Trenton’s numbers don’t tell a pretty story.  By anyone’s measure it’s currently an unsuccessful city.

• Trenton has 17.5% unemployment,
• We have a $20M budget shortfall,
• We will be bankrupt in 2012
• We have the highest taxes in NJ
• We have the 2nd highest crime rate in NJ
• And, we’re losing population

This is not a good situation.

We’ve been doing the wrong things

In my eight years of observing Trenton, its clear that while there has been a good deal of effort expended towards “revitalization”, the effort has not been well directed and has had little effect.

Our numbers show that we’ve been moving backwards

• Trenton has lost ground in per capita income growth compared to the rest of the state.
• We’ve lost population and
• Our budget situation has gone from weak to dangerous.

There’s no formula for turning around a city like Trenton

• The administration, state and city council have largely been operating from a conventional wisdom shared amongst other US cities in similar situations.
• Our general plan of attack has been to raise taxes, ask the state for more money, build affordable housing, get tough on developers and do our best to solve our own crime problems.
• These tactics have born little fruit as they are akin to attacking an elephant with a fly swatter.

It is not enough to decide how to cut the budget, rather we must use the budget to fix our economy and resulting structural deficits.  Cuts only, will continue the death spiral.

So how can we re-think our city?

Both government officials and citizens are responsible for working through the bold steps that will be required to revitalize Trenton.

Elected and appointed officials have a role

Our elected officials will need to rethink conventional wisdom and stop assuming our hands are tied.  It may take a rather extreme set of actions to right Trenton’s ship.

Perhaps our form of government is in the way? Perhaps the state is in the way?

Let’s dictate our terms and force the legislature to help. Or, if they can’t or won’t help us, go our own way and agree as a city that the state will have to physically stop our revitalization efforts.

Voters have a responsibility

We can’t expect our city officials to act boldly unless the citizens empower the right officials and give them a mandate to act.

As Trentonians begin the process of attending political fundraisers and debates over the next several months, I encourage them to ask candidates about their recovery plan.  You can be sure I will.  I encourage citizen participants at City Council to implore that body to lead rather than follow.  Finally, I’ll offer yet again, to help the current administration work out a recovery plan that the citizens of Trenton can believe in and support.

Use the budget to reach Trenton’s goals

As a city we need to

• Know where we’re going
• Make major structural changes to our revenue and cost structure
• Learn to use the budget as an instrument of policy
• Revamp our budget process

You can’t get there unless you know where you’re going

Yet politicians, and Trenton’s are no exception, are loathe to set measurable goals for the future.

The first step in this journey is to imagine what a revitalized Trenton’s budget would be like.

The best measure of economic rebirth would be for Trenton to pay not 12% of our total municipal and school budget, but rather 50% (as do Hamilton and other middle class cities).

If we were able to pay 50%, we would

• Be at less risk of suffering catastrophe at the hands of a dipping state budget,
• Have built up a much larger economy, and
• Enjoy the resulting amenities both from that larger economy and our ability to fund city services.

To be in a position to pay 50% of our own budget, it stands to reason that just like Hamilton; we’ll need to have a per capita income (CPI) that’s about average for the state.

Today Trenton’s CPI is about $16,600 which compares unfavorably to Hamilton’s CPI of $30,400 and New Jersey’s CPI of $33,200.

See “My discussion for the role of incomes on revitalization” to understand the impact of a higher per capita income.

The second step is ask, “Why we are here?”

This is an easier question than one would think, yet Trentonians spend an awful lot of time debating a foregone conclusion.

Trenton has two reasons to exist as a city.  Numbers three through ten don’t even register.

1. Trenton is a bed-room community to New York, suburban NJ and Philadelphia
2. Trenton is the home to state, county and some federal government

A recent survey of new residents showed that 90% had chosen Trenton because its housing stock was less expensive and more interesting than suburban or big city options.  10% chose Trenton because it was both less costly and closer to their government jobs.  Of the 90% that commute “from” Trenton, all were influenced by lifestyle decisions such as affinity with a community (urban black or gay), appreciation of old buildings or had post-urbanism views on cities such as “green living”.

None of the respondents had children and no one moved to Trenton for the schools.

Our budget should enhance these good reasons to be here rather than attempt to fix the reasons to stay away.

Trenton should be the “best” urban bedroom community on the northeast corridor.  By best, we’ll want to be rated as the most livable city of over 50,000 inhabitants.  This means low taxes, low crime, wonderful housing stock, amenities and access to jobs.

We can already check off one of the five, access to Jobs.  Trenton lies in the middle of the largest job market in the US.

The theory is if we’re a great bedroom community our population will grow with a disproportionate number of middle to high income people.  Eventually we’ll move back to having an average per capita income.

Finally we need a ten year plan that shows how we can reach our goals

Our 10 year plan should show how our annual city budgets will be used to achieve measurable goal of fiscal health.  The very tangible goal I recommend is to move from receiving 88% of our municipal and school funding from the state to 50%.

Such a change in our revenue structure inherently de-risks the budget as we would necessarily be more dependent on property taxes generated by a much wider variety of commercial and residential interests.  Today, when the legislature coughs we catch pneumonia.  This is no way to run a city.

Make major structural changes to revenue and cost

There are six structural changes I recommend to reach the 50% self-sufficiency goal

1. Impose a non-citizen wage tax for no more than 10 years
2. Change our property tax system from value based to land based taxation
3. Invite every law enforcement agency available to help us crush our gangs
4. Re-invent the inspections function to be developer friendly
5. Re-orient spending towards attracting high income residents
6. Sell off all city owned properties

The first two changes will undoubtedly be controversial and will cause conflict with the state.

By instituting a non-citizen wage tax aimed at raising $20M per year we will plug our budget gap.

