MEETING: Financial crisis?

[VENTNOR eVOICE ADMIN]

An e-mail arrived stating that there was a notice on page C3 of the paper yesterday to inform Ventnor residents about a last-minute meeting regarding the city's financial affairs.

If anyone attended and can file a report, feel free to post information here.

[VENTNOR eVOICE ADMIN]

An e-mail has been sent to City Hall, requesting a copy of any handouts that might have been provided.

From someone who attended, and with "caveats" in case something reported by e-mail was misunderstood by our source, there are these highlights:

• Expenses coming due August 1st, and projecting forward, find Ventnor needing to bridge a money gap.
  
• Budget "needs" projected at roughly $10,000,000 only find about $5,000,000 on hand.
  
• State of NJ has not approved our budget, and is late in approving many other towns' budgets. (It's not known if the cuts in state aid play a role, forcing towns to scramble and submit late budgets.)
  
• Without state budget approval, Ventnor cannot collect taxes.
  
• Ventnor still needs money to cover payroll, and schools, until that state approval comes through.
  
• Amount of what is like a "swing loan" will be approximately $4,900,000 at 2.2% interest and to be paid back by February '09.
  
• It's likely that taxpayers will receive an estimated tax bill, like the one from last year when successful tax appeals and a 5% decline in city tax collectibles (from 98% to 93%) created a $2.1 million cash shortfall.
  
• One question asked by someone at the meeting was: "Is the Swing Loan separate from the Bond Issue talked about [for the pier] or was it in place of the Bond"? Short answer: "Separate."
  
• This other short term loan is to meet every day operational needs, until tax billings can go out and tax payments come in, to extinguish the loan.

Under the headline of "Ventnor - Special Money Meeting Today" ... part of what the AC Press reported was:

"basically borrowing money briefly, until tax payments start coming in next month."
and
"the city is in a poor cash position."

Much of the short-term problem might be due to how the city met progress payments for the pier's construction, without having actually received grant funds and Green Acres loan funds, and without having issued the bonds. In addition, a $420,000 emergency resolution to cover unexpected health benefits payouts in 2007 from the city's "self-insured plan" was passed in December 2007 but its actual funding overlapped into the 2008 budget year.


Update: article by Shaun Smith for the DB Current

[Justice & American Way]

Mell of a hess. All over.

[Bayliner]

Federal (bailout of banks) to state to county ($40 million freeholder bond vote was 6-3) to local (new surprises). You can't blame people for inherited problems, but hope they can make right decisions to solve them.

[Justice & American Way]

Budget 2009 is first one that will be theirs.

[OPRA Reporter]

The following is from a text-scan of a hand-out provided at a Workshop in which the pier bonding topic arose.

CITY OF VENTNOR CITY

MAYOR THERESA KELLY
COMMISSIONER JOHN PIATT
COMMISSIONER STEPHEN WIENTROB

THE 2008 MUNICIPAL BUDGET, BOND ANTICIPATORY NOTE & REVENUE CORRECTION ISSUES

THE BUDGET: Since their swearing in ceremony on May 20th of this year, the Mayor and Commissioners and their transition team have been diligently examining the 2008 Municipal Budget which was presented, but not passed, by the previous administration. That process of examination has led to many concerns regarding the many budget projections and predicted spending levels. There are also concerns regarding the financial performance wherein some line items have nearly reached the annual projection in less than one- half of the budget year. There are also concerns regarding the projected revenue included in this budget.

In an effort to immediately control spending, this administration has not approved any of the capital expenditures presented to it for approval, including early requests for vehicles.

Recently the City’s Chief Financial Officer indicated to John Piatt, Commissioner of Revenue and Finance, that many departments have nearly expended their entire temporary appropriation and that a budget needed to be passed in order to assure the continued orderly operation of many municipal functions. He further indicated that if the total budget of the 2008 budget as presented by the previous administration was changed by more than one percent, or if any line item was changed by more than ten percent, then the entire budget process must begin anew, including publication of notice and public hearings, all of which would cause further delay and possibly jeopardize municipal functions. Also tax bills for August must be mailed shortly. If a budget is not in place at that time, “estimated bills” would have to be mailed which would include legal attachments that many residents would find very confusing. An additional concern has been the level of municipal aid expected by the State. The budget being presented for approval has absorbed and reflects cuts in municipal aid by the State.

