The COVID-19 Era Case for Municipal Consolidation

With people out of work, municipalities in need of money, and taxes already onerous in New Jersey, could this be the best possible moment for advocates of municipal consolidation to make their case?

The coronavirus has impacted all aspects of daily life, both at home and in the community.  In addition to the very obvious clear and present danger posed to the health and well-being of individuals, the financial fears which follow have only added to the woes brought by COVID-19.  With millions of Americans losing their jobs in record time, stores and businesses have shuttered their doors from coast to coast.  Municipalities have to face the financial shadow looming over them and determine the best ways to turn their respective ships around before being cast over a fiscal cliff.  With unexpected expenditures associated with COVID-19 sapping public funds, combined with a shortage of revenues from taxes, permits, licenses, and other sources, politicians are hard pressed for options.  New Jersey, already one of the most heavily taxed states in the union, has been experiencing an exodus over the years, as residents look for cheaper places to call home.  With that in mind, leaders are wary of looking to make up the shortfalls simply by hiking up taxes, lest they create a more inhospitable environment to live and do business.

“We found that people were working 2 to 3 months just to pay their property taxes,” Gina Genovese, Founder and Executive Director of Courage To Connect NJ, said.  “If that goes 3 to 4 months, maybe people will start insisting that we look into ways to reduce our property taxes.  It has to come from the people.  They have to push it.  I think this is a clear opportunity if people feel that they want more for their money.”

When asked about the biggest hurdle, the former Long Hill Township mayor was clear.  “The status quo is extremely strong.  You not only have elected officials, you have municipal chairs, you have county chairs, and they’re going to lose their appointments.  They’re going to lose their contracts, there’s a lot on the table here and they’re absolutely not going to relinquish their power.  They frighten the people by saying ‘you’re going to lose your sense of community.’  Remember, our high property taxes pay for services, not our sense of community.  So that right there is stoking fears in people.  They can’t look at what the reality is, which I was able to do since I was the elected mayor of my town and also a small business owner.  I realized there were very few options for managing tax increases, and the only way we could do it is to form more regional ways to deliver services and larger, efficient structures.”

Could New Jerseyans collectively use their voices to essentially undo Boroughitis, the late Victorian phenomenon that shattered the map into a patchwork quilt?

“If people start to realize they have the power in this,” Genovese said.  “They need to coalesce around the idea that they absolutely can pay less for the services that are being delivered if we do it in a more efficient manner.  They have to get angry or motivated enough to put their foot down and be educated.  That’s what Courage To Connect NJ has been about the last ten years.  But, again, it is very difficult when you have county chairs who do not want to lose their appointments because that serves them and their power.  You have local elected officials who are so adamantly against consolidation but they’re making huge salaries or taking bribes.  Then you realize their motivation is not about people losing their sense of community or identity.  It’s about them.”

Every student knows that in the United States, there are federal, state, county, and local levels of government.  When collective action is needed, however, the system can show some shortcomings in terms of efficiency and direction.  “You see what decentralized government is with coronavirus,” Genovese said, “you see that there’s a federal government and fifty states.  We have decentralized government here with one governor and 565 towns and over 600 school districts, which are huge money drains.”

As Genovese advocates of the consolidation of municipalities themselves—more than just shared service agreements in which she has little confidence—doing so would require support and action on the part of Trenton.  That, of course, demonstrates another institutional obstacle.  “When you’re in the state level, you have a district that has, perhaps 12 or 28 mayors in it,” Genovese said “and you have to make sure that that relationship continues.  I have never seen a lobbyist who comes to Trenton who was there for the little people who are working 2 to 3 months to pay their taxes.  There’s nobody there representing them.  So, I don’t see a state official sticking his neck out.”  Genovese said that former Senator Bob Gordon and Senator Vin Gopal had been willing to discuss the idea, however.  “To get a mass of [state politicians] to talk about it is very difficult.  So it either has to come from the governor or the people at this point.”

Genovese said that the coronavirus was “exposing” how the fractured governments are struggling to survive.  “Perhaps if they were bigger there would still be some struggles.  A lot of New Jersey municipalities have a decline in school enrollment, hovering around 30%, which makes counties like Sussex and Salem having to spend more per pupil.  We are starting to see these demographic changes that are not really benefiting from having all these fractured governmental entities—it’s really taxing those communities.  Things are changing in New Jersey demographically and coronavirus has made that even more apparent.  We need to ask, is what we are doing working or can we do something better?”