• Of course we will make Trenton a less desirable business destination in the balance, but business growth isn’t our immediate goal.
• Furthermore, most remaining jobs in Trenton are in the relatively immovable government sector.
• A non-citizen wage tax is a reprehensible non-democratic measure and is a last desperate measure therefore we must not take it lightly and insure that the tax is repealed within ten years.

Value based property tax penalizes investment and therefore prevents economic recovery.

• A land tax on the other hand, penalizes property owners who leave their land vacant, in speculative hopes of a good price.
• By switching from a land tax we put our revitalization interest back in line with our tax policy.
• The land tax can be implemented in such a way as to not greatly affect current tax bills.
• For instance, a gradual system can be put in place that taxes land at a different rate than structures.
• We can also index parts of the city differently over time in order to soften the change

Steps 3-6 are directly within our control

• Timing the use of state and federal law enforcement “surges” with efforts to revitalize specific neighborhoods will let new development take hold
• Re-inventing the property inspections function to be the best in the country is a matter of budget, inspired leadership and management priority
• Spending towards attracting high income residents is a matter of political will and understanding the principals of urban economic development
• Selling off all city owned properties “for nothing” is simple math as every year we hold out for a great price, is a year we don’t get tax revenue

Trentonians have been living with a crumbling infrastructure, sparse amenities and no real economy for many years. However, even with the Water Works sale, we’re facing enormous tax hikes for the foreseeable future.  Within the next 3 years, unless something is done, our tax payment will likely exceed the average homeowner’s mortgage payment.  This will depress home values and drive some homeowners into bankruptcy.

Use the budget as an instrument of policy

In any organization, the budget is the major instrument of policy.  If a company wants to expand sales, it increases the marketing budget.  To cut cost, it reduces expense budgets.  A city is no different.

Step back from the line items and ask what a budget is supposed to do.

If the budget is basically the same as it has been for the last several years, is there any reason to expect a different result in the pace of revitalization?  Common sense suggests not.  Yet Trenton’s budget has seen only incremental changes over the years.

Tax rate hikes penalize newcomers and reward long time residents.

This may be good politics but its terrible policy and offensive to new residents.  A rate hike disproportionately taxes new homes and recent home renovations as the assessed value is more up-to-date. Meanwhile the resident who’s lived here for 30 years and has stood by watching Trenton fail, skates by with an 30 year old assessment  while the newcomer who breathes new life and capital into the city gets fined. Furthermore, every rate hike makes Trenton less attractive for future newcomers.

Re-assessments are part of the solution and can be combined with a shift to land based property taxation

Invest in the budget areas that will fix the problem.

Inspections and Economic Development are two departments that can help right the ship.  Even though both departments have problems, throwing money at them is likely to the good.  There are good ideas floating around on how to make these departments more relevant.  Recreation and Culture also  makes the city more attractive to newcomers.

Essential services like fire, police, and public works may have indirect impact on investment.  However, the linkages are not well documented and are likely non-existent without a specific plan to capitalize on improvements in these areas.

As the efficacy of these essential services is largely unknown, I recommend neither raising nor lowering the budget amounts.  Raising the budget including the police budget would be irresponsible without understanding how the budget change will directly lead to improvement in quality or life or in increasing ratables.

A much better solution to our crime problem is to opt for a temporary solution that allows economic development to take hold and have its good affect on crime.  Inviting the NJ State Police to Trenton has been proposed and would serve as a viable temporary option.  Any such “surge” in police presence must be backed up with aggressive and targeted economic development activity.

There are many non-essential services the city provides as well.  Unfortunately these budget items don’t directly contribute to economic development and must be cut until Trenton can afford them.

Revamp the budget process

While the budget has received more attention over the past year, the process itself is still poorly understood and obviously ineffective.  Several improvements to the process are in order and should be demanded by council and the citizenry

Budget material needs to be easy to obtain and analyze.

• Excel files of the working and statutory budget should be made available to Council and the public.
• All files should be made available on the city web site.
• The administration should look for creative ways to educate all citizens about the budget, the review process and the policy impacts.

A clear timeline should be published for council and the public.

• There should be no confusion from any admin official, councilperson or activist about the process and timeline.
• While there are state checks on the city budget, these must be managed rather than used as an excuse for inaction
• Budget goals can be set before revenues are known and adjusted in a second phase

The process should include a “results” conversation

• We (through our council) need to be in the position of changing the conversation to one of efficacy not staffing and expense levels.
• We should understand the output of each department
• Do they produce enough output for the money we put in (e.g. what’s the cost of animal control catching a dog, what do we spend for each crime cleared)?
• If Trenton’s cost to clear a crime were the best in the nation no one would bat an eye.  If every dollar spent in economic development yielded $100 in new ratables  I’d stop complaining.  If our addiction levels in Trenton actually went down I wouldn’t bemoan dollars spent on recovery centers. If per capita income in Trenton actually outpaced the NJ’s average increase, this blog wouldn’t even exist.
• If the Administration doesn’t force these conversations then City Council must.

Council should demand justification for each budget.

• A system of zero based budgeting process should be put in place to help force discipline over the next several years.
• The budget should be accompanied with textual notes explaining each line item.
• In addition, Directors should be required to explain how their budgets will serve to accomplish the goals of the city.
• The Business Administrator and Mayor should be required to explain how the budget will ensure the overall health of the city especially its fiscal health.

Public review needs to be a central element of the process.

• We can’t expect citizens to support bold action without providing clear explanation of the budget and its proposed impact on the city
• The public needs excellent analysis and information before the review sessions.
• There needs to be a set citizen review format that reduces the need for micro-management.
• Administration and council representative needs to be present to answer questions.

13 Responses to “The “Reinvent Trenton” Guide to Fixing the Budget”