ANNUAL STATE OF THE CITY ADDRESS

MAYOR FRANK HUTTLE III

ENGLEWOOD CITY CHARTER

This address is delivered in fulfillment of Section 5.6 of the Englewood City

Charter.

OVERALL PURPOSE

The overall purpose of this address is to have a full and frank discussion on the

true economic conditions facing the City.

THE STATE OF OUR CITY Our assets are unlike any other municipality which can

guide us out of any crisis, including: One of a kind location – 10 miles from Times Square Tremendous City Assets

Downtown bergenPAC Englewood Hospital Flat Rock Nature Center MacKay Park Englewood Library Stable Neighborhoods Industrial / Commercial Sector

Active, informed and engaged residents Strong and Active Communities centered around Houses of Worship

The Delivery of Services Financial Condition

THE STATE OF OUR CITY However, the City is coming out of a historic and

sharp decline the Great Recession of 2008 and its lasting impacts.

The State of the City in 2009 was in a financial and infrastructural imbalance caused by: INTERNAL FACTORS - Out of Control Tax Increases to

support uncontrollable and wasteful spending. INTERNAL FACTORS – True City deficits have been hidden

by interest only bonds EXTERNAL FACTORS - A Municipal Quagmire brought

about by the Global Financial Crisis – the City, like so many others, was at a tipping point.

EXTERNAL FACTORS – A sharp cut in aid by the State of New Jersey and an increase in State mandated spending.

THE STATE OF OUR CITY Municipal Government needs to re-invent

itself to face the cold reality that a 4 decade real estate bubble has come to an end:

Mayor’s “Municipal Tipping Point” – Mayor Frank Huttle, Swearing in remarks, January 3, 2010

“Local governments have been hit with a one-two punch – State aid and property taxes” - Pew Charitable Trust Report

“Cities are still going to be facing very rough waters for the next couple of years…” – Wall Street Journal, August 11, 2012

“Municipal Tsunami” – Professor Raphael Caprio, Bloustein School of Planning and Public Policy, Rutgers University

THE STATE OF OUR CITY

As Margaret Thatcher said of Great Britain,

I was not elected to manage the decline of

the Great Britain.

THE STATE OF OUR CITY

Here in Englewood I can say,

Neither I nor the Council were elected to manage the decline of the City of Englewood…and we

have to make a plan now to work through the great recession by using the gifted assets of our

City and its people.

THE STATE OF OUR CITY

We knew something was wrong, that is why I created the Mayor’s Commission on budget and Finance – to study the problem.

How did we get here? Local – Mistakes of the past State – vise grip of the State government on

our budget and this Administration’s depletion of State Aid.

Economic – massive real estate downturn And…

THE STATE OF OUR CITY …WE ARE A MATURE ECONOMY.

THE STATE OF OUR CITY The perfect storm has come and it’s why I’m here…

to face the storm head on to meet these insurmountable challenges: Drop in Real Estate Values – NO NJ COMBACK Over reliance on property taxes throughout the State –

National Average of local property taxes is 29% and in NJ it is 70%.

Rising Health Care costs. Drastic Cuts in State Aid. High statewide unemployment rates at nearly 10% A historic and unprecedented number of tax appeals

State mandated, historic uncontrollable pension cost increases

Reliance on short term borrowing – weakening the balance sheet

THE STATE OF THE CITY

It becomes – in the real world outside of government an operational deficit.

For the first time, I have embarked on projecting the true finances, and we have a multimillion dollar structural deficit (without resorting to tax increases.)

We are faced with after four decades of rising real estate values and we have to plan and dig our way out.

THE STATE OF OUR CITY

2012 2013 2014 2015

($500,000.00)

$0.00

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

$3,000,000.00

($0.50)

$2,900,000.00

Deficits

Projected

And

Ris

ing…

.

THE STATE OF OUR CITY

2005 2006 2007 2008 2009 2010 2011$40,000,000

$45,000,000

$50,000,000

$55,000,000

$60,000,000

$65,000,000

THE STATE OF OUR CITY The Englewood Projections match with

Prof. Caprio’s. Upon taking office, I wanted to hit the

deficit head on….But as I was told when I came into office: “Don’t worry Frank in municipal

finance, we don’t have deficits, we just raise taxes.”

I said no, this is a new day.

STATE OF THE CITY

Now let’s drill deeper into the budget and dynamics that drive it because we have to understand where we came from before we know where we are going.

