One More Time? City Officials to Borrow Money To Help Close 2013 Budget Gap
Wednesday, February 6, 2013 • 12:00pm
PATERSON, NJ – For the third time this fiscal year, city officials are planning to borrow money to pay bills they cannot afford to cover in their regular budget, an ongoing practice of delaying the payment of current expenses until future years.
The City Council on Tuesday night gave preliminary approval to a bond ordinance borrowing $1.4 million to cover a deficit from the 2012 budget that resulted from successful tax appeals that year. The city is looking to pay off that debt in three installments from 2014 to 2016, including $72,488 in interest.
Paterson officials in December decided to borrow $2.27 million to pay retirement packages for 22 Paterson police officers and six firefighters at a cost of $163,000 in interest. In January, officials approved an $11.6 million bond restructuring plan that will delay about $5 million in debt payments due this year and result in about $3 million in additional interest costs.
Councilman Rigo Rodriguez sharply criticized the financial maneuvers, saying the city had to “close the door” on excessive spending and “say enough is enough.’’ He said borrowing to cover operating expenses was bad business.
Councilman William McKoy said he shared Rodriguez’ concerns, but he said the city was “in a bind” and had little choice but to go ahead with the borrowing plan. “Sometimes, you have to put some things on the credit card,’’ said McKoy.
Paterson Finance Director Anthony Zambrano said the New Jersey Department of Community Affairs (DCA) told the city to borrow money to cover the tax appeal deficit. Under an agreement providing Paterson with Transition Aid, the DCA has certain oversight powers regarding city finances. The city might jeopardize the amount of Transition Aid it gets for the current fiscal year if it does not follow the DCA’s instructions, officials said.
The tax appeal borrowing plan does provide some good news for this year’s budget, officials said. By borrowing the $1.4 million, the city will be able to reduce this year’s deficit by that amount, officials said. Paterson’s preliminary budget included an $8.5 million deficit.
The City Council has scheduled a public hearing and final vote on the $1.4 million bond ordinance for a special meeting on Tues., Feb. 19.