This administration does believe that it is now necessary, because of time constraints and the depletion of temporary appropriations as well as the need to avoid confusion amongst taxpayers, to pass the budget of the previous administration, but will institute internal restrictions on the level of spending within the budget. Departments will be advised that their approved level of spending may be less than the approved appropriation in the budget and those levels of spending will be carefully monitored at all levels of management. Those restrictions may save as much as one million dollars by year’s end, unless an emergency occurs.

This administration came to office with the primary mission of stabilizing property taxes. Once in office, the Commissioners and the transition team assisting them, diligently began the arduous task of deciphering the complexities of the municipal budget in great detail. That task began less than two months ago and, unfortunately, requires more time than we now have, given the necessity to pass a budget to keep the municipal departments rutming.

Many of the appropriations in the Ventnor City budget have been identified only as "other expenses” under respective departments which include numerous line items such as “miscellaneous”.

That standard does not meet the expectations of this administration. The Chief Financial Officer has been asked to assist in the

continued on reverse side of single page handout:

process of clarifying and identifying those expenses for future budget analysis.

The fact that this administration will now pass the budget as is, does not mean that this administration will not continue its examination of the budget process, install spending limits beyond what the budget calls for, and verify revenue projections to the extent that it is possible to do so.

Further, this administration has indicated many times that in the first year that it has to present its own budget, next year, that the budget process will be “zero-based”, which means that every municipal department will be required to indicate in great detail exactly what they will need to operate for the year, eliminating miscellaneous, unidentified appropriations wherever possible and reducing the overall budget.

This administration will report its progress as it monitors the spending levels as this budget continues throughout the remainder of this year with the goal of minimizing expenses below the levels called for in the budget.

THE BOND ANTICIPATORY NOTE: The Mayor and Commissioners took office at a time when the City’s cash position was severely depleted by the practice of the previous administration of paying for construction projects out of Current Funds. Simply stated, that means that cash budgeted for departmental operations was used to pay for the reconstruction of the Ventnor Pier on an ongoing basis, leaving a severe cash shortage in the City’s operating accounts. While the practice is legal, it does not represent good fiscal management in the view of our current administration, nor is it endorsed by auditors or bond financing professionals.

Ordinances passed to reconstruct the Pier dating back to 2006 remain unfunded, although the contractors have been paid from current funds in the amount of $2.4 million thus far with more due during the balance of this year.

To correct this and restore the City’s cash position, this administration believes it is necessary to immediately secure financing to immediately restore the current fund. That process is underway via a financial instrument known as a Bond Anticipatory Note. The Bond Anticipatory Note is seen as a temporary measure, which will require a “rolling over” in the future, but it is an appropriate measure to enable the City to continue operations and meet its payroll. With an interest rate of approximately two percent it is seen as an affordable cash correction plan.

CORRECTIVE REVENUE ISSUES: Questions have been raised regarding the collection of certain revenues, particularly the Water Department revenues. The Mayor and Commissioners have learned that in excess of 4,000 water meters are currently inoperable, registering no consumption. Those residents have been charged the minimum water bill charge, regardless of their usage.

The water meter current technology provides for “radio reading” of the meters from the street, but to maintain the system, batteries must be replaced at certain intervals. The batteries now in place were to be replaced at five year intervals, but never were. Longer lasting batteries are also available, but at a higher cost.

Our options include replacing the current batteries with the same type batteries for a total cost of about $272,000, replacing them with “20 year batteries” for a cost of about $620,000, or replacing the current meter technology with the newer digital meter technology for about $810,000.

The current meter technology is dated and difficult to maintain as replacement parts become scarce. The digital remedy seen as easier to maintain and allows for more flexible rate structures. The Mayor and Commissioners are studying the issue and hope to resolve the problem soon to restore this important revenue source and provide fair and appropriate water usage billing to the City’s residents.

PARKING METERS: The Mayor and the Commissioners are also investigating the revenue levels from parking meters and parking violation enforcement. Currently many parking meters are either not operating or are missing. Corrections will be made on a gradual, ongoing basis to restore parking meters as a more viable source of revenue.

July, 2008

[OPRA Reporter]

Photoimages of the handout are below.






ADMIN update: Text of the resolution is below.