STATE OF THE CITY

Everyone is entitled to their own opinions, but not to their own facts. -Daniel Patrick Moynihan, U.S. Senator, New York

FINANCIAL CONDITION

OF THE CITY OF

ENGLEWOOD

FUNDING THE CITY GOVERNMENT

THE REVENUE SIDE OF THE CITY BUDGET

REVENUE, GENERALLY 1/5

10%

5%

70%

1% 8%

1%

3%

Revenue 2005

Surplus UtilizedLocal RevenuesProperty TaxesSpecial Items (non-recurring)State Aid - Un-restrictedState & Federal Grants - RestrictedDelinquent Taxes

REVENUE, GENERALLY 2/5

5%8%

75%

3%

1%

5% 1% 3%

Revenue 2011

Surplus Utilized Local RevenuesProperty Taxes Library (min)Special Items (non-recurring)

State Aid - Un-restricted

State & Federal Grants - Restricted

Delinquent Taxes

REVENUE, GENERALLY 3/5 In 2011, the amount of money raised

from Property Taxes had risen to 75%, while State Aid had declined to 50% of its 2005 number.

The hole in State Aid shifted the burden directly to Property Taxes.

The Governor should not balance the State’s own budget on the backs of municipalities.

REVENUE, GENERALLY 4/5

2005 2006 2007 2008 2009 2010 2011

Surplus Utilized

4800000 4479000 4800000 5000000 4800000 2600000 3100000

Local Rev-enues

2558221 3251908 3644400 4005625 4374000 4567000 4751000

Prop-erty Taxes

$34,208,21

3

$35,614,08

6

$38,576,15

0

$42,173,71

0

$44,245,34

8

$45,365,95

5

$45,246,88

9

Library (mini-mum)

NaN NaN NaN 1820235 1820235 1848665 1795551

Special Items (non-recur-ring)

700000 721000 NaN NaN NaN 1000000 500000

State Aid - Unre-stricted

4098447 4098447 4068703 3456110 3409372 2763296 2763296

State & Federal Grants - Re-stricted

535282 445993 143077 114693 508320 479194 605758

Delin-quent Taxes

1700000 1500000 1350000 1350000 1350000 1800000 1800000

$2,500,000

$7,500,000

$12,500,000

$17,500,000

$22,500,000

$27,500,000

$32,500,000

$37,500,000

$42,500,000

$47,500,000

$34,208,213 $35,614,086 $38,576,150

$42,173,710 $44,245,348 $45,365,955 $45,246,889

Revenue Detailed 2005 - 2011

REVENUE, GENERALLY 5/5 Our revenues have increased due to

out of control property taxes which we have put a stop to….for now.

REVENUE SIDE OF THE BUDGET 1/2

2005 2006 2007 2008 2009 2010 2011$40,000,000

$45,000,000

$50,000,000

$55,000,000

$60,000,000

$65,000,000

$48,600,163 $50,110,434

$52,582,330

$57,929,423

$60,387,843 $60,507,275 $60,562,494

Total Revenue 2005 - 2011

REVENUE SIDE OF THE BUDGET 2/2

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

-45.83%

78.87%

38.02%42.86%

-32.58%

-10.48%

5.88%

Revenue Variance 2005 vs. 2011 Budget

PROPERTY TAXES

Runaway Property Taxes disguise the City’s sustainable revenue base.

Property Taxes could be raised to feed spending when real estate was appreciating.

Now the reverse has happened and one consequence is the City must confront a massive amount of Property Tax appeals and refunds which at present totals $6 Million over a few short years.

