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Property Taxes, School Funding issues
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1-31-07 GSCS FYI

GOP calls tax aid unconstitutional

AG examines accusation but Corzine and Democrats dismiss objections as politics

Wednesday, January 31, 2007

BY DUNSTAN McNICHOL

Star-Ledger Staff

The state Attorney General's Office is reviewing Republican claims that a $2 billion property tax relief program making its way through the Legislature is unconstitutional, even as Democrats dismissed the claims as groundless and political.

"If we don't get this fixed now, I guarantee somebody's going to file a lawsuit and the whole thing's going to go down," Assembly Minority Leader Alex DeCroce (R- Morris) said at a news conference yesterday. "If I were the people of New Jersey, I wouldn't be spending the checks yet."

Gov. Jon Corzine and other Democrats quickly dismissed the Republican claims.

"We smell a rat," said Corzine's spokesman, Anthony Coley. "We're not exactly sure what some of our Republican friends are up to, but one thing's for sure: New Jersey's middle- and moderate-income families need and deserve lasting property tax relief and reform; this political maneuver is a roadblock to that."

Republicans claim a property tax relief bill that the Assembly approved 71-8 Monday is flawed be cause it would offer tax credits that vary based on a homeowner's in come. That, they said, runs afoul of a provision in the state constitution that requires all property to be taxed based solely on its value, not on the income or personal characteristics of its owner.

The "uniformity clause," they maintain, prevents policymakers from adjusting tax rates to discriminate against unpopular groups.

To clear up the problem, Republicans want Democrats to offer uniform levels of relief to all homeowners regardless of income -- or to seek voter approval for a constitutional amendment specifically authorizing a graduated tax credit program.

Democrats who sponsored the relief bill (A1) say the restrictions the Republicans cite are overrid den by other constitutional provisions that allow lawmakers to set up tax relief programs.

"The constitution couldn't be more clear or concise in supporting this relief initiative," said Assemblyman John Burzichelli (D- Gloucester), a sponsor of the bill. "If the Republicans and their lawyers want to continue along this path, they do so at their own risk because the state constitution and the residents of New Jersey are in our corner."

Republicans contend the state's existing rebate program, which offers varying levels of benefits de pending on income, is also unconstitutional.

"That the state has acted unconstitutionally for the past three years does not, however, sanctify its actions," attorney Mark Sheridan said in a memo prepared for the Republicans. "Regrettably, this was not caught sooner."

The Attorney General's Office is reviewing the issue, said spokesman David Wald.

In the meantime, the state Senate yesterday introduced legislation (S20) identical to the tax relief bill the Assembly approved Monday. The Senate bill is scheduled for consideration next Monday.

The tax credits would provide state funds to offset a portion of most homeowners' property tax bills. The credits would equal 20 percent of this year's property tax bill for homeowners with gross in comes up to $100,000; 15 percent for homeowners earning from $100,001 to $150,000, and 10 percent for homeowners earning between $150,001 and $250,000.

Senior citizens, who can receive up to $1,200 under the existing re bate program, would continue to get rebate checks, either for their current amount or the amount of the new credit, whichever is larger.

The legislation also imposes a limit of 4 percent on the amount any local government's tax collec tions can grow each year, but includes exemptions for revenue from new real estate developments, certain scheduled pension increases and costs.

The $2 billion credit and cap program is the centerpiece of a wide-ranging menu of local tax reform bills that lawmakers have been working on since July.

Senate President Richard Codey (D-Essex) said he saw little reason to postpone Monday's consideration of S20 in the face of the Republican concerns.

"Let them explain that to the taxpayers -- that they want to hold up relief," he said.

Dunstan McNichol may be reached at (609) 989-0341 or

dmcnichol@starledger.com.

Audits question $15M in school expenses

Of the 4 large state-run districts reviewed, Camden comes under greatest criticism

Wednesday, January 31, 2007

BY JOHN MOONEY AND KASI ADDISON

Star-Ledger Staff

Outside audits of four of New Jersey's largest and most troubled school districts found inadequate financial controls and raised questions about more than $15 million in expenses.

