As Paterson faces an $18.6M budget gap, this is how the city may raise revenue

PATERSON — City businesses would pay $4 million in new garbage disposal fees, municipal property taxes would rise by 4%, 50 employees would lose their jobs and recreation spending would be cut by $600,000.

Those are some of the things Mayor Andre Sayegh is considering in his efforts to close Paterson’s $18.6 million budget deficit for 2023, the largest gap he has faced since taking office in 2018.

But even if all those and other potentially unpopular measures are imposed, Paterson still would need about $6.8 million in extra help from the state government to balance its budget, according to the Sayegh administration.

'By choosing inaction, you are choosing action'

Sayegh’s business administrator, Kathleen Long, and his finance director, Javier Silva, said they have been holding private meetings about the budget deficit with members of the often-contentious City Council to explain the plan for closing the shortfall. The administration plans to begin asking the council to approve some of the new fees in the next several weeks, officials said.

“We have had numerous conversations with City Council members, presenting tough but doable options to close the gap, ranging from increased fees for city services to charging commercial entities for solid waste pickup — something most other municipalities already do,” Sayegh said in a written statement.

“Our solutions need to be sustainable, as the cost increases are not one-time expenses,” the mayor added. “Importantly, we need to take decisive action as we are up against the clock to have a real impact in rolling out any options.”

If the council balks at the fee changes, the state would be less likely to increase Paterson’s funding, administration officials said. Without fee increases, officials said, the potential tax hike would become even greater.

“By choosing inaction, you are choosing action,” Long said.

Administration officials acknowledged that the political timing could prove difficult, because six members of the council may be running to retain their seats in the city’s ward elections in May 2024. Some of Sayegh’s critics said the mayor ought to hold one of his many press conferences to outline the budget crisis to Paterson residents.

“The real numbers have to come forward,” said 5th Ward Councilman Luis Velez. “The administration has to explain to the community why we fell into this deficit.”

Sayegh’s staff has attributed about $9 million of the budget gap to a major increase in fees that Paterson must pay into the state’s employee health benefits program. Four years ago, Sayegh touted the switch to the state benefits plan as one of his accomplishments. Administration officials said Paterson’s medical insurance expenses would be even higher right now if the city had not switched to the state program.

The city’s garbage collection contract and pension costs are other deficit-causing factors cited by the administration.

Sayegh noted that Gov. Phil Murphy announced Tuesday that he may provide money in the state budget to offset some of the health insurance increase.

“Paterson’s projected budget gap has been created by increases outside of the administration’s control — a spike in health insurance, pension and solid waste costs,” the mayor said. “All cities throughout New Jersey are suffering some or all of these same challenges.”

Sayegh in recent years repeatedly has boasted about the widespread development taking place in the city under his watch, recently saying Paterson has attracted more than $1 billion in new investments.

But Sayegh’s staff this week said many of those projects were built with tax abatements under various state programs and won’t be producing tax revenue for the city for another five, 20 or 30 years.

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Council members raise concerns

Councilman Michael Jackson said the current budget crisis has proved the truth of his prediction from several years ago that Sayegh was misusing the $130 million in state tax credits that the Legislature awarded Paterson by picking projects that would not boost the city’s tax base.

“What we’re seeing now is the result of those irresponsible actions,” said Jackson, who represents the 1st Ward.

Alex Mendez, the 3rd Ward councilman who finished second to Sayegh in the 2022 mayoral race, said Paterson residents are unwilling to pay more taxes as the city struggles to contain crime. He said Paterson should be enforcing existing laws to collect fees and fines that would help the budget. Mendez also questioned Sayegh’s spending practices.

“Ever since Andre Sayegh got into office, he’s been spending money he didn’t have,” Mendez said.

Two of Sayegh’s allies on the council expressed their reluctance to raise property taxes.

“To me, the 4% tax increase is the last thing that can happen,” said Councilwoman Maritza Davila, asserting that fee hikes would be preferable.

“My big concern,” said 6th Ward Councilman Al Abdelaziz, “is that we don’t put the burden on the residential property owners. Any increase is not reasonable.”

One of the budget-cutting options the city already has cast aside was the potential shutdown of one of Paterson’s firehouses, officials said. Instead, Paterson is applying for a $14 million grant from the federal government to cover firefighters’ salaries and avert layoffs in that department.

Joe Malinconico is editor of Paterson Press.

Email: editor@patersonpress.com

This article originally appeared on NorthJersey.com: Paterson NJ $18.6M budget gap: Tax, fee increases likely