SPENDING THE APPROPRIATIONS SIDE

OF THE CITY BUDGET

APPROPRIATIONS, GENERALLY1/5

2005 2006 2007 2008 2009 2010 2011$40,000,000

$45,000,000

$50,000,000

$55,000,000

$60,000,000

$65,000,000

$48,600,163 $50,110,434

$52,582,330

$57,929,423

$60,507,275 $60,443,110 $60,562,494

Total Appropriations 2005 - 2011

APPROPRIATIONS, GENERALLY 2/5

General Gov't6%

Land Use0%

Public Safety35%

Public Works10%

Community Svs.0%

Health & Human Svs.2%

Recreation2%

Construction Code1%

Library4%

Accumulated Leave1%

Utilities12%

Empl. Benefits4%

Insurance11%

Grants1%

Cap. Imprv. Fund0%

Debt Service6%

Deferred Charges & Contigent0%

RUCT5%

Appropriations 2005

APPROPRIATIONS, GENERALLY 3/5

General Gov't5%

Land Use0%

Public Safety32%

Public Works8%

Community Svs.0%

Health & Human Svs.1%

Recreation1%

Construction Code1%Library

4%

Accumulated Leave1%

Utilities10%

Empl. Benefits10%

Tax Appeals1%

Insurance10%

Grants1%

Debt Service6%

Deferred Charges & Contigent1%

RUCT5%

Appropriations 2011

APPROPRIATIONS, GENERALLY 4/5

Non-Operating Budget Items(Discretionary)

$4,150,2006.8%

Mandated Expenses (Fixed Costs)(Non-

Discretionary)$16,248,925

26.8%

Other Costs Not Reasonably Subject

to City Control(Non-Discre-

tionary)$2,640,019

4.4%

Employee-Related Costs

(Discretionary)$34,760,865

57.3%

Non-Employee Operating Budget (Discretionary)

$2,889,1714.8%

Budget Allocation: $60,562,494

APPROPRIATIONS, GENERALLY 5/5

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ries a

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Wages

O

ther

Expenses

Sala

ries a

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Wages

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Expenses

Sala

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Wages

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Expenses

Sala

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Wages

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Expenses

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Wages

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Expenses

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ries a

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Wages

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ther

Expenses

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ries a

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Expenses

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ries a

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ther

Expenses

Cit

y L

ibra

ry

Sala

ries a

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O

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Expenses

Uti

liti

es (

incl

Dum

pin

g F

ees

& S

ew

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Em

plo

yee

Benefits

(FIC

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& P

ensio

n)

Tax A

ppeals

Medic

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W

ork

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C

om

p

SU

I

O

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Sta

te &

Federa

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rants

- R

e-

str

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Capit

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Impro

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Fund

Debt

Serv

ice

Defe

rred

Charg

es &

C

onti

ngent

Reserv

e f

or

Uncollecte

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Taxes (

RU

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General Gov't

Land Use

Public Safety

PublicWorks

Com-munitySrvs.

Health &

HumanSrvs.

Recreation

Con-struc-tionCode

CityLi-

brary

Accum.Leave

Util. Empl.

Benef.

TaxAppeals

Insurance Grants

Cap.

Impr.

Fund

Debt

Srv.

Def.Chrgs.&

Cont.

RUCT

-50%

0%

50%

100%

150%

200%

250%

21.68%24.77%

0.00%-8.15%

18.33%

2.31%

11.45%-2.81%

0.00%

46.83%

-16.42%-17.77%-14.45%-39.05%

54.21%

6.90%

23.97%

9.04%

0.00%7.20%

204.42%

0.00%

28.44%

3.70%0.00%

35.98%

-8.60%

75.00%

10.90%9.62%

46.00%

Appropriation Variance 2005 vs. 2011 Budget

LABOR COSTS 1/3

Since 2005 to 2010, labor costs have ballooned and the City workforce, although having been lower in number, increased greatly in cost. In other words, we were paying significantly more for less workers.

EMPLOYEE RELATED COSTS2/3

Salaries and Wages; $27,649,207; 70.3%

Employee Benefits; $11,679,745; 29.7%

Employee Related Costs: $39,328,952

EMPLOYEE RELATED COSTS3/3

2010 Budget 2012 Budget$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

Total Salaries Bud-geted; $28,589,504

Total Salaries Bud-geted; $27,649,207

Total Employee Benefits;

$10,534,895

Total Employee Benefits;

$11,679,745

Total Salary and Benefits;

$39,124,399

Total Salary and Benefits;

$39,328,952

Salary and Benefits 2010 vs. 2012

MANDATED EXPENSES 1/2 Many of the expenses / appropriations

the City must make are mandated by State Law.

Those expenses cannot be controlled locally but must be paid locally out of our budget.

Statewide, 50% of every Property Tax Dollar saved must go to pay for a loss in State Aid.

