Two years ago, when I returned to the Plainfield City Council, I recommended to the Mayor and to my council colleagues that the City of Plainfield should revert from a fiscal year to a calendar year. At the time, I was told that the absence of a CFO would make it somewhat challenging for the administration to do the work that would be necessary to prepare the application to the Division of Local Government Services in the New Jersey Department of Community Affairs.
However, I never gave up on the goal of having the city revert to a calendar year. Out of the 51 municipalities that were previously on a fiscal year, roughly 26 have already reverted. When the 2011 goals of the Finance and Administration Committee were announced earlier this year, we knew that reversion had to be a priority. As the Chairman of the Finance and Administration Committee I laid out the steps that would be necessary in the process of reversion as well as the advantages to doing so.
As has been reported by the current CFO, the city faces a budget gap of $3.4 million. The gap has been expanded as a result of the Council’s decision to restore funds to two of the city’s operating divisions, and will expand even further when the city receives a bill from Union County for the county’s 5% share of all PILOT revenues paid to the city since 2005. Prior to 2005, all PILOT revenues went to the city, with none going to the county or to the local school district. However, due to a change in the law dating back to 2005, all counties must now receive 5% of PILOT revenues. Therefore, what was thought to be a $3.4 million budget gap could easily balloon to over $4 million, depending on the bill that has been or will be sent to the city from the county.
Hence, in light of the rising expenses, declining revenues, and a budget gap that continues to grow, the idea of reverting to a calendar year, which I first proposed in 2009, is one whose time has come. I am happy to report that the city now has a CFO who is savvy enough to be able to put all of the required pieces together to assists the council in making this idea a reality. The primary benefits of reverting from a fiscal year to a calendar year are as follows:
- A fiscal year that runs with the calendar year from January to December would be aligned with the election cycle and would allow newly elected official to participate in the budget process from the outset. Newly elected official would no longer be able to say that they had nothing to do with the budget.
- The confusion stemming from the use of two tax rates, one for the fiscal year and one for the calendar year, will disappear and property owners will be better able to understand their tax bill.
- The city will be able to pull in all state aid into the transitional year budget between July 1 and December 31, thus regenerating surplus and regaining a more solid financial footing.
- On January 1, the City would become eligible for a new round of state aid as a calendar year municipality.
- The potential loss of jobs and services that could result from the challenge of complying with the governor’s mandated 2% CAP (when faced with a potential budget gap that could reach over $4 million) would be minimized.
Although what I have outlined above are key benefits of reverting from a fiscal year to a calendar year, I must caution that this is not a panacea; these financial benefits must be viewed as one-time hits. They do not eliminate the need for the city to be fiscally prudent and for the collective bargaining units to come to the table in good faith to work with the Mayor and Council to find long term solutions to the financial challenges the city faces. All parties must now work together to ease the property tax burden while, at the same time, preserving as many jobs as possible and maintaining quality municipal services.