RESOLUTION No. 90 of 2008
CITY OF VENTNOR CITY
ATLANTIC COUNTY, NEW JERSEY

RESOLUTION AUTHORIZING ISSUANCE OF TAX
ANTICIPATION NOTES NOT EXCEEDING $4,967,000.00

BE IT RESOLVED BY THE COMMISSIONERS OF THE CITY OF VENTNOR CITY, IN THE COUNTY OF ATLANTIC, NEW JERSEY, AS FOLLOWS:

Section 1. In anticipation of the collection of taxes during the current fiscal year, thereare hereby authorized to be issued tax anticipation notes of the City of Ventnor City, eachto be known as “Tax Anticipation Note of 2008”, in amounts not exceeding $4,967,000.00. The proceeds of such Notes shall be applied only to purposes provided for in the budget or for which taxes are levied for the current year.

Section 2. The attached certificate which is made a part hereof has been prepared by theChief Financial Officer and is filed in office of the City Clerk.

Section 3. The following matters in connection with the Notes are hereby determined:
a. All Notes issued hereunder shall mature at such times as may be determined bythe Chief Financial Officer, provided that no note shall mature later thanFebruary 14, 2009.
b. All Notes issued hereunder shall bear interest at such rate or rates as may be determined by the Chief Financial Officer.
c. All Notes shall be in the form prescribed by the Local Budget Law and otherwise as determined by the Chief Financial Officer and such Officer’s signature upon the notes shall be conclusive as to such determination.
d. All Notes shall be executed by the Mayor and the Chief Financial Officer and attested by the City Clerk.

Section 4. The Chief Financial Officer is authorized and directed to determine all matters in connection with the Notes not determined by this or by a subsequent resolution and such Officer’s signature upon the notes shall be conclusive as to such determination.

Section 5. The Chief Financial Officer is hereby authorized to sell the Notes from time to time at public or private sale in such amounts as such officer may determine at not less than part and to deliver them from time to time to the purchasers thereof upon receipt of payment of the purchase price plus accrued interest from their dates to the date ofdelivery thereof and payment therefore.

Section 6. Any instrument issued pursuant to this resolution shall be a general obligation of the City, and the full faith and credit of the City are hereby pledged to the punctualpayment of the principal of and the interest on the obligations.

Section 7. The Chief Financial Officer is authorized and is directed to report in writing to the City at the meeting next succeeding the date when any sale or delivery of the Notespursuant to this resolution is made, such report to include the amount, the description, the interest rate and the maturity of the Notes sold, the price obtained and the name of the purchaser.

Section 8.The City hereby covenants that it will not make any use of the proceeds of the Notes or do or suffer any other action that would cause:
(i) the Notes to be "arbitragebonds" as such term is defined in Section 148(a) of the Internal Revenue Code of 1986, as amended ("Code"), and the Regulations promulgated thereunder; (ii) the interest on the Notes to be included in the gross income of the owners thereof for federal income taxationpurposes; or
(iii) the interest on the Notes to be treated as an item of tax preference under Section 57(a)(5) of the Code.

Section 9.The City hereby covenants as follows:
(i) it shall timely file, or cause to befiled, with the Internal Revenue Service, such information report or reports as may be required by Sections 148(f) and 149(e) of the Code; and
(ii) it shall take no action that would cause the Notes to be "federally guaranteed" within the meaning of Section 149(b) of the Code.

Section 10.The City hereby designates the Notes as "qualified tax-exempt obligations" as defined in and for the purposes of Section 265(b)(3) of the Code. For purposes of this designation, the City hereby represents that it reasonably anticipates that the amount of tax-exempt obligations to be issued by the City during the period from January 1, 2008 to December 31, 2008, and the amount of obligations designated as "qualified tax-exempt obligations" by it, will not exceed $10,000,000 when added to the aggregate principal amount of the Notes.

For purposes of this Section 10, the following obligations are not taken into account in determining the aggregate principal amount of tax-exempt obligations issued by the City:
(i) a private activity bond as defined in Section 141 of the Code (other than a qualified 501(c)(3) bond, as defined in Section 145 of the Code); and
(ii) any obligation issued to refund any other tax-exempt obligation (other than to advance refund within the meaning of Section 149(d)(5) of the Code) as provided in Section 265(b)(3)(c) of the Code.

