At the March 11th Council Meeting there was some heated discussion regarding the ZERO BUDGET that was presented by Councilmen Pellegrini and Carelli at the February 25th meeting.
Prior to this, Pellegrini arranged for the Finance Committee to meet. The committee includes Councilman Brad Clinton and Mayor Bill Budesheim. Riverdale’s CFO Ken Sesholtz and Carelli were also invited for professional support. Sesholtz created an official version of the ZERO BUDGET that, if approved by the Council, could be introduced at the March 25th meeting. The outcome of this meeting was discussed publicly on February 25th.
According to Carelli, the CFO agreed that the ZERO BUDGET was workable. Mayor Budesheim presented a few last minute additions to the budget which included a $25,000 request by the Pompton Lakes-Riverdale First Aid Squad for new radios and a $6,000 request by the DPW for new tires.
At the Council Meeting, Clinton stated his desire for a 1% tax increase to cover these costs. Budesheim read aloud the list of the expenditures acknowledging that most would not require a tax increase with the one exception being the $25,000 for the First Aid Squad. Carelli said that the town could purchase the radios through a state-contracted vendor and pay for it from Riverdale’s capital fund, this would negate the need for a tax increase. Although Budesheim agreed, I’ve been down this road before and decided to ask for confirmation. CLICK BUTTON BELOW FOR AUDIO
In response, Pellegrini said that if taxes truly had to go up a little then they would do what was needed but felt it was the Council’s duty to keep taxes as low as possible. Councilman Carelli affirmed his position in support of a zero tax increase, if you have vision you can make it work. CLICK BUTTON BELOW FOR AUDIO
Mastrangelo questioned Carelli’s “vision” but as you heard in the audio, Mastrangelo did not even prepare a 2015 budget for the DPW; something that should have been his first priority as chair of the Public Works Committee. When Budesheim discussed the expense he said the borough pays $6,000-7,000 every year for tires, so why was this not in the budget? Mastrangelo went on to say that he would not condone any budget that would affect the borough’s debt payment, touting that he paid off his 30 year mortgage in 18 years. Let’s look at that for a moment…
If you had a $300,000 mortgage with a 4% fixed rate you would pay a total of $515,610 for your home. By paying it off in 18 years you would save $94,410 in mortgage interest. To do this though, you would have to pay an extra $6,216 year. If you instead put this in your 401k, with a conservative return rate of 8%*, you would have accumulated an additional $127,399 towards your retirement. Considering the $94,410 interest is fully tax deductible, accelerating your mortgage would actually cost you in the neighborhood of $60,000. The town cannot invest money but you can, the problem is that Budesheim, Mastrangelo and Clinton do not see this connection.
*The Dow Jones Industrial Average grew an average of 8.42% per year over the last 10 years, this includes the crash of 2009.
With this in mind, I asked what the total outstanding debt was and how did we arrive at an annual payment of $600,000? The answer to the outstanding debt came from Carelli who confirmed it as $1.9 million for which we are paying less than 1% interest annually. After some prodding, Budesheim admitted that he came up with the figure and suggested that, since the Council approved his budgets, they apparently agreed. He went on to say that it was his philosophy to pay off the debt as quickly as possible so that the town could pay capital expenditures in cash rather than borrowing money. In other words, he would like to take our hard-earned money and build up a pile of cash which he and the Council can spend at their discretion. It’s been my experience that if the government has extra capital they will find ways to spend it. The fiscally responsible approach to government is to take from the taxpayers only what you need and to work hard to keep that number as low as possible.
When challenged on this, Budesheim changed his story saying that we should pay off the note quickly to provide “real tax relief”. Now ask yourself this, when was the last time you remember your property taxes going down? If taxes were raised by just 1%, it would cost us taxpayers about $50,000 this year. Whether taxes are raised or not, the debt can be paid off in 4 years. Over this period, the 1% increase that Clinton asked for would cost taxpayers a total of $200,000; the savings to the town, just $1,800. This is why we must insist on tax relief today, not 4 years from now.
Please come to Town Hall at 7:30PM on Wednesday, March 25th and let the Council know that you support the Carelli-Pellegrini ZERO BUDGET.