Rising pension, insurance costs present challenges Early draft of Keyport budget carries 32-cent increase to tax rate BY LORI ANNE OLIWA Correspondent "Privatebenefits cannot compete with benefits from the public sector." - Robert Bergen Mayor KEYPORT - The cost of maintaining essential services and keeping financial obligations in Keyport has increased dramatically, according to borough officials. Pension payments alone will increase by 64 percent in 2007, for a total cost of $301,900, according to borough officials. In 2006, pension costs were $183,000. The budgetary challenges involved with rising costs and reduced revenues were discussed during a Borough Council workshop on March 12. A preliminary budget was expected to be presented for initial introduction on March 20, according to Borough Administrator Peter R. Valesi. A public hearing will still have to take place before a final budget is adopted. In addition to rising pension obligations, the cost of health insurance premiums for 53 borough employees has increased from $575,000 in 2006 to $595,000 in 2007, a 13 percent increase. "Health insurance premiums are a losing proposition," Valesi said. To alleviate the burden, Valesi would like to renegotiate the borough's health plan. According to Valesi, "2007 is the last year for our health contracts, and they must be renegotiated. That will not be an easy process, but it must be done." Mayor Robert Bergen said that "health insurance is killing us," and added, "Private benefits cannot compete with benefits from the public sector." Bergen also mentioned the possibility of employee-funded contributions to health care as a cost-saving measure. The increase in pension and health insurance costs alone would add 5 cents to the tax rate. The current municipal tax rate in Keyport is 1.345, according to Valesi. If the budget is adopted in the form discussed last week, the owner of a home assessed at $149,000, which is the median in the borough, would pay $476.80 more in property taxes this year. This figure is exclusive of county and school taxes. The borough will once again request extraordinary aid from the state, having been successful in procuring $300,000 in 2006. Extraordinary aid is defined as an addition to normal state aid that a municipality can request. "Extraordinary aid is crucial to the budget," Valesi said. The state will determine the need, according to Valesi. He said that extraordinary aid cannot be anticipated for 2007, so it cannot be projected as revenue in the budget. As a result, a 10-cent increase had to be factored into the budget, Valesi said. Another issue affecting municipal revenue is the slow increase in ratables in the borough. According to Valesi, ratables have only increased at a rate of 2.7 percent per year since 1998, or about 0.3 percent per year. Valesi said that new development or redevelopment can break this trend and increase the ratable base. The 4 percent spending cap imposed by the state and sanctioned by Gov. Jon Corzine is not helping matters either, according to both Valesi and Bergen. "The cap is going to dramatically change the way we do business," stated Valesi. Bergen agreed that the cap "will make things very difficult," and added, "Keyport has more money coming from increased taxation, and this will definitely hurt us." Bergen also stated that the cap will virtually guarantee elimination of personnel, but that Keyport has no immediate plans to eliminate jobs. "There are positions open due to attrition that we haven't filled yet, but we have no immediate plans to start cutting jobs," he said. Aside from the major issues impacting the budget, Valesi also cited price increases for supplies, equipment, salaries and "the overall cost of doing business and providing key services" as reasons for the potential increase in the budget. "Even garbage collection services have increased by $13,000," he said. In its present form, the budget would require Keyport to collect about $5.5 million in tax revenue. Valesi said that commenting further on the numbers would be irresponsible at this point. "Revenue and appropriations are not set yet, and there is actually no budget until the numbers are set," he said. He also said that there are private discussions occurring within individual departments that will affect the final numbers in the budget. Bergen explained that not all sources of revenue have been calculated yet. Bergen said his goal is to lower the tax increase before a final version is unveiled. "I would like to reduce the budget to a 10- or 11-cent increase," he said.