Section 11. This resolution shall take effect immediately

I, SANDRA M. BIAGI, City Clerk of the CITY OF VENTNOR CITY,
do hereby certify that the foregoing resolution was duly adopted at a
regular meeting of the Ventnor City Board of Commissioners held
this 29th day of July, 2008 and in witness whereof I have
hereunder set my hand and official seal on this date written.


________________________________
SANDRA M. BIAGI, RMC/CMC
CITY CLERK

[AbsolutelyOutraged]

Smith writes that repayments will be as taxes come in. Letshope so since 2.2% X $4,967,000 is $109,274 of extra spending for interest, and add to that 2% X $2,936,000.00 is $58,720.00. annoying part of $58,000 is what we have to pay for debt when we could had waited to get grant money.

[OPRA Reporter]

Text of another Resolution

No. 91 of 2008
AUTHORIZING TAX COLLECTOR
TO ESTIMATE TAX RATE
AND ISSUE ESTIMATED TAX BILLS

WHEREAS, the City of Ventnor City is awaiting certification from the State of New Jersey that the City of Ventnor City’s 2008 Adopted Municipal Budget has been approved and that the tax rate has been certified and the City of Ventnor City Tax Collector will be unable to mail the City’s 2008 tax bills on a timely basis;

and WHEREAS, the City of Ventnor City Tax Collector in consultation with the City of Ventnor City Chief Financial Officer has computed an estimated tax levy in accordance with N.J.S.A. 54: 4-66.3, and they have both signed a certification showing the tax levies for the previous year, the tax rates and the range of permitted estimated tax levies.

NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners of the City of Ventnor City, County of Atlantic, State of New Jersey as follows:

1.The Ventnor City Tax Collector is hereby authorized and directed to prepare and issue estimated tax bills for the City for the third installment of 2008 taxes to reflect 100%. The Tax Collector shall proceed to take such actions as are permitted and required by P.L. 1994, c72 (N.J.S.A. 54: 4-66.2 and 54.4-66.3).

2.The entire estimated tax levy for 2008 is hereby set at $42,495,141.32.

3.In accordance with the law the third installment of 2008 taxes shall not be subject to interest until the later of August 10th or the twenty-fifth calendar day after the date the estimated tax bills were mailed. The estimated tax bills shall contain a notice specifying the date on which interest may begin to accrue.

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Page 2

PROPOSED CALCULATION OF 2OO8 ESTIMATED TAX RATE
2007 TAX LEVY
2008 ESTIMATED
AND TAX RATE RANGE FOR TAX LEVY LEVY

TAX RATE 95% 100% 105%
LOCAL MUNICIPAL PURPOSES
$17,885,895.45 0.669
$16,991,600.68
$17,885,895.45
$18,780,190.22

DISTRICT SCHOOL PURPOSES
DISTRICT SCHOOL BUDGET
$15,395,507.00 0.576
$14,625,731.65
$15,395,507.00
$16,165,282.35
LOCAL MUNICIPAL BUDGET
$1,737,589.74
0.065
$1,650,710.25
$1,737,589.74
$1,824,469.23

COUNTY TAXES
COUNTY BUDGET
$5,839,901.25
0.218
$5,547,906.19
$5,839,901.25
$6,131,896.31

COUNTY LIBRARY
$791,385.70
0.030
$751,816.42
$791,385.70
$830,954.99

COUNTY HEALTH SERVICES
$322,470.00
0.012
$306,346.50
$322,470.00
$338,593.50

OPEN SPACE
$522,392.18
0.020
$496,272.57
$522,392.18
$548,511.79

TOTAL TAX LEVY
$42,495,141.32
1.59
$40,370,384.25
$42,495,141.32
$44,619,898.39

2008 RATABLE BASE $2,674,232,800
EST. RATE
1.510
1.59
1.67

$0.0159
$40,370,384.254
$42,495,141.32
$44,619,898.39

________________________________
Julie Harron Tax Collector
_______________________________
Barry E. Ludy CFO

[OPRA Reporter]

This Resolution authorizes an Estimated Tax Bill for the current year, and cites the backlog in state government approvals as one of the causes.



The image of the chart below explains the numbers, and the range of estimates used for the estimated billing, better than the cut-and-paste in the earlier post.