Posted on 10/19/2001 8:12:34 AM PDT by Hugh Akston
JERSEY CITY, Oct. 18 — At almost every campaign stop, Bret D. Schundler recounts how he held property taxes down in his eight and a half years as mayor here by reforming government to make it more efficient.
He impresses audiences with the story of how he closed a $40 million structural deficit soon after taking office.
He says he did it all even as the state was drastically cutting its aid to Jersey City, simply by learning to do more with less.
These claims — along with the resurgence of Jersey City's economy, its booming waterfront, and its plummeting crime rate — make up the heart and soul of the Schundler mystique: a financial wunderkind who has turned around New Jersey's second-largest city. Mr. Schundler says he is now ready to tackle even larger economic challenges in Trenton as New Jersey's next governor should he defeat his Democratic opponent, James E. McGreevey.
But a close examination of Jersey City's finances shows that Mr. Schundler's rendition of his record often overlooks the costs of the decisions he has made.
Even his critics say Mr. Schundler did some truly innovative things as mayor. But a study of city records and interviews with current and former city officials show that he overstates both the challenges he faced and his successes at addressing them; that to avoid raising property taxes he often used budgetary sleight of hand, and at other times tried new financial devices with mixed results; and that, if he had inherited a rickety fiscal house, the one he left to his successors had been mortgaged to the hilt.
Mr. Schundler prides himself on finding creative approaches to solving problems. And his earliest coup may stand up as his signal financial accomplishment. In the early 1990's, Jersey City property tax bills were so high that many people, unable to pay, were losing their homes to foreclosure. The city's tax collection rate fell so low at 78 percent that its budget was snowballing: it had to set aside as much money in each year's budget as was uncollected the year before.
Mr. Schundler broke that cycle.
After winning a special election in November 1992, Mr. Schundler, a former Wall Street broker and analyst, won a full term the following spring by promising a huge tax cut based on a bold, but complex idea. He found a way to recoup millions in back taxes the city had failed to collect. It took a special state law, which the Legislature's Republican leaders pushed through on his behalf.
The plan: Jersey City would bundle delinquent tax liens and sell them in bulk to underwriters, for $25 million in cash and a note for $19 million more. The underwriters would issue bonds, to be paid off as they collected back taxes or foreclosed on the properties.
It did not all go smoothly. Collections dragged out far longer than anticipated. Homeowners sued the underwriter, and in July were awarded $30 million in damages. Jersey City also sued the underwriters when its note went unpaid, and received a settlement of just $6.25 million.
Still, the bulk-lien deals dramatically improved the city's tax collections, as many property owners paid their taxes faster out of fear of foreclosure. For the last four years, the tax collection rate has been better than 99 percent. The city's reserve for uncollected taxes, meanwhile, is just $2.5 million, down from $25 million in 1993.
Henry A. Coleman, director of the Rutgers Center for Government Services, who studied the bulk lien sale, said Mr. Schundler brought many city properties back from tax delinquency. "That's something he deserves credit for," he said.
Mr. Schundler has repeatedly blamed the state for Jersey City's fiscal problems, saying Trenton continually shortchanged the city. But despite a few steep cuts, over all, state aid to Jersey City actually rose during Mr. Schundler's mayoralty, his own budgets show.
In response, Mr. Schundler says state aid was effectively cut because it did not keep up with inflation, and that because it made up such a large part of his budget, those cuts hurt more than cuts in other cities.
Mr. Schundler eventually struck a Faustian bargain with state officials: he received an extra $15.6 million from Trenton in 2000, but had to endure Jersey City's being branded a "distressed city," as well as submit to more state scrutiny of his finances.
That scrutiny gave rise to sharply critical reports during the Republican primary campaign and again last week.
Those reports have cited Jersey City's continuing structural deficit, which Mr. Schundler says he closed soon after taking office.
A structural deficit is what happens when a city's recurring revenues, like taxes, are not enough to support its regular annual expenses, like salaries and benefits. To eliminate it requires raising enough in taxes each year, or cutting enough spending, so that the two even out.
Instead, Mr. Schundler has turned to a series of nonrecurring, or one- time, revenues. Fiscal experts and credit-rating agencies frown on these so-called one-shots, like the sale of city-owned land, to pay for operating expenses. Once sold, after all, an asset cannot be sold again.
Indeed, Jersey City's most recent bond offering statement acknowledges that the structural deficit persists: the city continues to require "approximately $20 million to $30 million in nonrecurring revenue sources for the budget."
Mr. Schundler says that some nonrecurring revenue, like land sales, should be treated as recurring revenue — even though his own budgets do not do that. There are always going to be some nonrecurring revenues, he says, so they might as well be called recurring.
Mr. Schundler's critics call this Bretspeak.
Tom Gallagher, Mr. Schundler's former chief of staff and now a campaign assistant, defended Mr. Schundler's use of one-shots. "In general, you'd rather not have them," he said.
"But if the choice is between one- time revenues or an increase in property taxes, we'd take the one-time revenues."
In one case, the city found $9 million to plug a hole in its 1997 budget by selling Cochrane Stadium, a ball field at Caven Point on the waterfront near Liberty State Park. The buyer was the city school district, which had to borrow the money.
FReepers, we need your help. Once again, the massive wheel of propaganda is attempting to roll over us. But, as with our victory over Franks, we, the grassroots conservative, MUST and WILL triumph.
Write/email BUSH conveying the need for him to back Schundler NOW! We cannot afford another Gore here in terrorist-infested NJ while just in the beginning of War.
Tell you lib in the cube next to you that JIM MCGREEVY WAS THE DECIDING VOTE CAST FOR THE LARGEST TAX INCREASE IN THIS STATE EVER, UNDER HIS FRIEND FLORIO.
I cannot understate the urgency of this election for New Jersey Governor.
Lord be with you. Say a prayer for Bret and the men of God in the leadership of our nation!
Actually, I found it to be much better than anticipated, given the barf alert. Schundler was praised by critics, called an innovator, and broke the horrible tax-cut cycle. Sure, there was a negative spin on the story, but this is far better IMHO than some of the trash the Slimes has printed.
I haven't read the article yet, but someone here said that it wasn't until halfway thru the article, that it turned negative. And THAT is a positive sign for Halbfinger!! LOL!
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