Despite years of state oversight in all four districts, the reports found Newark, Jersey City, Paterson and Camden schools all need immediate attention in areas including payroll, accounting and purchasing.

Among the findings by the state-hired auditors:

·  In Camden, more than $13 million in expenses was "questionable."

·  Purchases from an open account held by Newark superintendent Marion Bolden included figurines, decorations and a $1,795 jukebox.

·  Jersey City administrators spent thousands of dollars for out-of-state and overseas trips.

·  In Paterson, custodians could double their pay through overtime, and controls were so lax that more than 2,000 purchase orders exceeded their stated dollar amounts by a combined total of more than $6 million.

State officials said the latest audits, conducted by the accountancy firm KPMG, were about ensuring that the state's money is well-spent and the children are getting educated.

"There is definitely progress that has been made, but there are still things that need to be fixed and done differently," said Education Commissioner Lucille Davy.

"Catering bills, floral bills; there was one airfare to Houston with no people identified, nothing about what they were going to do," she said. "Some of this may have a good explanation, but bottom line is: This is public dollars, and the work has to be done and the paper in place to support the money being spent."

Although a state intervention team has been in place in Camden for several years, the auditors found few uniform procedures or controls there.

For example, auditors reported how, upon starting their review, they immediately sought the district's manual of standard operating procedures.

"It became evident after only a limited number of interviews that the procedures in the manual were simply words on a page and not applied in the course of district operations," read the audit's executive summary.

The report went on to list more than 260 questionable expenses out of the 330 reviewed.

Most appeared to be for services and supplies that weren't properly documented or documented at all. But there were also tens of thousands of dollars for staff trips and catered food, $5,000 for the former superintendent to lease a 2002 Volkswagen, and nearly $800,000 for mechanical work in the elementary schools when the board approved no more than $400,000.

Adding to Camden's problems are multiple scandals over finances and test cheating over the last two years. Auditors noted in their report that some of the missing documents had been subpoenaed in separate investigations -- and no one had made copies.

The results of the audits, commissioned by the Corzine administration, were released as Gov. Jon Corzine and his administration craft a new school finance formula that many predict will reduce state aid to the needy districts covered by the Abbott v. Burke school-equity rulings.

They are not the first troubling audits of the state-run schools; finances in Newark and Paterson schools, in particular, have come under scrutiny at various points in the last five years. The criticism has left the state second-guessing its takeovers and looking for an exit.

District officials said they welcomed the extra review, although some were critical of the tight schedule for contesting the findings or documenting "questionable" expenses.

In Newark, officials said the audit confirmed many of the internal controls already put in place as part of a management restructuring several years ago. And they disputed many of the $446,000 in items cited as questionable, including the jukebox. Officials said it was purchased for a planned student center on Broadway.

"If you are talking about a little less than half a million dollars out of a budget of almost $900 million, you have to think the district is doing pretty good and the state is being nitpicky," said advisory board president Feliz Rouse.

Added business administrator Ronald Lee: "If this is the worst Newark has to offer, then they are doing okay."

Rouse also pointed at the state's own role in the district after taking control in 1995: appointing its superintendent and keeping its audit teams housed in the district.

"State control means the state is responsible for operating our district," he said. "They were really coming in and looking at themselves. If you are going to point the finger, who are you pointing the finger at?"

The reports came out of the latest court rulings in the Abbott v. Burke case last spring, when Corzine sought to freeze state spending in those districts. In making the request, the state agreed to audits of management in all 31 Abbott districts, starting with the four released yesterday.

According to the department's fiscal 2007 budget, more than $1.03 million was earmarked for the four audits, and $2.25 million was budgeted for the remaining 27 districts.

Jersey City's superintendent Charles Epps Jr., who is also an assemblyman, said nothing in the Jersey City audit surprised him. He has long been dogged by questions about his and his staff's outside trips, including to conferences in Germany and England.

