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By A. Thornton Bishop, Chairman, Planning Board The Sunday Sun, April 28, 1946 |
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PART IX
Teaneck's Financial Stability
One of the old axioms we have come to regard as irrefutable is that a burden is carried more easily when distributed on many shoulders. It has the logic common among the laws of physics. But what may be true in science falls to apply in the field of municipal finance. Paradoxically, it seems that as the number of taxpayers increase, instead of sharing the cost of governmental operation, lightening the burden each citizen must share, the cost for each taxpayer increases. At least, this is the experience among a majority of local governments. This condition, so difficult to believe, is not always the result of mismanagement of public affairs. It is chiefly because the costs for the municipal service demanded by the increasing population mount at a higher ratio than the increase in population figure.
A parcel of farm land or an area undeveloped with living accommodations requires practically no municipal service. Sewers are not needed, police and fire protection are not urgent, there are no streets to pave, and there are no children to send to school. A high percentage of whatever taxes are paid to the local government represents a profit to the municipality; the property asks little in return.
Chances When House Is Built
However, when a house is built and a family moves on the tract, the need for service begins. Protection in case of fire, and possibly from theft, start the demands. Provision must be made for the education of children, and as other houses are built the list of services required increases. Sewage disposal becomes a problem, and roadways must be maintained. It Is not long before the municipality faces the problem of issuing assessment bonds to finance the needed improvements, and distribute the cost over a period of years in the hope that other abutting property-owners will avail themselves of the improvement and help to liquidate the town's investment.
These are the years when the municipality may be said to be experiencing its "growing pains" and caution must be exercised by the town fathers to avoid improvement projects becoming too extensive and beyond the ability of the taxpayers to absorb. Many a community of hard-working, honest citizens have found themselves faced with financial disaster because of commitments made by their municipal officials that they could not meet in the progress of their normal growth. Teaneck found itself in such a situation in 1929.
Township Exceeded Debt Limit in 1929
After nine years of increasingly inefficient and costly administration, the local government reached a crisis. Assessment bonds had been issued to finance many concrete roadways which traverse large areas of undeveloped land. In 1929 the Township reached its liberal debit limit and in 1930 exceeded it by approximately $1,500,000. The gross debt was well over $6,000,000 and the annual interest on it more than $300,000. The amount appropriated in the annual budget for payment of interest on the debt was more than half the total to be raised by taxation for Township purposes.
At this time the population was approximately 16,500 and though this represented an increase of 400 per cent over the figure shown in the 1920 census, the financial obligations imposed upon this number of taxpayers was out of proportion to their ability to absorb. The per capita net debt of the Township--that is, the gross debit less the amount of cash on hand available for debt payment--increased from $237 in 1922 to $480 in 1928, or a trifle over 100 per cent in six years.
During the nine years from 1920 to 1929 the annual budget increased 1,560 per cent, while the per capita cost for the Township's government rose from $9.10 to $43.30, or nearly 400 per cent.
Township Faced Bankruptcy
The Township's bonded debt was due for payment in such amounts as would force the government into bankruptcy at an early date. Of the $5,544,000 outstanding as of January 1, 1930, maturities were scheduled as follows:
1930, $396,000; 1931, $406,000; 1932, $406,000; 1933, $846,000; 1934, $1,609,000; 1935, $549,000; 1936, $548,000; 1937, $441,000; 1938, $154,000; or a total of $5,355,000.
The balance of $189,000 was spread over the following twenty-seven years.
Manager Form Adopted
The people of Teaneck had tried bi-partisan administrations, and finding no improvement in their local government under either party, adopted the Municipal Manager form of government in a referendum held on September 16, 1930. The election of the first Council under the Municipal Manager Act was held, as required by the Act, on the fourth Tuesday following the referendum, and consequently on October 14th five non-partisan candidates endorsed by the Teaneck Taxpayers League, were elected.
The first and most important task of the new Council, after organizing, was to complete the formation of the governing body by the selection and appointment of a Township Manager. The next step was unprecedented; it was to select as Township auditor the Department of Municipal Accounts of the State of New Jersey, and for the first time Teaneck had an independent, non-political auditor. The Township accounts were in such a muddled condition that it took the state auditors almost a year to complete the audit for 1930. They had to go back through various Township and County records to the year 1911 before they could strike a balance. Financial records of the Township's transactions had been found totally inadequate, some accounts were not complete while others were lacking. Expenditures had been made without appropriations, accounts did not balance, and it had been impossible to tell at any time the exact financial position of the Township.
Install New Records and System
Under the direction of the Department of Municipal Accounts, the new Township officials installed new records and a new accounting system. Ever since, the books have been kept in excellent condition, and it is now possible to tell at any time the Township's exact financial position.
Availing themselves of the opportunity of bringing the finances of the Township into an orderly arrangement, the Township officials chose provisions offered in Chapter 233 of the Laws of 1934 of New Jersey, and arranged for the refunding of the bonded debt, sustaining the Township's credit to the mutual advantage of its bondholders and the taxpayers. Under the provisions of this Act it was possible to issue $2,898,000 of 21-year serial bonds, bearing five per cent interest, and with the yearly maturities of an approximately equal amount so that it fits in with other necessary debt service payments.
Budget Economies Effected
In the meantime, the new Council effected many economies and the annual budget started to decline. In 1931 the total amount to be raised by taxation was more than $83,000 below the 1930 budget. In the same year the statutory net debt was reduced by $720,000, and the net debt percentage was reduced from 9.059 to 4.85. Teaneck was now within the statutory debt limit of seven per cent. In 1932 the net debt was further reduced by $200,000, and by 1934 the gross debt had been reduced by $1,600,000, and nearly $500,000 of had been bought by the Township in advance of their maturities, effecting a saving of more than $45,000 in principal and interest. Throughout the years, Teaneck has continued its reduction of the debt and since January 1, 1931 has paid off $4,021,512.47 or approximately seventy per cent of its bonds. As of December 31,1944, the net debt stood at $1,741,538.74.
This has been the result of sound and conservative financial planning by the Township's officials. Under present schedules of bond maturities, Teaneck will be practically free from its present debt by 1956. The future will be what we make it.
