The following is a letter written by Union County Manager Alfred J. Faella to members of the Union County Board of Chosen Freeholders, regarding the 2013 Executive Budget.
We are now at the beginning of a second year of what is a multi-year budgetary turnaround, as we have closed an approximate $28 million budget gap.
Overall, the County appears to have stemmed the tide of eroding revenue collections in line with the national recovery, while taking long term steps to create new revenue streams, and implement proactive measures controlling our costs for future budgets.
This year, we have turned our attention to the completion of several areas identified in last year’s executive budget for reform: Runnells Specialized Hospital, the Watchung Stables and the Union County Jail. It should be noted that we’ve commissioned studies in all three areas.
Last year, we completed the privatization of dietary and housekeeping services of Runnells to achieve a substantial savings. This year within the next six to eight weeks, we will review the results of a study we’ve commissioned regarding the future operations of the hospital and work toward a final policy implementation.
Over the past three years, Mercer, Cumberland, Sussex, Salem and Burlington Counties have all either privatized or sold their hospitals/nursing homes. Monmouth County is currently seeking to do the same. We do not take this decision lightly, and will work to painstakingly review every angle before determining a final course.
There is much at stake. The County’s annual subsidy was approximately $17 million at the close of 2011, and it is fair to say we anticipate a similar amount if not more for 2012. It should be noted that further reductions in Medicare and Medicaid reimbursements are expected to continue.
Additionally, the County has received a feasibility study it commissioned on the Watchung Stables, and we are currently putting together a business plan to be considered for implementation within the next six weeks. Any reforms put in place will help stem an approximate $600,000 loss the stables incur annually.
A third area worth mentioning is the County Jail, which costs more than $50 million to operate, inclusive of fringe benefits. We currently have two studies that are ongoing.
The first management study, approved during the Summer, is underway at the county jail, reviewing management, personnel matters, staffing levels, custodial care, budget creation and management and labor contracts at the jail. The report is expected to be completed within the next 30 days and will be reviewed upon completion for implementation.
We are already reaping benefits from a second study, conducted through Luminosity, which began in January, 2012. This study, through the engagement of stakeholders, that include our Courts system and law enforcement agencies, has helped reduce the daily population of the jail by 17 percent, saving at least $500,000 in food and medical costs.
It has also enabled the County to embark on a state-mandated renovation of the jail, and also help save the County as much as several million dollars as there are less prisoners that need to be placed temporarily at outside facilities during the renovation. The Freeholder Board recently extended the Luminosity study for several more months, and received more good news this past week, when state officials announced it would fill vacancies in the Union County vicinage. Union County currently has 10 judicial vacancies out of a full complement of 25, and any effort to fill these vacancies would speed the processing of inmates through the jail, further decreasing the institution’s daily population’s numbers — and costs.
The Luminosity Study has also enabled the County to begin marketing the old juvenile detention center at Caldwell Place and Elizabethtown Plaza, which was closed during the middle of the previous decade. This facility has undergone a renovation to convert it to adult correctional space. The renovation is near completion.
The County had originally planned to use the facility for overflow or “swing” space for the Union County Jail, but as the Luminosity Study has helped reduce prison population numbers, the County can now market the space for rental or lease as a correctional facility — and create a new revenue source.
As we examine the budget as a whole, new revenue sources are desperately needed, even as overall revenue collections were near flat in 2012 (in 2011, we sustained a $9.2 million drop). The County once again suffered from a reduction in state and federal reimbursements, as well as increased mandated costs, which included contractual salary costs, health insurance and pensions, and a financial impact from Hurricane Sandy.
Some of the major drivers of our deficit included:
- A $5.8 million dollar rise in contractual salaries, pensions and health insurance costs. Even with this increase, there is better news ahead in our future budgets. We have already witnessed reductions in the rate of increase of pension and health costs due to statewide reforms, and now have an outstanding opportunity to implement long-term control over salary costs as 19 of 22 the County’s bargaining units have expired contracts. Our goal will be to negotiate balanced contracts with an eye toward further controlling costs.
- A $3.8 million decrease in state and federal reimbursements which impacted Runnells and our Department of Human Services. Further reductions in revenue can be expected as the state implements reimbursement through managed care contracts.
- A $6 million rise in debt service for much needed public investments largely in our County College and Vocational Technical educational system, transportation infrastructure (roads and bridges), improvements in our parks system, and the construction of the state-mandated family court. These bonds also helped finance the construction of the Union County College School for Nursing, which has helped make the College the largest educator of Allied healthcare professionals in New Jersey. Please read on to my additional comments on this matter below.