"I think we have justified those," he said.

But overall, Epps said, the audit contained worthwhile advice.

"It's another eye to look at where we are," he said. "Based on that critical eye, we are already making some changes to improve things."

Paterson superintendent Michael Glascoe said he also expected the audit "wouldn't paint a rosy picture."

"There have been audits here for a decade and nobody has done anything about them," he said. "A lot of this we have begun to address, but we will put the necessary procedures in place."

Camden officials said they, too, would take the audit to heart. The time covered by the audit was under superintendent Annette Knox, who left under pressure last year over several mounting scandals.

"It is a comprehensive and detailed report that has great promise to help us to correct matters and to improve our district," said interim superintendent Leonard Fitts in a statement.

John Mooney may be reached at (973) 392-1548 or jmooney@starledger.com.

 

No voice or vision on Republican side of aisle

Wednesday, January 31, 2007

Democrats who are busy squeezing the life out of the reform movement don't seem at all concerned about this year's election.

One reason is that the checks containing property tax credits will likely go out in the mail during October, a few weeks before the election. Democrats have concluded that voters don't care much about reform -- they just want that cash.

"The filet mignon is the credit," says Senate President Richard Codey. "Everything else is just a side dish."

But Democrats have another reason to be cocky. They are blessed to have the hapless Republican Party as their opposition.

And Republicans won't offer a cogent alternative to the Democratic plan. They prefer to snipe from the sidelines.

The big test came when Democrats proposed a 4 percent cap on the growth in property taxes. It's a clumsy answer to the problem, but given the relentless 7 percent growth in recent years, one that is no doubt necessary.

You would think that Republicans would love this. They are al ways talking about the need to shrink government, at least in theory.

But look what happened. They were just as eager as Democrats to pencil in exceptions to that cap. And they were whining just like Democrats, saying schools and towns could not live with a strict 4 percent cap.

"Municipalities now could never make it without the exceptions," said Assemblyman Alex DeCroce, the Republican leader. "They have growing insurance costs, health costs, pension costs. When all is said and done, the 4 percent will be more like 7 or 8 percent."

Pause for a moment and chew that one over. The Republican leader is saying that local governments and schools must be free to increase spending far above the inflation rate. This is what passes for conservative in Trenton these days.

Keep in mind, too, that this cap would not ban spending over the limit. It only bumps the issue to a referendum, giving local voters the chance to decide. Even that is just too strict for the Republicans to unite around.

We are talking about a party in ideological meltdown. On the defining issue of the day, one that should play to their strengths, they are punting.

"Republicans have to put for ward their own plan," says Donald DiFrancesco, a Republican who served as Senate president. "They have to respond to this."

Republicans have supported some good reforms, like a ban on dual office holding and a ban on pay-to-play campaign donations. And Democrats have done all their work on property taxes behind closed doors, depriving the opposition of a chance to offer amendments in committee.

But the hard truth is that Republicans are almost as eager as Democrats to serve the status quo in Trenton.

Ask Joyce Powell, leader of the powerful teachers union. She was working the hallways in the capitol this week, urging legislators in both parties to loosen the cap to allow more school spending.

Did she notice any big difference between the parties? Were Republicans pushing for tougher limits on spending?

"Not at all," she said. "We're not hearing that. We've done very well with Republicans. We have good relations."

The Republican meltdown is worst in Bergen County, where they have devoted most of their energy to fighting each other, rather than the dominant Democrats. It got so bad last year that the Republican headquarters in Hackensack was padlocked be cause the party couldn't afford to pay the rent.

"We're struggling -- no question," said Guy Talarico, the county chairman. "We've really got to start all over, and focus on winning local races, town by town."

For now, though, Democrats in Trenton have the field to themselves.

And no matter how badly they mess up, it seems that Republicans will always be there to save them.

