presented: March 1, 2016
Normally I would present the annual County Budget Message and introduce the 2016 County budget today. However, given the economic uncertainties and financial challenges that confront both Atlantic County and the state of New Jersey, the state has given counties additional time to complete their budgets. What I would like to do today is to give you a better understanding of these challenges and our responses to them as well as other factors that are shaping our 2016 budget.
Many of these challenges are well known, such as high unemployment, record home foreclosures, the decline of our major industry, and most significantly, the collapse of our property tax base. Any one of these factors alone would be daunting. Collectively, they may seem overwhelming. We will address them responsibly and head on.
Another challenge we face is uncertainty. There are questions that remain unanswered and proposed state legislation that can fundamentally challenge the assumptions upon which our budget will be based.
Our tax ratable base has declined from $58.2 billion to $36.8, a loss of $22 billion. We have been told that the value of the County could drop even more. This value is one of the key factors that regulate our tax rate. It may also be further affected by the number of property tax appeals. Of these, casino property tax appeals have had the most significant impact on county finances.
One impact is that the county had to refund significant amounts of money to Atlantic City when the city settled or lost casino tax appeals due to their improper assessments. These refunds have been as high as $16.6 million in 2013 and in 2016 will be $7.3 million. As of this year, the county will have refunded $49.1 million to Atlantic City. Tax assessment, unfortunately, is strictly a municipal function in which county government has no say. The over assessment of casinos is the leading cause of the precipitous drop in our ratable base. The so called PILOT legislation is expected to be reintroduced as part of an overall financial restructuring package for Atlantic City. This again adds to the uncertainty. Will casinos remain in the property tax base or be removed as they were in the last bill? If they are removed, the impact on the county tax rate would be devastating to all 23 municipalities.
In its original form this PILOT legislation was seriously flawed. The amended version is somewhat better yet still flawed. It was pocket vetoed by the Governor earlier this month. Whether this legislation will be introduced in new and better form in the new Legislature or a different proposal will be put forth remains to be seen. How this might affect our 2016 budget we cannot say at this time. Again, more uncertainty.
Let me offer the Legislature a simple and effective solution to stabilize casino property taxes. Pass legislation that would require casinos to be assessed at proper market value annually. If such legislation had been in place years ago, we would not be in the mess we are today. How is it that other jurisdictions with casinos can assess them correctly? Why can’t we? The solution doesn’t seem that complicated.
What impact Atlantic City’s financial crisis will have on county government and our 22 other municipalities is unknown. Yet we must proceed as best we can with this uncertainty – an uncertainty that is exacerbated by new proposals for North Jersey casinos. It is indisputable that North Jersey casinos would only make matters worse. The Legislature’s promise to send some of the North Jersey casino tax revenues back to Atlantic City cannot be relied upon and would do little to address problems that extend well beyond just Atlantic City. The gambling market is over saturated. I believe that it would be foolish to develop any reliance on the expectation of revenues from North Jersey casinos. If you believe the promise of certain politicians to send Atlantic City $300 million a year in North Jersey casino taxes, a number that somehow mysteriously keeps escalating, you’re dreaming. The state needs to be looking for the next best thing to grow and sustain our economy rather than focusing on a 1970’s economic development strategy that has run its course. Only in New Jersey can the solution to having too many casinos be more casinos.
We face other challenges as well. As revenues decline, the costs of state mandated programs increase. Pension costs are up by $2.6 million since the state imposed pension holiday ended and the cost to maintain county residents in state mental institutions is up by $1.4 million.
The 2016 budget that I will present shortly will take bold, decisive steps to hold down costs and reduce taxes. Unfortunately, these steps will be unpleasant. We are exploring several alternatives that could see a $1.7 cent reduction in our general purpose tax if our equalized value stays at $36.8 billion and a possible increase of $1.4 cents if the equalized value falls to $34.9 billion. Our County Board of Taxation is recommending the $36.8 billion projected value but we are waiting to get a sense of the number and location of tax appeals that may be forthcoming in 2016 and the submission of tax books from Atlantic City.
All aspects of county government will be looked at carefully and everything will be considered. Regretfully, we may have layoffs and mandatory furloughs of up to 10 days. But until we have more solid information we cannot determine how significant these reductions will be. These difficult costs saving measures will be coming at a time when citizen demand for county services such as food stamps, TANF, employment training, and maintaining our roads and bridges are increasing. They will also impose hardships on many of our employees who have seen their salaries decline due to increases in their benefit costs while at the same time being asked to take on more work and responsibilities.
Most services that we provide are mandated by the state. In 2016 we may have to contend with the costs of a new mandate. The Bail Reform/Speedy Trial Act passed by the Legislature will be quite expensive to our local property taxpayers. The benefit to Atlantic County will not be as dramatic since the County Prosecutor, the courts and our Corrections staff have already been working to reduce the inmate population for eight years. Over the next two years we will need to budget over $1 million to fully fund this state-mandated program. We are working with the New Jersey Association of Counties to recover the costs for this new program from the state. It astounds me that this state continues to look for ways to force us to spend more money.
Most of our non-mandated, discretionary programs have been eliminated over the years. I am again requesting the Freeholder Board appoint committees to recommend whether any services should be eliminated, privatized or continue to remain with the county.
Ultimately we will only be able to cut the budget so far before public health and public safety are compromised and our quality of life diminishes to the point that economic decline becomes almost irreversible. Cuts alone cannot solve our problems. We must grow our economy as well.
The good news is the glass is half full. Atlantic County is committed to working for a brighter future that we can be proud to share with our children and grandchildren. In the coming year we will place a much greater emphasis on economic development. Last year Atlantic County retained AngelouEconomics, a nationally recognized firm, and completed an economic development strategy and action plan. The plan identified the most promising areas of growth and outlined a process for capitalizing on that growth. The report found that our overreliance on one economic sector, tourism and gaming, is a threat to our economic future and economic diversity is critical.
Our inclusion as one of the six FAA test sites for unmanned air vehicle research offers significant economic development opportunities. To realize this potential, the county will be working closely with the Stockton Aviation Research and Technology Park and the newly formed Atlantic County Economic Development Alliance to attract and retain aviation related businesses. The upside potential to this is enormous while the cost of doing nothing is much higher and more certain.
We are proceeding with construction of the first building at the ARTP this year. In addition to growing the aviation industry, we will aggressively pursue opportunities in education, tourism and medical care to secure our future. The Gateway Development Project will bring a new Stockton University Island campus along with a new South Jersey Industries corporate office to Atlantic City. The Casino Reinvestment Development Authority has committed $17 million to support this effort and the New Jersey Economic Development Authority has approved nearly $70 million in tax credits.
An emphasis on our wineries and our Jersey fresh produce will help promote farm to table agri-tourism. A new physician assistant program between Stockton University, Reliance Medical Group and Philadelphia University will help to meet a need for primary-care providers and encourage students to remain in Atlantic County after completing their training.
Our $2 billion casino industry is ranked third in the nation. Both Borgata and Tropicana have announced plans to reinvest. Borgata is committing $50 million to enhancement projects and Tropicana will make over $25 million in renovations. This follows the recent completion of Harrah’s new Waterfront Conference Center that is attracting new business to our area. And just last week Caesar’s announced it was looking to hire 335 new employees.
In conclusion, 2016 will be a transformative year. You may be certain that we will end the year much differently than we started. It is my hope that those differences will only be positive and that we will be able to lay the groundwork for a new and more prosperous era in Atlantic County for generations to come.