a typo error in the budget), but it is available in the 2015 annual financial statement which can be obtained from the city.