Tom Moran may be reached at tmoran@starledger.com or (973) 392-1823. ____________________________________

NEW YORK TIMES   January 26, 2007

Option to Rent: Great New Jersey Views, Many Lanes, Tollbooths Included

By KEN BELSONTRENTON, Jan. 24 — The New Jersey Turnpike has long been the subject of song and an object of scorn. And now Gov. Jon S. Corzine, who earned a reputation as a shrewd negotiator on Wall Street, is thinking seriously about leasing it out, banking on the hope that it and two other toll roads could fetch as much as $30 billion and hold the key to solving some of the state’s nagging fiscal difficulties.

Mr. Corzine’s need to secure a fiscal Hail Mary pass is evident: budget talks are looming, and other states, including neighboring Pennsylvania, are interested in leasing their own toll roads, which could create stiff competition for investors’ dollars in this emerging market. He is also mindful that any deal will have to be sold to wary voters.

Following recent leases of toll roads in Chicago and in Indiana, New Jersey is among two dozen states that have either formed partnerships with private groups or passed legislation paving the way for such agreements. But as lawmakers from California to Virginia have discovered, efforts to take toll roads, prisons, lotteries and other state assets private can quickly become mired in political quicksand.

Polls show that voters in New Jersey oppose the idea, and powerful lobbying groups, from commuters and trucking companies to environmentalists and public employee unions, are also skeptical.

But the biggest complaint is that to recoup their huge up-front payments and generate returns of 10 percent to 15 percent a year, private operators are winning the right to raise tolls faster than public agencies would have. In the case of the Garden State Parkway, for instance, where tolls have been unchanged for 17 years, a sharp increase would be inevitable.

Some opponents said that they were concerned that the proceeds from these deals would be used to plug immediate financing needs instead of meeting long-term needs.

New Jersey has a long track record of using short-term fixes for long-term budget problems,” said Phineas Baxandall, a senior analyst for tax and budget policy at U.S. PIRG, a federation of state government watchdogs, “If they spend the money in the first 10 years, the question is what happens in Year 11.”

So as Mr. Corzine and his advisers press ahead on deciding on whether and how to structure a deal, the cross-fire in New Jersey, home to some of the country’s most heavily traveled toll roads and heftiest state deficits, is already so messy that it threatens not just to bruise the governor but also his fellow Democrats, who face re-election in November.

New Jersey has its back to the wall in an acute way and Corzine doesn’t have a lot of options,” said John Foote, a senior fellow at the Kennedy School of Government at Harvard University, who studies making highways private. “He knows this will not be a politically popular decision.”

Despite the pitfalls, long-term lease agreements for toll roads, perhaps the most lucrative source of funds for governments these days, are increasingly common. In 2005, Chicago received $1.8 billion from investors to run the 7.8-mile Skyway for 99 years. Last year, Indiana signed a 75-year lease on the 157-mile Indiana Toll Road, which brought in $3.8 billion.

Mr. Corzine, a former co-chairman of Goldman Sachs, who made his name selling debt on Wall Street, is eager to come up with an arrangement before the state’s new fiscal year begins on July 1, people who have recently spoken with him say.

The governor will move one step closer to the ability to lease the roads as early as next week, when State Senator Raymond J. Lesniak is expected to introduce a bill that would authorize him to begin negotiating a deal on roads like the turnpike.

Kris Kolluri, the commissioner of the Department of Transportation, said that while Mr. Corzine checks daily to see how his advisers’ analysis of a possible lease is going, “We’re engaged in a thoughtful discussion instead of rushing to the market.”

The governor is aware of the potential value of highway leases, which would bring billions of dollars. And some of that cash could be invested until it is needed, earning hundreds of millions of dollars in interest income every year. But the governor is also sensitive to the growing backlash.

For instance, critics worry about agreements that can make it harder for states to build new interchanges and roads to meet future needs. They point to the Transportation Authority in Orange County, Calif., which in 2003 had to buy back the express lanes it leased to a private operator because of a noncompete agreement that prohibited it from improving an adjacent toll-free road.

