Looking At Both Sides

by guest blogger Sean F. Byrnes, former Middletown Township Committeeman

Last week we saw the Township of Middletown enveloped in a dispute over the Township’s effort to convince the Board of Trustees for the Library to turn over a significant share of its surplus to the Township Committee for budget relief purposes. Unfortunately, the manner in which the township chose to solicit these funds lacked tact. Although the township had previously made less threatening overtures to the Library in an effort to win the Board of Trustees’ support for a funds transfer, when that effort failed, the Township pursued an aggressive campaign to convince the public that a transfer would be in their best interest. Spearheaded by new Committeeman Kevin Settembrino, this effort, whether intended or not, seemed rooted in tactics of intimidation and threats to de-municipalize the library and combine it with the County Library system. This effort also suggested that a failure of the Board of Trustees to abide by the wishes of the Township Committee would result in the loss of ten police officers, the layoff of a significant number of Township employees and, if you heard the comments at the Library Board of Trustees’ meeting, an effort by Township Committee members to replace existing Board of Trustees members.

Based on the comments from Board of Trustees’ members at their meeting on Tuesday, it would appear that the resolve of the Board of Trustees has not wilted in the face of these threats. Led by Randy Gabrielan, the Chairman of the Board, the Library challenged the assumptions, numbers and legal authority for the Township’s demand for a funds transfer. Looking ahead, as a Township resident, I would hope that both sides could retreat from the current level of heated rhetoric and restart their discussions.

I think it would be in the interest of all taxpayers for the Township Committee and Library to continue their discussions. It might make more sense to have the Township Administrator meet with the Director of the Library to discuss how the Library might be able to assist the township in this time of budget crisis. From the Library’s perspective, the Board has worked hard to build a reserve that could be used for future capital projects, and there is an understandable reluctance to use these funds to satisfy operating expenses for the Township. From the Township’s perspective, the Library has a protected stream of revenue that is not subject to the same stresses and demands that the Township must face when health care costs increase, pensions become more expensive and the cost of doing business generally continues to go up. There may be opportunities for these two parties to cooperate in other ways that would provide relief to the Township without exhausting the reserves of the library.

There is no question that the Township finds itself in a perfect storm of budgetary constraints. To be fair, some of these strains are beyond its control. But the Township moved at a glacial pace over the last several years as this financial crisis approached. A quicker response to the approaching financial storm would have made the Library ask a smaller one. Accordingly, before the Library turns over any of its reserves to the Township, it would be nice to see an acknowledgment that a swifter response from the township in 2009 and 2010 would have avoided the seriousness of the budget crisis that the Township currently faces. The Township did lay off approximately 16 employees last year, but did so only mid-year. Other municipalities took action much sooner and in more dramatic fashion. The former Mayor’s claims of 40 layoffs include retirements.

Other cost-saving measures were proposed over the last several years, but were rejected as too extreme. Unfortunately, as a result of the Township’s failure to act, the Township Committee must now contemplate cuts that go far beyond those that were previously considered “extreme.” Until the Township forms a subcommittee whose function is to focus on budget recommendations, track existing and anticipated debt, look for opportunities for consolidation and sharing of services and generally manage the Township’s finances on a more regular basis, the Township will always be reacting to rather than planning for increased demands for Township resources.

Once again, in fairness, the unfortunate timing of the Township’s reevaluation in 2009, just prior to a steep decrease in property values, set the Township up for a tax appeal nightmare in 2010 and 2011. (Of course, the township had mistakenly put off its reevaluation for approximately 14 years – had the township completed the reval when it should have, the steep drop in real estate prices would not have resulted in such a large number of tax appeals.) But regardless of the failure to conduct a timely revaluation, the Township has a legitimate reason to gripe, because when a resident or commercial property owner prevails on their tax appeal, the township must return to the taxpayer not only the municipal share of the taxes received from the taxpayer, but must also reimburse the taxpayer for the funds received by the School District during the year for which the tax appeal was filed. This reality is difficulty for some to believe, but true. And, in light of the fact that approximately two-thirds of the tax dollars go to school district activities, the Township ends up paying back the taxpayer for School District funds that the Township never received in its budget.

Consequently, the steady decrease in real estate value over the last couple of years has produced a field day for those filing tax appeals. The Township is now struggling to repay multi-year tax appeals that are probably worth nearly $4 million. Unfortunately, the Legislature has failed to assist municipalities facing this dilemma. Under the circumstances, given the unique circumstances facing municipalities, including picking up the tab for the Legislature’s bungling of pension contributions for public workers, the Legislature should provide assistance to townships by creating opportunities for public entities to finance the tax appeals or extend their repayment terms. In several years, the Township will be through this unique period where tax appeal refunds are substantial and hopefully return to a more predictable budget cycle. The Township Committee took the first step in this direction in 2010 when it decided to conduct a reassessment. Even thought the reassessment cost $400,000 the savings achieved in 2011 from reduced tax appeal filings will be far greater.

The realities of the tax appeals as set forth above increase the pressure for some agreement with the Library. At the same time, the Library will see its share of funding decrease by more than 10 percent next year, due to the fact that its revenue stream is dependent solely upon property values. With a 1.3 billion drop in the total assessed real estate in the Township of Middletown, the Library’s stream of revenue will be reduced considerably. Given this dynamic, it may make sense for the Township and Library to discuss mutual relief. In other words, the Township needs money now most desperately. The Library in the out years may need assistance as its funding stream declines. Perhaps assistance from the Library during the current year could be received in exchange for promises by the Township to return the favor several years down the road.

It might also make sense for the Library to consider some sort of partnership with the Arts Center. While the Arts Center has its own Board of Directors, this arrangement, as far as I know, is not routed in any legislative scheme. Indeed, the Township has effectively turned over the operation of the Arts Center to a non-profit corporation and the Board supervises these activities. Resident Jim Grenafege was the first person to suggest that the Library Board of Trustees might consider assimilating some of the Arts Center’s operations into its activities. A casual review of the websites for these two entities suggests that there is some degree of overlap between the artistic and cultural offerings from these two bodies. Given that they both have buildings that are relatively new and both are focused on improving the education of the citizens of this Township when it comes to arts, literature and music, there may be some opportunity for the Library to assist in the operation of the Arts Center, including some of its expenses. It is exciting to contemplate what the far larger Library work force might be able to provide to the Arts Center when it comes to running the day to day events and offerings at the Arts Center.

At the end of the day, the current legislation when it comes to Library transfer to municipalities, amended in October of 2010, will likely allow some transfer to take place. From the Township’s perspective, the amount of money to be transferred under the current legislative scheme will fall short of what the Township needs to avoid drastic reductions in personnel and services. However, somewhere within the circumstances discussed above, creative minds on both sides should be able to work out an arrangement that provides some additional relief for the Township, even if it may not be a direct transfer of funds of the magnitude the Township seeks. My hope would be that the time and energy on both sides be spent working toward that goal, rather than on blaming the other.