- A $1 million expense caused by Hurricane Sandy, which damaged over 11,000 homes, and caused $45 million in damage to public sector property;
- A loss of $975,000 in revenues through the rental of beds in the Juvenile Detention Center as Bergen County’s contract to lease beds from Union County ended with the opening of their new juvenile detention facility. As mentioned above, we are seeking to offset this loss through the potential lease of space at the old juvenile detention center.
The ongoing slump in New Jersey real estate values and the destructive impact of Hurricane Sandy plagued the county as the ratable base once again declined, by 3.8 percent to $65.9 billion. As a result of the weakness in the market, tax appeals have jumped an average of 35 percent over the past two years.
While these statistics may sound ominous, there appears to be signs of a recovery evident in a few areas where revenues increased.
Revenue collections jumped in our County Clerk’s Office to the tune of almost 20 percent in one year — a $1.1 million increase — to $6.8 million in the areas of realty transfer fees and business office fees. This is still down substantially from record highs several years ago, but nonetheless a noteworthy jump.
Next, our County Parks and Community Development Department increased its revenues by $250,000 — which may sound small but is actually remarkable since the hurricane closed many parks facilities for days if not weeks. This increase, which would have been substantially higher, was largely fueled by the Division of Golf Operations, which has now operated in the black for the past three years since the implementation of our turnaround plan. This year, we look forward to the opening of the Clubhouse at Galloping Hill Golf course in April. The opening will mark the final — and greatest — milepost in the transformation of our golf operations.
Speaking of revenues, through our aggressive pursuit of funding, we also managed to collect an additional $3.2 million in welfare reimbursements owed by the state.
Overall, we managed to close the budget gap, meeting the state cap on spending. This year’s Executive Budget is $506.4 million and would increase property taxes by an average of about $120.
Finally, I would like to now use this opportunity to address the importance of making public investments in Union County as it relates to our high quality of life and our debt service as noted above. Union County continues to rank highest among all counties to live in NJ in quality of life polls conducted:
- Three of our Union County Vocational Technical Schools earned a place in the 2012 Newsweek national list of top high schools in the country.
- In a poll conducted just a little more than a year or so ago, Union County scored 7th highest among all 21 New Jersey Counties in the Garden State Quality of Life index by Monmouth University. In comparison to its urban neighbors, Union County doubled the score of Essex County, while also besting nearby Hudson, Middlesex and Passaic Counties in the index.
- Four of our suburban municipalities polled in New Jersey Monthly’s 2012 Top 20 towns to live in — tied for the highest of any County in New Jersey.
We maintain a high quality of life in Union County and remain one of the most desirable places to live and raise a family. This is because we continue to make public investments in our educational systems, preserve open space (more than 300 acres in one of the nation’s most developed counties), maintain and improve our parks system, our cultural institutions, and our roads and bridges. Unfortunately quality does not come without cost. As I noted earlier, this year we will realize an increase in our debt service for a number of these improvements.
Overall, Union County continues to maintain a strong fiscal profile, with among the highest bond ratings attainable from the three major ratings agencies — Moody’s, Fitch, and Standard and Poors. In fact, a recent report from Fitch cited Union County’s “low debt levels,” noting that the County’s debt amortization is rapid and capital needs are modest with limited additional debt plans.
In line with our efforts to improve our quality of life, Chairman Carter has recently announced a series of five initiatives entitled “Helping our Families and Empowering Women.”
These initiatives are designed to jumpstart economic growth, provide jobs training, improve public safety, encourage green practices and assist women. Some highlights include:
- The development of new jobs training and business assistance programs. “Union County Choices,” a targeted jobs training program involving Union County College, will provide courses the priority fields of Healthcare/Allied Health, Transportations and logistics, and Retail/Hospitality. We will also continue to build on the success of the “Union County Means Business” program by hosting an additional four forums. One of these forums will focus on the specific needs of women in business.
- We will implement green and energy-saving initiatives: The County will explore a Community Energy Aggregation program designed allowing residents, business and governments to purchase low-cost electricity. The County will also take the lead in undertaking the development and implementation of an Energy Efficiency assistance program allowing governmental bodies to reduce energy consumption through the installation of energy efficient boilers, lights and HVAC equipment.
- We will pursue a partnership with a local Domestic Violence Shelter for battered women and provide training programs, enabling these women to enter or re-enter the workforce and become self-sustaining and independent.
As we look ahead, there is much work that we need to do in order to achieve our goals. I look forward to working with the Freeholder Board, our County employees and our residents to continue our progress.
Alfred J. Faella
Union County Manager