Committee agrees to deferred school tax plan
Arrangement is intended to provide temporary relief
BY TOM CAIAZZA
Staff Writer

HOLMDEL - The Township Committee introduced its budget May 4 and agreed to use deferred school taxes to reduce this year's tax rate increase to 1.5 cents.

The $19,144,833 budget comes with an initial 14.4-cent tax rate increase, down 1 cent from last month, when the budget was tabled to look at other ways of controlling the increase, attributed to what Township Administrator Chris Schultz said was Holmdel's cost of doing business. Using deferred school taxes lowers that number to a 1.5-cent tax rate increase.

The operating budget, he said, was not the only reason for the increase.

"This is a no-nonsense budget. There are other factors hurting this year's budget," Schultz said. "It is not just the operating budget."

Schultz cited increases in nondiscretionary spending such as a 140 percent increase in the pension program and a 96 percent increase in the police and fire operations.

Holmdel, like many municipalities, is in the middle year of a tiered system to refill the state pension coffers. For several years, municipalities were exempted from paying into the pension fund and have recently found themselves being weaned back up to full capacity.

Schultz said this year's budget is as low as it can be without causing problems later in the year.

"I think the operating is where it is going to be without needing emergency revenue, like in '04," Schultz said.

The committee agreed in a resolution to use taxes collected and earmarked for the school district to lower the tax rate for the municipality. Deferred school taxes, allowed by law, are made possible because the district and the town are on two different fiscal schedules. There is a six-month gap between when the town collects school taxes and when the district actually uses that money.

According to Township Auditor Robert Oliwa, that money is essentially sitting in an account and could be used by the municipality to get them on a cash basis accounting system.

The entire committee was not convinced.

Committeeman Larry Fink, the lone Democrat on the dais, asked if deferring school taxes was a smart choice for the future.

"Is the deferral something we should be looking to do going forward?" Fink asked. "Is it a stop-gap tactic?"

Fink said that if the township uses the principle amount collected for the school district, there is the fear that they will be unable to pay the district when it comes due.

"Yes, it is money we have in our pocket," Fink said. "But it is not really our money."

Holmdel Chief Financial Officer Joseph Annecharico said that the town has used deferred school taxes sporadically, not routinely, in the past, and that being unable to pay would not be an issue.

"It has nothing to do with not providing the amount to the school in a timely manner," Annecharico said.

Oliwa said that the township will use 30 percent of the amount allowed to be deferred, approximately $2.6 million, which he said was a little below average.

Schultz has said in the past that using deferred school taxes was simply a way to put Holmdel back to a level of finances that are manageable. A slipping ratable base and last year's extraordinary aid were two reasons Holmdel was in need of reaching a fiscal equilibrium.

According to Annecharico, the town's ratable base has been reduced in the last year by nearly $2 million. While only a small percentage of the total, one-10th of 1 percent, the slip in ratables Annecharico said it was a sign of a financial shift.

"The very fact that we see retrograde like this is disturbing," Annecharico said. "It is a sign the town is moving from a developing community to a developed community."

The deferred school tax resolution passed by a 3-2 vote with Committeeman Terence Wall and Deputy Mayor Rocco Pascucci voting against. The public hearing for the budget has been scheduled for the June 1 Committee meeting.