Pay No Attention To That Man Behind The Curtain: Scharfenberger "The Tax Man" Issues Middletown Tax Update

Pay no attention to that man behind the curtain I say, it is simply a man who is desperate to save himself from the bitter truth and who has earned the title of the "Tax Man" by overseeing the rise in the municipal tax rate of 41.9% over the past 5 years(once the currently proposed Township budget is approved).

Over the past couple of days an email has been making its way through cyber-space, written by non other than Middletown's appointed mayor, Gerry Scharfenberger. He is so desperate to inform the voting public that the pending municipal budget (which includes a 13.87% municipal tax increase) is the result of circumstances beyond his control, that some residents have received it 3 or 4 times.

In the email Scharfy states that "Some of the information I have heard from folks around town is based on very false and misleading data", and that he has "...put together a fact sheet to give people the reality of all things associated with the 2010 budget..."

After reading his email, I found it somewhat lacking in true facts and misleading in it's own right. So, what I have done is to post Gerry Scharfenberger's email below, broken down with comments in blue, to counter some of what he attempts to "clear up" and to show that the reason for Middletown's massive tax increases over the past 5 years is due to his poor leadership and overall mismanagement:


By Mayor Gerry Scharfenberger

The Middletown budget has been the subject of quite a bit of discussion lately. Some of the information I have heard from folks around town is based on very false and misleading data. To try and clear things up, I thought I would put together a fact sheet to give people the reality of all things associated with the 2010 budget, as well as the situation at the state level. As always, if you have any further questions or need additional information, don't hesitate to contact me. Also, please look over the attached FAQs - they are quite sobering.
Here are the facts:

- the proposed municipal tax increase is 2.8% which means the municipal increase on a $5000 tax bill will be $140 per year, a $10,000 tax bill will be $280 per year and so on. This will go down prior to adoption, thanks to legislation the governor has signed that will allow us to make additional cuts.

The OVERALL tax increase is 2.8%. This includes the BOE and County taxes. The Township tax rate has increased 13.87% over last year. The amount raised from property taxes is depicted in the following chart. These numbers came from Township budgets or were reported in Middletown Matters.

If the Governor has allowed the Township to make additional cuts, why are they not made NOW so the budget could be reduced further?

- 98% of all of the municipalities in the state had to do estimated tax bills this year. This is due to the state budget and the uncertainty of state aid to the municipalities.

There is no uncertainty of State aid to the municipalities. The Mayor specifically lists the amount of State aid that was cut this year below at $1,564,911. The Township knows the amount of State aid it will receive. How can a budget be proposed is there is uncertainty in the amount of aid to be received?

- it is a mistake to multiply the third quarter estimated tax bill by four - THAT IS NOT THE PROPERTY TAXES FOR THE YEAR! When people get their fourth quarter bill, that will be accurate and will also be much lower than the third quarter bill.

The 4th quarter tax bill (just before the election) will be more accurate because the Township is meeting with the Local Finance Board, in Trenton today (8-10-2010) to find out just how much the Township can exceed the State cap of 4%.

- Middletown has one of the lowest tax rates in the region. While we are currently at 35 cents, Fair Haven, for example, is almost 49 cents and Little Silver is over 50 cents.

The tax rate is one of lowest in the area, but other towns' tax rate has no bearing on what the tax rate in Middletown should be. A big reason why the tax rate has increased almost 14% this year is because the Township came up short $5.5M last year and it had to borrow money from the 2010 budget to make up the difference. This is shown in the chart above as the difference in the amount of money raised by taxes between 2010 and 2009.

- Middletown has one of the lowest worker per capita in the state (305 for 70,000 residents and 41.4 square miles) and one of the lowest spending per capita (around $880 per person).

Middletown might have the lowest worker per capita, but how other towns manage there resources are different from town to town. Plus, what other towns do with these resources should have no bearing on how Middletown uses the resources that are employed.