For Genovese, a brave example needs to be set to serve as a model for other municipalities to study, as far as making larger entities is concerned.  “We need to have a pilot, like a Salem county which has a population of 62,000 and 15 towns.  We need to have the state government support an effort there, so instead of chipping away towns, we need to have towns that can step up, and get support from the state to make sure that it happens.”

Intashan Chowdhury, Borough Administrator of Prospect Park, the smallest municipality in Passaic County and among the smallest in the state, thinks that a more gradual approach would be best.  He advocates for shared services agreements, and the expansions thereof, before actual political mergers should take place.  “I think it is a great opportunity for municipalities to think about the inter-local service agreements they might have with other municipalities or school boards.  For the recipient of the shared services, you’re able to get a much-needed service while cutting costs, and for the provider, you get to generate much-needed revenue.  I think this virus plays a huge role because unexpected expenditures are increasing while paid revenues are decreasing, since government has halted.  Courts have been suspended, building and construction departments are slowing down with permits, recreation departments are slow, so municipalities have to get a bit creative.  But I think if municipalities were to consolidate services more, they’d have more flexibility in terms of their budget.”

Home rule is alive and well in New Jersey, and to Chowdhury, this presents both opportunities as well as challenges for residents and governments.  “I think the numbers speak for themselves.  In New Jersey, there are 565 municipalities, more than the state of California, we have so many in such a small area, while in California there’s more land and they have fewer municipalities.  Fire departments are already doing mutual aid and a lot of their calls aren’t in their towns, answering calls for other towns.  I think, however, for the sake of the local elected officials, there’s a positive and negative to home rule.  You know what you’re getting in terms of leadership and departments when you have your own chiefs.  It creates comfort for the public as you can control the environment much more than if you were outsourcing or merging with others.  It’s a double-edged sword.”

Enter coronavirus.  Few Americans can say that they have lived through a time which so fundamentally required a change in behavior and, for the first time since the Spanish Flu pandemic of 1918, businesses have been forced to close to slow its spread.  “This public health crisis wakes you up,” Chowdhury said.  “In two weeks after the crisis, in March when things were kicking up, you saw people already thinking about what to do if they can’t pay their taxes or mortgage—or their rent—which supports landlords and mortgages.  What happens then?  Property taxes are a huge revenue source for municipalities.  The fact that that component plays a huge role and that things can shift within one or two weeks, shows if you were to consolidate more or merge services, I think that would have made more flexibility.  But in New Jersey, it’s a hyper political state, a lot of layers—it’s very progressive but there’s a lot of home rule creating barriers for consolidation.  It becomes a buzzword.”

When asked about some concrete examples that people could look at, Chowdhury said that he had spoken with Brian Wilton, former mayor of Lake Como.  “He’s big on shared services and consolidation, and he said that they consolidated their police department and handed the keys to Belmar.”

According to reports, Wilton played a critical role in outsourcing Lake Como’s fire department and first aid squad to Belmar when the latter’s response rate was seen to be declining.  Wilton also instituted a ten year police contract with Belmar that saw the dissolution of Lake Como’s 10-member home police force.

And there’s the other extreme—micro-municipalities such as Guttenberg, Hi-Nella, Teterboro, Victory Gardens, Shrewsbury Township, Audubon Park, and Loch Arbour.  “You’ve still got towns like Tavistock with five people that are operating,” Chowdhury noted.  That municipality, the smallest in the state, is essentially a country club golf course and three households.  Perhaps unsurprisingly, Tavistock also had a reported average property tax bill of $31,376, making it the highest taxed municipality in Camden county.

