On Thursday May 5^th, Trenton’s City Council will vote on an administration proposal to sell a bond (i.e. take out a long term loan) to pay a debt to the Internal Revenue Service caused by our payroll company (IPS) having stolen employee payroll taxes.   The amount of money is large, $4.7M so paying for it out of Trenton’s current funds is impractical.

As of this writing neither the public, City Council nor I know the proposed term of the bonds (I assume 15 years),  whether this is all that Trenton will owe (do we owe the State of New Jersey money?), will we recover money from IPS (the thief) or even how did this happen?  The City of Trenton has been stingy on letting taxpayers know what’s happened to their money.   That’s too bad but blogger Kevin Moriarty has done a great job writing about it and actually researching what’s going on.

I’m hopefully calling this a mistake because our administration shouldn’t have been so lax in its supervision of IPS.   It was a mistake to renew IPS’ contract even after the city was warned that IPS hadn’t been paying payroll taxes to the Federal Government.   Kevin’s research is turning up facts that potentially make this worse than a mistake, but for now I’ll chalk this up to plain old bad management in City Hall.

Reinvent Trenton mostly restricts itself to the economic issues and that includes how we use the budget as a policy tool.  So when a proposal (as vague as it seems) gets floated to fund a large $4.7M mistake made by the current administration over the next 15 years, in order for future voters to enjoy paying for a current problem, I take notice.

Responsible money managers know as a basic fundamental tenet that long term debt should only be used to fund long term assets.   We fund new water treatment facilities, new garbage trucks and even new hotels with long term debt (i.e. bonds).    We do that in our personal lives as well, our houses and cars are funded with long term debt, but not our clothes and food.

This $4.7M payment is a current liability and if we don’t have the funds in our budget we have only two responsible options:

1) change our budget by cutting something, or

2) fund it with short term debt (2 years or so) and raise taxes to make the payments.

Funding this mistake should happen during the course of this administration.   Spreading out our pain over 15 years deflects responsibility for this monumental blunder to future Mayors and future generations.   As voters and taxpayers, WE are responsible for this administration and this City Council, therefore we are responsible for the pain that our voting decisions have wrought.

Our decisions about how to budget and fund our operations are important.  They’re important in both matching priorities to our precious tax dollars and they’re also important in matching the benefit (or pain) of an expense to the actual taxpayers who will receive the benefit, or pain.

I know that none or our elected officials want to burden current taxpayers with this $4.7M mistake.  I’m sure that some voters would prefer to kick the cost down the road.   However, we are stewards of the financial health of our city.  Pushing this mistake into the future is both wrong and unfair to future voters.

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