Below are some of the drivers of the budget and how we've addressed them. Get rid of binding arbitration, civil service and unions and we could really do some cutting. For now, we are legally prohibited from doing what is really needed to make deep, significant cuts.

If Middletown can't legally make the cuts it wants to, they should plan to manage the resources on hand better. You just don't throw up your hands and say we can't legally do something.

While there were many factors that contributed to this year’s budget problems, the main ones were:

$1,564,911 loss in 2010 state aid. This loss comes after a $640,000 reduction in 2008, $184,000 in 2009.

Why rely on State aid to begin with? The Township should budget for no State aid and if the State should provide some type of aid, then it should be used in the following years' budget. Notice the amount of State aid for this year compared to last 2 years. Last year the loss of State aid was touted, by Mr. Scharfenberger, as the worst thing that could happen. This year the Mr. Scharfenberger says that the Governor is doing the right thing.

$1.4 million for prior year’s salary increases from resolved labor contracts;

When a municipality goes into labor negotiations, it should anticipate an increase an budget accordingly. This was not done, obviously. What was management thinking, that the unions were not going to demand some type of increase?

$1 million increase in health care costs,

CFO, Nick Trasente, increased theses costs because the Township came up short the past 2 years. He is just doing some PLANNING to avoid future shortfalls.

$900,000 for snow and rain storms clean up,

This is a legitimate and unexpected expense.

$900,000 for unexpected retirements. Cost includes payments for unused sick and vacation time.

When the new Governor was elected, he said that there would be changes in the retirement rules. It might have been a little late in the year, but some planning could have been done to ease the shortfall. There will be many more retirements to come this year.

$1.8 million increase in pension payments mandated by the state.

Middletown knew that pension payments would have to be made this year. Middletown was told to defer last years' payment in order to exceed the 4% State cap.

$400,000 loss in recycling revenues

The Green Initiative, started years ago by Mr. Scharfenberger, should have planned for additional recycling efforts. This has only come to pass because the State and County have implemented plans to include all paper and cardboard as part of the recycling plans. Middletown should have been a leader in this since there was a "Green Initiative" in place.

To address these, the Township Committee instituted:

40 staff/position reductions since January 1, 2010.

A total of 16 employees were layed off this year. The other 24 are people retiring because of the change in the Governors' policy.

A 15% reduction in 2010 department funding requests.

Each department submits a "wish list" budget every year. This is reviewed the day after the election, in November. The Township Committee told the departments to cut it 15%. At that point they should have reviewed the requests and made real cuts.

Purchasing natural gas and electricity as part of a collective of 119 government entities known as the New Jersey Sustainable Energy Joint Meeting (NJSEM) instead of from the utility company. The move is slated to save approximately $160,000 this year.

This is a good measure and should be encouraged every year. Buying in bulk is almost always less expensive.

Funding the 2010 Summer Concert Series with community and business sponsors.

Sponsors for all events should be sought after. Even our Library Conservancy sponsored a concert. Do these sponsors fund the police, stage rentals, shuttle buses, etc...?

Canceling Middletown Day unless sufficient private sponsorship is found.

The concerts were going to be cancelled if sponsors were not found, too. Sponsors have funded much of Middletown Day in the past.

Closing the township’s skateboard park and mini-golf course.

The skateboard park is closed and the supervision that was on site removed. The children are still skateboarding, though.

Closing the Police Department’s Community Relations Bureau and suspending the DARE program.

This is just what the community needs; less police relations. This will only lead to an increase in crime, thus increasing the relations that the police will have with the community only in a negative manner.

Limiting lifeguards on municipal beaches to weekends only.

A lifeguard should be present if the beach is open. We wouldn't want someone to get swept out to sea from one of those rip currents.

Continued limitation of overtime for non-essential personnel without approval of the Township Administrator.

All non-essential overtime should be eliminated. If it is not essential why is it needed? This should be a part of good management.