When Passaic County was created on February 7, 1837, Manchester Township came into being from territory that had been Saddle River Township in Bergen County.  Encompassing areas that are now held by Prospect Park, Hawthorne, North Haledon, Haledon, Totowa, and parts of Paterson, Manchester Township was a victim of Boroughitis in the late 19th Century.  Hawthorne and Totowa broke away in 1898.  Then Prospect Park and North Haledon broke off in 1901.  Manchester Township ceased to exist when the remaining part became incorporated as the Borough of Haledon in 1908 following a referendum.  But could Manchester Township realistically be resurrected with sufficient popular and political will?  Chowdhury was not willing to jump on board right away—and potentially champion a process that could put himself out of a job.  He favored a slower, measured approach, but was not completely dismissive of seeing Manchester rise from the political grave.  “I think local government has been efficient for the most part.  Being a small town, do we ache for resources compared to larger towns?  Of course we do.  I believe when it comes to looking at services, people should look at it year to year.  Before you go to consolidation, people need to have more inter-local service agreements.  That could lend itself to consolidation.  I don’t think you can just go to consolidation without thinking about shared service agreements.  Then and only then, who knows, maybe merging the towns and recreating Manchester Township wouldn’t be so bad.  But the first step in order to analyze this is to encourage municipalities to enter into more local service agreements.  I think you have to do it incrementally, you can’t jump into consolidation without looking at and analyzing what is working and what is not.  Ultimately, the locals will determine.”

Using little Lake Como as an example, Chowdhury believed that the discussion could begin with looking at what had happened there.  “If you look at some towns that started sharing services, they would start getting rid of their police departments for a larger agency, EMS, or Fire.  At first, when you talk about first responders, it is a touchy subject but they did that to work on the rest.  I think as people start consolidating, then eventually these small municipalities may not exist.”  Chowdhury added that this seemed more likely in particularly rural parts of the United States.  “I think it is something that is harder, in terms of population, in New Jersey and New York.”

Joseph DeMarco served the City of Bayonne for four years as their Business Administrator, and three years as Business Administrator and Assistant Town Attorney of West New York.  He saw some practical problems for revenue-strapped municipalities with respect to the coronavirus and shedding home rule institutions.  “I think it’s a Catch-22, because, yes, for cost-savings there are things you can say we collectively do better, like respond to a pandemic.  We’re all fighting for the same supplies.  If there was a county-wide or region-wide purchasing facility, instead of 10 towns trying to buy masks and gloves, you have one county buying through a co-op or something like that.  The challenge is when you do shared services for something like health officers.  You run the risk of having one health officer and a streamlined department and now you’re facing a pandemic.  You ask if everyone would be better served if they had more staff?  That’s always the risk and the balance you trade off on: is there a reduction of service or ability to respond with a cost savings?  But that’s what municipal government is all about when it is said and done.”

DeMarco acknowledged the deep-rooted tribalism in New Jersey local politics, despite municipalities working together to some varying extent.  “When there’s an emergency in a small town–a big fire—and there’s something going on in a neighboring city, it’s about the resources.  It’s the age old debate of local rule in New Jersey.  ‘I’m a little municipality, I want my individuality’, but that comes, unfortunately, with a price tag, and that’s the challenge.  I think what you really learn from the pandemic isn’t so much about shared service agreements, per se, where we share the same health officer, but mutual aid agreements.  How do we all come together when you need the aid?  How do I get it from a neighbor, or the county, or things like that?  What is the mechanism we use to engage?  I think those things, especially at this time, if they were in place and vetted properly—not just hollow—if someone went through the process to say they could give additional coverage or things of that nature, in retrospect, would’ve served people as they would have a playbook.  And that’s what the Office of Emergency Management is for, to figure those things out, get in control, and deal with it.”

Genovese, Chowdhury, and DeMarco all looked at less urban examples first when it came to practical consolidation.  “I think consolidation is best for rural areas,” DeMarco said.  “The urban areas have a bigger economic base, are traditionally professionally served by police and fire.  You have rural areas in New Jersey where their police are the state troopers.  But there are differences.  Their taxes on evaluation are much lower than the taxes on an urban center covering all that cost.  You get the government that you pay for.”

Looking at Jersey City with a $70 million shortfall, DeMarco took it further and projected the fiscal crisis onto a bigger map.  Mayor Steven Fulop was swapped out with Governor Phil Murphy.  “Jersey City’s problem is minor compared to a state where there’s no one paying sales tax.  What’s everyone buying now?  Food.  No one is at the Bridgewater Mall, there’s no sales tax on food.  If you’re looking far out ahead, you ask what is the state budget looking like on September 30?  I don’t know if anyone has that answer yet.”