“We are ill-equipped in government to adequately predict what the world will look like with the time horizons associated with these agreements,” said Assemblyman John S. Wisniewski, chairman of the Transportation Committee, who, like the governor, is a Democrat, but is a leading opponent of leasing roads.

And environmentalists say that commuters who opted to avoid toll roads would flood some local streets.

The private operators who lease toll roads become responsible for maintenance, so issues like when and how often snow must be plowed must be included in lease agreements.

Not surprisingly, the prospect of higher tolls is unpopular among New Jersey drivers. A recent Fairleigh Dickinson University poll found that 54 percent of those surveyed said that leasing the 148-mile turnpike was a bad idea.

And a Quinnipiac University poll made public on Wednesday showed that a clear majority of respondents were opposed to selling or leasing the turnpike or the Garden State Parkway, even if it would reduce debt and provide property tax relief.

Garden State motorists have little love for the turnpike or the parkway, but they want to keep these famous — or infamous — toll roads in public hands,” said Clay F. Richards, assistant director of the Quinnipiac University Polling Institute. The Atlantic City Expressway could also be leased out.

Mr. Corzine was well aware of such opposition when he acknowledged those concerns in his State of the State address.

“The challenge,” he said, “is the risk that we receive too low a price for the assets, we set terms and conditions that do not sufficiently protect the state’s or the public’s interest or, worst of all, our reinvestment choices squander the proceeds.”

If the state cannot include a “reasonable and predictable schedule” for letting the private operator raise prices, he added, no deal will be done. The governor also promised to allocate funds from any deals for debt relief and capital investment, not tax rebates and quick fixes.

Opponents say Mr. Corzine would be passing the buck if he let private operators raise tolls that he cannot or will not raise himself. They also question the way toll increases are often structured in lease agreements with private operators. They say companies are asked to limit increases for a few years but are then free to raise tolls much faster later on — by which time the politicians who approved the arrangement are out of office.

As drivers in Chicago and Indiana are learning, toll increases are typically linked to growth in consumer prices, or gross domestic product. But those indexes often rise faster than wages do.

In Chicago, many of the drivers who use the Skyway are from out of state, and many of the drivers on the Indiana Toll Road are interstate truckers — two groups that have less political sway than local drivers. But in New Jersey, the turnpike and the 173-mile-long Garden State Parkway— the state’s main arteries — are used not just by truckers and out-of-state commuters, but also by hundreds of thousands of state residents every day.

For all the handwringing in New Jersey about such an arrangement, its tolls are less than half the national average. Still, state legislators have been reluctant to raise them or gasoline and motor vehicle taxes.

But Mr. Corzine insists that inaction can no longer be an alternative. The state’s debt load, about $30 billion, is roughly equal to its annual operating budget. And five months before the fiscal year ends on June 30, the state is already staring at about a $2 billion deficit.

With numbers this large, Mr. Corzine is expected to try to get the most he can, by seeking to lease the three toll roads as part of one package, which according to Philip Villaluz, an analyst at Merrill Lynch, could bring the state about $30 billion.

But investment funds may have trouble coming up with that much capital. “Everyone’s hyping up this deal,” said one banker involved in infrastructure deals, “but no one is asking how it gets done.”

David W. Chen and Richard G. Jones contributed reporting.

 

 

 

Community Dialogue with Governor Jon S. Corzine

Saturday, February 3, 2007

1:00pm – 2:30pm

Union Township Municipal Building

Council Chamber

1976 Morris Avenue

Union, NJ 07083

To RSVP for this event, please call 609-777-0994 or fax your response to (609) 777-0350. If you have special needs, please advise us in your RSVP. Sign language interpreters will be present.

***No large bags, back packs or signs will be permitted ***

 

 

Union Township Municipal Building

Council Chamber

1976 Morris Avenue

Union, NJ 07083

To RSVP for this event, please call 609-777-0994 or fax your response to (609) 777-0350.

If you have special needs, please advise us in your RSVP. Sign language interpreters will be present.

***No large bags, back packs or signs will be permitted ***