MANDATED EXPENSES2/2

PFRS Pen-sion; $4,155,521; 25.6

%

PERS Pen-sion; $1,031,710;

6.4%

DCRP

Pen-sion; $28,000; 0.2%

Con-soli-dated Po-lice &

Fire Pen-sion; $31,817; 0.2%

Debt Service; $4,506,085; 27.8%

BCUA

Sewer

Treatmen

t Cost

s; 2967246; 18%

Garbage Dumping Fees

; 1055000; 7%

Recycling Tax; 45000; 0% Minimum Library Ap-

propriation; 1795551; 11%

Re-strict

ed Grants;

609697; 4%

Mandated Expenses (Fixed Costs): $16,221,627

MUNICIPAL STATE AID 1/3

MUNICIPAL STATE AID 2/3 The State controls a large portion of our

budget and also regulates how we spend it. Cuts in State Aid and Municipal mandates by

the State created a vise grip on municipalities and are a recipe for disaster.

State property tax caps with unintended consequences.

Despite this municipal aid has been cut drastically and the Administration has increased our spending, another perfect storm.

MUNICIPAL STATE AID3/3

2005 2006 2007 2008 2009 2010 2011$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

$4,500,000

$5,000,000

$4,691,600 $4,693,970

$4,308,629

$4,018,453 $3,949,298

$2,763,296 $2,763,296

Total Municipal State Aid 2005-2011

GOOD NEWS – DEBT SERVICE VS. BUDGET

2009 2010 2011$0.00

$10,000,000.00

$20,000,000.00

$30,000,000.00

$40,000,000.00

$50,000,000.00

$60,000,000.00

$70,000,000.00

Total DebtBudget

BAD NEWS – SHORT TERM DEBT

But every Silver Lining has its cloud. The City has used Bond Anticipation Notes

(BANs) for short term borrowing (effectively the same as a home equity loan) disguising the real interest cost and principal amount without any real plan to repay the debt. This further fuels the fire.

From 2005, a financial gimmick was used to kick the can down the road to this Mayor and Council.

The Debt we took on was not used to fund any meaningful capital improvements.

DEBT SERVICE 2011, 2012, 2013

2011 2012 20130.00

1,000,000.00

2,000,000.00

3,000,000.00

4,000,000.00

5,000,000.00

6,000,000.00

$4,506,085.00 $4,594,293.00

$5,525,000.00

Debt Service Payments

Debt Service Payments

Projected

THE TURNAROUND

OF THE CITY OF

ENGLEWOOD

THE TURNAROUND

When I came into office, I set goals from day one which we as a City government would accomplish to bring the best practices from the business sector to the City government.

Here are the points of the Recovery Plan…

MANAGEMENT RESTRUCTURING

New management team in place to function as one cohesive strong management unit effective in running the operations of the City, including: New City Manager New CFO New Human Resources Director Construction Code Official And more…

GOVERNING BODY Doubled the number of Council

Meetings and increased Workshop sessions – Council monitors City operations if there is an issue, Council can fix it.

Council workshops were created to discuss important Council business prior to regular voting meetings.

This was to improve accountability and transparency of City government.

BOARDS AND COMMISSIONS

Englewood Economic Development Corporation (EEDC) reorganized and redirected as planning body.

Reorganization of the Environmental Commission.

All Boards and Commissions will report quarterly to the Mayor and Council to promote accountability, responsibility and ownership.

COMMUNITY PROGRAMMING 1/3

Residents have clamored for a Community Center for years, maybe even decades.

The first step is to provide service programming utilizing existing City facilities from MacKay Park to Liberty School.

COMMUNITY PROGRAMMING2/3 Creating Partnerships between the

City of Englewood, Not-for-Profits and the Philanthropic Sector to achieve Community Programming far beyond what each could do on its own.

COMMUNITY PROGRAMMING3/3 These partnerships will enable the

development of programs for children and adults.

Also, After 3 programs and SBYD – Sports Based Youth Development.

DEMANDING LIGHT RAIL1/2 INFRASTRUCTURE - As a mature

City infrastructure is key to enhancing our property value and improving our way of life.

Light Rail is a critical part of this plan.

DEMANDING LIGHT RAIL2/2 Multiple Station Stops in the City

of Englewood will: Improve traffic flow Increase Commuter Flow –

making Englewood more desirable for employers and commuters.

Raise Property Values

CITYWIDE MAINTENANCE PROGRAM 1/2

Creation of maintenance, deferred maintenance programs and capital budgeting to identify and prioritize

needs.

The City did not maintain an effective maintenance program for roads and City properties.

Using existing resources, we have developed a regular maintenance program for downtown, roads and City Properties enhancing its value as a City asset.