Although a request for an interview with New Jersey Shared Services “Czar” Nicolas Platt did not receive a response, former assemblyman and Republican gubernatorial candidate Jack Ciattarelli offered his insights when asked if municipal mergers and shared services could be a path forward for struggling towns.  Ciattarelli holds claim to some unique experience, since he had a role in one of the few concrete examples of municipal mergers in recent New Jersey history.  “When I was in the state legislature, my district included Princeton Borough and Princeton Township.  During my tenure there, they became one… I assisted with the state picking up 100% of the one-time upfront costs of consolidation that sometimes are an impediment,” Ciattarelli said.  “All the tax maps have to be redrawn.  All the bonding needs to be refinanced—the logos on the police cars to take it to the most granular level.  You can’t believe all the things you need to do when you consolidate two towns, and the upfront costs sometimes serves as an impediment.  What we did then was the state picked up 100% of the upfront costs so it was not an impediment.”

This was an example which echoed Genovese’s call for a pilot, or an example by which others could follow going forward.  All those interviewed agreed that the local political establishment would, at the absolute minimum, be disinclined to dispossess themselves of their perches.  Ciattarelli recounted a story which demonstrated mayoral opposition when he was in county government.  “One of the reasons I became a freeholder was because I saw the waste and inefficiency that came with all the duplication across our 21 towns, 19 of which had their own police departments, and certainly that’s the case with our 565 towns throughout New Jersey,” Ciattarelli said.  “When I was a freeholder, I put forth a 2 year study that demonstrated that a regional approach to local law enforcement would be much more cost efficient and offer an improved quality of service.  It saved $94 million in property taxes over a ten year period and on Day One had 63 fewer people on the payroll.  At the very beginning, the vote was 19-0 to go ahead with the study from the 19 mayors whose towns had police departments.  When the study was over and it was time to implement its findings, the vote was 17-2, against.  Seventeen mayors voted no.”

With the institutional establishment being what it is, inherently designed for self-perpetuation, Ciattarelli said, “At the end of the day it’s got to be up to the local people.  They’ve got to put the pressure on their local leadership to do these regionalized plans, projects, and consolidations when it makes good sense.”

The former assemblyman expounded on a different idea—instead of eliminating the municipal level, abolishing the county level as seen in some other parts of the US.  That type of approach could work in certain instances, but New Jersey might not be the best fit for it due to the initial problem provoking the conversation in the first place: small municipalities.  “I would agree that we can eliminate county government if our municipalities were much bigger, but they’re not.  For example, if you look at other states, it’s either the county or the townships where most of the local governmental services are since the townships are so big.”

On top of that, the state itself would present a particularly massive institutional legal impediment.  “You’d have to change the constitution, which is fine by me, I’ve called for a constitutional convention.  I don’t think our 1947 state constitution addresses today’s realities well, particularly on educational funding and affordable housing.”

Assuming that counties were abolished in New Jersey, Ciattarelli said there would be other problems if 19th Century-style large townships were not replacing the current bewildering, Holy Roman Empire-like municipal map of New Jersey.  “The challenge is delegating.”  Ciattarelli cited the county clerks, surrogates, prosecutors, and sheriffs—all county officers who serve a regional role which would otherwise have to be handled locally.  “If you get rid of county government, are each of our 565 towns going to take that over?  When I was a freeholder—and I was a municipal official, too—I never had a mayor come to me and say, ‘we want to pick up our own recycling, we’ll get our own trucks, we don’t want the county to do our recycling anymore’.  A regionalized approach to services works. And I think it’s better, for example, in any crisis, the Office of Emergency Management is handled by the county.  I think the counties actually do a very good job.”

The effects of COVID-19 on municipal finance will be analyzed, discussed, and worried over for years to come.  However, the options available to those municipalities, and the residents who call them home, will be determined by the particular circumstances which are so unique to New Jersey’s political demands, as well as its fiercely defended identity.  While those interviewed did not have uniform ideas of approach, they all did agree that the power to do so ultimately lay in the hands of the people.  Will New Jerseyans demand to dissolve political barriers with their neighbors, or continue to look to for solutions within their own familiar borders?

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