Tougher Times Likely in Store for New Jersey Cities

11 July 2011 12 views No Comment

Published in The Record one day after the Mayor’s Finance and Budget Commission Report was issued, the following article warns us that even though the recession is over, many cities in New Jersey could still feel some of the strongest aftershocks this year.

Cities could feel brunt of recession with tax collection dropping
Saturday, July 9, 2011
By Salvador Rizzo
Statehouse Bureau
The Record

The recession might be over, but New Jersey’s beleaguered cities could feel some of the strongest aftershocks this year, a group of economic experts said Friday.
Property tax collections will be dropping, and there is a chance some cities will default on their debts, making it harder for them to borrow money.

The poorest municipalities are already bracing for layoffs, said the experts, who participated in an economic forum at Rutgers University, and they waiting to see if Governor Christie and Democratic legislators strike a deal to restore up to $139 million in desperately needed aid.

“It’s an unprecedented period of economic stress for state and local governments,” said Robert Kuttner, a managing director of Moody’s Investors Service. “These are serious spending and revenue crises.”

Cities were able to stave off gaps in revenue when the recession struck because of delays built into the property tax system, Kuttner told an audience filled with mayors, but now that grace period has ended.

Mayor John McCormac of Woodbridge, a state treasurer in the administration of former Gov. James E. McGreevey, said local governments responded by courting businesses, streamlining the regulatory process and putting as much information as possible online.

Former Gov. Jim Florio said it was now up to the federal government to assume more of the costs for programs like Medicaid that eat up state revenue.

“The traditional ways are not going to work,” Florio said. “At some point, the federal government will have to become re-engaged.”

Economy has changed

Turning to the state’s 9.4 percent unemployment rate, James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers and a member of the panel, said the two sectors with the steepest losses — manufacturing and construction — would be difficult to fix because of fundamental shifts in the economy.

In terms of manufacturing, New Jersey can’t keep up with low-cost labor markets like China and so must focus on sophisticated products like biomedical equipment. And there is little appetite for construction, since the United States already has a glut of unsold and foreclosed homes left over from the housing market bubble.

But amid the gloom there were glimmers of hope.

“There’s reason to be optimistic today,” said Thomas Bracken, president of the state Chamber of Commerce. New Jersey has the raw materials to overcome, he said, citing location, infrastructure, a high quality of life and a well-educated workforce as draws for big businesses.

In addition, he said Christie has tried to attract new business to the state through tax incentives and deregulation.

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