City budget takes hit from Chrysler plant

The university's purchase of the Chrysler site, albeit beneficial to the school, will cost the city of Newark a considerable amount of money in the short term, city officials said.

Since the university, as an educational entity, does not have to pay property or transfer tax from the sale, the city will lose out on approximatly $330,000 once the settlement on the Chrysler plant is completed, Newark Mayor Vance A. Funk III, said.

"This is good for Newark in the long run because it will create jobs and services," Funk said. "But over the next two years or so it'll be tight for the city because of the loss of revenue from that site."

The city will lose money from property taxes on an ongoing, yearly basis. The university also will not have to pay the transfer tax, a cost that comes into play every time property is bought and sold in Newark. Dana Johnston, community affairs officer for the city of Newark, said this hurts the city financially.

"We lose out on a lot of money from that property," Johnston said.  "If a for-profit business had bought the site, it would have been better."

The lost revenues from the Chrysler site have created another challenge for city officials in their attempts to designate money evenly for services. Dennis McFarland, director of finance, said the city, reeling from the economic downturn, has proposed a total operating budget of $31.2 million for 2010. 

With a variety of needs from different city staff and less money to work with, Funk said city officials are attempting to find a delicate balance between generating revenues while keeping residents pleased.

"The problem is that residents basically want all the services and don't want to give everything up," he said. "So, if we have to provide services in this economy, you're going to have a tax increase."

The budget would attempt to increase revenues by creating new services while still providing those valued by Newark residents, Johnston said. The recession has made it difficult to keep taxes low, with revenues dropping in some areas by millions of dollars.

"We have absolutely felt the effects of the recession, particularly in transfer taxes," she said. "The budget is diverse, however, with proposed revenue diversifications and a reduction in expenditures."

McFarland said one idea is to adopt an ordinance that institutes storm water utility fees, under which property owners would be charged based on the amount of impervious surface they have on their site. Another proposal is to charge for dumpster pickup at apartment complexes, McFarland said.

"Each budget is unique because we're trying to address different challenges and circumstances," he said.

Johnston said the additional services would bring in $700,000 per year. However, they could be problematic for students living in off-campus housing. Property owners may choose to pass new charges onto their tenants, McFarland said.

Along with the addition of new services, the city will cut eight full-time positions, Johnston said. This is a step Funk said he is happy to see for the first time in his five and a half years as mayor.

"I think what we're learning from the economic crisis is you have to cut back on the size of government now," he said. "We can't continue the way we have in the past."

To compensate from lost revenues from property taxes, the budget was going to have a 17.75 cent tax increase. But, with the new propositions and cutbacks on expenditures, Johnston said the increase would be lowered to only nine cents.

The city also finds other sources of income from the university. 

Rick Armitage, director of government and community relations for the university, said the university pays the city an annual subvention fund, in lieu of taxes.  Armitage said the fund was created about 40 years ago for city services such as police, fire, traffic control and street maintenance.

He said the university currently pays the city $204,000. The university, not immune to the recession, discussed reducing the payment by $24,000, a proposition met with pleas of disapproval from Funk. Armitage said university officals eventually decided to continue

"Even though Newark doesn't collect taxes from us, we're still in the same city so our interactions are extensive," he said. "We still make contributions to support their efforts."

Johnston said planning for the 2010 budget began almost immediately following the release of this year's budget. City officials attempt to gauge what services residents value the most and which they are willing to part with. A tax increase is usually the result if services cannot be cut down, Funk said.

"Honestly, I'd have to admit that this is one of the best prepaired budgets I've seen in recent years," Funk said. "The numbers are very realistic, and we won't lose out on money because of erroneous projections like we have in the past."