Saturday, March 3, 2012

Taxpayer to Auditor: Budget Deficits Have EVERYTHING To Do With Spending

The Northern Valley Suburbanite's February 23, 2012 article on Englewood Cliffs’ budget, entitled “Auditor warns of large tax increases,” reports that Englewood Cliffs' auditor Steve Wielkotz said “the borough's issues have nothing to do with spending."  In fact, Englewood Cliffs’ budget problem has everything to do with its current spending, both for (1) current expenses and (2) current payments for past deferrals of pension expenses and property tax refunds. 

There are three ways to address Englewood Cliffs’ budget shortfall, just as there are three ways to address a household’s budget shortfall.  One is to cut spending.  Another is to increase revenues by, for example, imposing a “gargantuan tax increase this year.” Unfortunately, Englewood Cliffs taxpayers cannot increase their household revenues to pay the increased property taxes as easily as the Borough can increase its revenues.  The third is to issue debt to pay for current expenses, as Englewood Cliffs has done in the past to fund current pension expenses and refunds for successful property tax appeals. The Borough’s past failure to reduce spending in response to lower property tax collections and past deferral of current pension obligations is one reason Englewood Cliffs’ expenses and taxes are as high as they are today. 

Englewood Cliffs faces a “gargantuan tax increase this year” only if the Mayor and Council choose to address that budget problem by increasing taxes instead of cutting spending.  If Englewood Cliffs’ pre-2010 fiscal practices and the Mayor and Council majority’s recent actions, including the hiring of a full-time deputy clerk and a full-time tax clerk, are any guide, Englewood Cliffs’ property taxes will increase substantially more than the inflation rate this year and the Mayor and Council majority will issue bonds in order to push the revenue loss from successful tax appeals into future years.  

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