Overview

There is a major, long-term, structural defect in this city’s finances – costs exceed income. Costs are increasing, income is decreasing. To put it bluntly, we cannot afford the city government as it is presently operated. In order to fix this problem, the city will have to fundamentally change the way it does business.

There are opportunities to increase revenue, but they are difficult to realize in theses hard times. Grant and Aid sources of revenue are drying up and cannot be counted on.  Redevelopment will be difficult in this recessionary environment and new ratables are a long time off.  

The municipal budget should be about setting priorities to control future spending. Controlling spending is about making choices. The longer we wait to identify and implement spending priorities, the fewer choices we have over what spending must be cut.  We have continued to hire and spend as if nothing has changed in the world.

The task of closing the $5,650,000 projected gap between municipal spending and revenue for this fiscal year is daunting.  The Mayor’s forum numbers are misleading because they are calculated using pension payment deferrals under the Corzine proposal.  This money would eventually have to be paid to the State with interest. This is no better than a credit card loan, a short term political ploy to give the appearance of lower tax rate increases. It merely delays this city’s rendezvous with financial disaster.  Without pension deferral, the mayor’s budget proposal represents a 13% property tax increase.

We believe the more responsible course of action would be to address the problem now. The CBAC has attempted to update their recommendations to reflect current financial conditions and remaining funds. But decisions on spending chosen from requests made last year do not fully address the fiscal problems faced by the city now and looking forward. Line item cuts identified in our specific budget recommendations can result in a tax increase this year of just over 8%. This figure could be less if extraordinary aid or stimulus dollars are awarded to the city.

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City spending decisions in the past have often been viewed only in the short term. Council spending decisions have sometimes been made on impulse and emotion rather than an informed choice. There needs to be a shift from “personality” based decision making to “process” based decision making.  The municipal budget should be both a planning tool and a measure of the city’s progress toward fiscal responsibility.  

This municipal budget is at best, a snapshot of the city’s finances viewed from last July 1^st, the beginning of the fiscal year.  Three quarters through the fiscal year there is still no budget. Money has been spent or allocated; hiring, promotions and salary raises, approved have been approved without any measure of fiscal responsibility.  This, in effect, makes the entire city budget process irrelevant and meaningless.

The CBAC is therefore more interested in identifying the waste and inefficiencies in the way that we operate our city than it is in any particular line item. We have provided line item details that represent a 10% spending cut this year. This is a starting point and in no way addresses the fiscal challenges the city faces in the future.

Immediate Action Programs

We have suggestions for operational audits to be accomplished in house with citizen, pro bono business and academic help that will hopefully identify areas in which we can change our spending habits and the way we do business. With out starting this process, it will be almost impossible to become fiscally responsible in the future. The Committee also believes these changes must originate from within our community in order to have any chance for long term success. The objective, in our view would be to have an overall process of ongoing evaluation and review that would be incorporated into a five year plan for fiscal stability and economic development.

Should there be corruption and mismanagement found during this process, those issues can be addressed directly. For this reason we are against spending money to hunt for specific instances of past corruption using expensive forensic audits by outside firms – no matter how these audits are packaged.  This is not a cost affective or result affective approach. 

A few examples of operational audits that can be conducted at no cost that have a high likelihood of budget savings:

It is the observation of the CBAC that the city has increasingly sought over the years to outsource work, be it tree pruning, purchasing, or PR, that increases costs unnecessarily and insulates local decision making and responsibility. In the long-term we would like to see contracting of services limited as much as possible. Short term we have identified evidence suggesting repeated violations of the Local Public Contracts Law that should be investigated and corrected.

• “Extraordinary unspecified services” appears to be the preferred method of avoiding open and competitive bidding in violation of NJSA 40A:11-5 (ii) which states that this exemption “shall be construed narrowly in favor of open competitive bidding.”  There are also requirements for the governing body to state supporting reasons for these exemptions and to publish details of the exemptions and supporting documents in the newspaper.

• The CBAC suggests an operational audit to review all contracts for services to be conducted by independent or outside parties (not the BA and CFO). No contracts should be automatically renewed without prior review. Going forward, the spirit and the letter of Local Public Contract Law should be followed.

• Cumulative purchasing transactions in similar categories are being ignored and potential savings to the city lost. As an example, computers, printers and copiers should be centrally managed with local oversight.  Consumables such as toner and ink cartridges can be bulk recycled for significant savings. 

• The CBAC suggests an operational audit in the form of evaluations by commercial services for equipment needs taking into consideration the entire cost of operation including consumables. This would be at no cost to the city. Once needs are identified and evaluated, the city should issue RFPs for combined purchase/leasing/maintenance contracts. High cost outsourcing contracts have little oversight and can lead to abuse. We believe much of those services can be leveraged out of regular equipment contracts. As an example, the Breaker Group contract:

*348-2008 A resolution awarding a contract to Breaker Group Inc. 32 Mill Street, Mount Holly, NJ 08060 for information technology support services commencing November 6, 2008 through June 30, 2009 in an amount not to exceed $36,000. (Meeting Nov 17, 2008)

1  IT support     Breaker Group 12/1/2008- 11/30/2009     $36,000

2. Telecommunications Breaker Group  12/1.2008 – 7/31.2009   $38,000

There was no RFP or public notice. The BA says it is only one contract. The contract list shows two. The BA says that this contract is an extension of an existing contract and therefore legal under temporary a[[ropriations, but I can find no documentation to confirm this.  The services in question are vague and the pressure on the Council to pass, was high. In a public hearing, the BA has said it is for our “mainframe“ but at other times alluded to the contract as meeting needs of basic office computer maintenance. She has also said that it is inclusive of hardware – are we buying a new system?  Who knows?