CITYWIDE MAINTENANCE PROGRAM 2/2

PSE&G UTILITIES PROGRAMS

When PSE&G was slow on response time during Hurricane Irene and the October 2011 Snow Storm – we sued, holding them accountable.

Now we have established a working relationship where the company is upgrading infrastructure to make the City more resilient.

THE MASTER PLAN 1/3 Two fold:

The Master Plan was stale, not taking into account the vibrant and changing community Englewood is and to meet the 21st century problems and opportunities.

The existing Plan does not make the community and its tax base stable and sustainable for the long term.

Bringing nationally recognized professionals to undertake a historic, community based approach to the new Master Plan.

THE MASTER PLAN 2/3 Together with our Professionals

Brown and Keener and Regional Plan Association, the City is developing a plan that will be multigenerational.

The Community based approach ensures that all facets of the Englewood are represented, from residents, to merchants to clergy and more.

THE MASTER PLAN 3/3

The process is going on right now with public hearings being held.

NEXT MEETING – October 22nd @7PM at Ahavath Torah.

LOBBYING THE STATE 1/3

As you just heard from Professor Caprio, the control of our local budget is not only pervasive but also is leading us down a destructive path.

Lobby the State more effectively for positive change and join together with other municipalities to do so.

LOBBYING THE STATE 2/3

Together with other Bergen County Municipalities, we can lobby for: Light Rail Infrastructure for North

Jersey A Moratorium on draconian

cuts to municipal aid. A Statewide Economic Policy

Plan

LOBBYING THE STATE 3/3

A Statewide Economic Policy Plan The State does not have an

effective economic policy plan, there is a lack of focus on establishing true economic policy to generate jobs from the bottom up.

The Plan can be coordinative sewing together the strengths of all NJ’s municipalities, Counties and regions.

DEVELOPMENT OF LINCOLN SCHOOL Lincoln School sat dormant for years

heading into the 2008 financial collapse.

There was no opportunity post-2008 with the freezing of capital and credit markets.

2012-2013 is a new day for the Lincoln School but short cuts will not be taken with its redevelopment . Its future is tied to the Master plan.

RE-ENGINEERING THE CITY’S ENTERPRISE ZONE

An EEDC initiative to re-energize our enterprise, commercial and industrial zones.

Work with the State Economic Development Authority (NJEDA) in order to capitalize on the new decade of jobs in high tech, bio pharmaceuticals, laboratories, etc.

Also to leverage our proximity to New York City.

JAMES STREET AND SHOP RITE

Accomplishing two parallel goals, creating a strong community and enhancing the economic development of the City.

James Street will have 11 single family homes, owner occupied.

Shop Rite Expansion of the current market. The Master Plan recognizes the need for a central shopping area with national brand stores. At a time when many national supermarket chains

are declining, this is one that is willing to expand in Englewood.

CREATION OF OPERATIONAL EFFICIENCIES We have continued to institute a plan to maximize operation efficiencies, including without limitation to:

Creation of a Debt Amortization Plan. Turning Liberty School into a performing asset. Continuing enhancement of the new deferred maintenance program on City

Buildings and roads. Merger of the Emergency Medical Services into Englewood Hospital. Merging the Police Department and Fire Department dispatch operations. Incorporating the Boys and Girls Club into the management of the Wright Arena to

greatly enhance services. Bring YWCA and Boys and Girls Club into the city to enhance services. Improvement of Parking areas city wide. Reducing Costs of operation of parking garage through utilization of technology. Reorganizing the permitting process to go paperless and electronic. Continue reduction of City workforce where it makes sense. Improvement in Human Resources and training of workforce. Replacement of antiquated phone system and equipment. In consultation of shared services with neighboring municipalities. Adopted the Recommendations of the Mayor’s Commission on Budget and Finance

Report of June 23, 2011. Reconstituted the successful Mayor’s Commission on Budget and Finance with a new

mission.

RECOGNITION OF OPERATIONAL COSTS We can’t run from issues – hard choices

will have to be made between the costs of labor and the cutting of critical services.

Labor cost currently reflect the revenue structure of a booming economy and do not take into account the new reality of a coming municipal tsunami.

ENGLEWOOD ONE COMMUNITY

We are One Community. Diversity is our Strength. To continue to deliver the services our

community needs we must prepare ourselves to make the difficult choices ahead.

THANK YOU.