The City Council members are clueless on the actual content of these contract(s) yet most voted for it(them) anyway.

• No contract should be renewed without review and repeat competitive bidding.  Companies make their money on repeat business. There is a lot of competition that we should be taking advantage of. 

  The Committee has annotated areas of other areas that would benefit from operational audits in the comments area of the FY09 Budget Recommendations spreadsheet that was e-mailed to Council members in January.

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   Other recommendations include making the CBAC a standing committee for the duration of the fiscal year. Committee members would serve in an advisory and support capacity for council members and city administration. This would leverage citizen expertise and facilitate communication and cooperation between the branches of city government with no additional cost to the city.

Long Term Priorities

The long-term priority continues to be the implementation of a plan to control and downsize city employment. Sixty seven percent (67%) of the introduced budget is comprised of salaries and salary related expenses that are excluded from CAPS. This will be painful but absolutely necessary for the wellbeing and long term survival of the City of Orange as a stand-alone municipality.  Broad and open discussions are needed with input from affected departments concerning the means to accomplish municipal downsizing. This should not be used as an excuse to delay the start of this needed action.

We suggest a City Streamlining Subcommittee comprised of at least one representative from the City Council, Administration and CBAC to formulate and oversee this process.  CSS members would work with dept heads and employee representatives, and report back to the city council with their recommendations.  Some general suggestions include:

Setting goals for department downsizing

• Ten percent (10%) downsizing this year with 10% per year, over the next two years. All Departments are not created equal and operational audits of individual Depts. must be prioritized to the overall needs of the City.  Some departments will need larger cuts than others.

• Positions should be eliminated or combined based on ongoing evaluations of the actual needs of city government. This process would be initiated by dept heads using operational audits conducted with the help of local university intern programs, scholar consultant programs and other pro bono experts.

• Vacancies should go unfilled with exceptions for only the most critical roles or positions that carry skills to reorganize our government at no net cost to taxpayers.

• Retirements should be strongly encouraged with some thought to monetary or benefit inducements, if needed.

• Seniority/experience should be considered when positions are eliminated but competence is the most important factor.  With that in mind, Dept heads should document job performance of all employees in their personnel files. Depart. Heads and supervisors should also receive critiques from those under their responsibility.

• Displaced employees should have first consideration for vacancies in other departments for which they are qualified.

• Union contracts should be revisited with the goal of tightening work rules, increasing efficiencies and lowering costs.

• Health care costs and co-pays should more closely match private sector, including employee contributions. Future new hires should have renegotiated benefit and work rules.

• Lowering unit labor costs and using programs like job sharing, will help keep as many people on the payroll as possible within budget limitations. Employee input on these choices is important, but not controlling.

• There should be no multiple jobholders or combining of part-time, full-time and stipend jobs (EEOC, as an example). Rewrite job descriptions and responsibilities instead.

• Vacant positions should not be carried unless absolutely necessary and filled in a defined and imminent time period.

We strongly encourage the formation of a Shared Services Subcommittee similar to the City Streamlining Subcommittee, but including representatives from Police, Fire, and Public Works. Even with the most optimistic outcome of current redevelopment plans, the financial numbers indicate that the City of Orange will never have a large enough tax base to sustain an independent municipality without State subsidy. Since continued State subsidy cannot be guaranteed, neither can the survival of the city unless immediate and meaningful progress is made toward sharing services with neighboring communities.

• Fire Dept:  There have been some who have made a case for the elimination of the entire Orange Fire Department and the outsourcing of services to neighboring municipalities. It is true that there may be no economic justification for our own fire dept when the City is only 2.3 square miles and is easily serviced from stations outside the city, but the same can be said for the existence as an independent municipality of the City of Orange itself.  The CBAC believes that both are worth fighting for.  Keeping an independent city, with its' small tax base, inefficient government and the top heavy labor costs, and an independent Orange fire department, can only be  justified if the city and the fire department aggressively pursue shared services opportunities.

• Public Works: Large equipment such as tree bucket trucks, stump grinders and backhoes are obvious candidates for shared buying and shared servicing. Example: Materials like rock salt should not be purchased by the city when it has no facilities to store and protect the material. Combine purchases and storage facilities or buy from neighboring towns as needed. There needs to be a five-year plan that identifies capital needs and allows exploration of shared equipment and facility investments.

• Police Dept. There has always been the need to coordinate enforcement across municipal boundaries. There are also advantages to shared dispatch and technical assistant programs, etc. The CBAC, for the time being feels comfortable with Director Rappaport’s testimony on his intended management reforms- especially cross training and more efficient use of manpower initiatives. We are very troubled by city hall hiring friends and political rivals for positions that have not been requested by the police department and that do not meet specific, immediate, and high priority police needs.