The “Up” side for Trenton

As the new Citizen’s Budget Committee prepares to form its recommendations to the public and our elected officials, I pondered aloud to my committee, “what limits our pace of revitalization?”

I’ll get to the answer but first I’ll recap the problem and the solution.

Our economic problems are dangerous

Trenton’s revitalization issues can be characterized in two important and related ways:

  1. We have a large income gap, Trenton has a $17,000 per capita income vs. $35,000 for NJ
  2. We have a structural deficit of approximately $70,000,000 (approximated from 2010 Trenton city budget and our recent tax increase)

Our income gap is a problem because Trenton can’t sustain the services needed to support its relatively poor population nor does it have the disposable income necessary to support amenities like stores and restaurants.  Furthermore, our lack of wealthy residents with access to capital make it much less likely that local business formation will take place that would create a private sector economy.

Our structural deficit is a function of years of operating with this income gap.  Expenses like crime prevention, schools and social services have gone up while revenues from property tax have proportionately gone down.   The state makes up the gap in our structural deficit.  However, if funding dries up (which has started) Trentonian’s will be left with massive tax hikes (which have started) and severe reductions in service (which have also started).

Trentonians need to be reminded that we fund only 10% or our school budget and 25% of our municipal budget.  We’re at the mercy of the state for most of the rest.  This is a risky proposition and we’re now suffering the consequences.

If this situation continues, many Trentonians will be bankrupt by their high property taxes and property values will decline, perhaps sharply.  As service levels go down and taxes rise, a house in Trenton becomes less attractive to a new buyer.  Homeowners will not be able to sell their homes if they need to move and the elderly will leave less in their estates to their children.  The structural deficit destroys the value of all our investments in Trenton.

Our solution is massive immigration to Trenton

There is much to say about these two problems (however none of our political candidates have tried), bet let’s assume for a second that the solution is attracting new people to Trenton.

Readers should remember that though Trenton’s population has fallen to around 80,000, it once housed approximately 140,000 citizens. We have both the land and infrastructure necessary to accommodate significant growth in population.

We can fix both our deficit and our income gap by going on a crash program of attracting new residents.  And given the choice, we should strive to attract middle class and wealthy residents that have no need of social services and schools.

The kind of crash program that will make a difference will attract 30,000 new residents to Trenton and lead to the development of 15,000 new homes.  These homes will average $200,000 a piece (a low estimate) and will increase the tax base by $3 Billion.  Assuming a 2.5% municipal tax rate, our property tax revenue would go up $75 Million.

Such a crash program to stimulate mass immigration into Trenton will go a long way towards resolving both our structural deficit and income gap problems as these residents would have incomes closer to or above the NJ average.

ALL current Trentonians both wealthy and poor, homeowners and renters benefit from this.  All of us have an interest in avoiding the destruction of property values and the preservation of our level of municipal service.  All Trentonians prefer to see more not less amenities in Trenton.  None of this will lead to residents being forced out (we have plenty of underutilized space) or having their taxes increased (new taxpayers will help us eventually lower our taxes).

Our upside is huge

30,000 new residents seem like a lot of people.  At our budget committee meeting I wondered how we could attract such a large number.  I asked, “Wouldn’t we be limited to some subset of the people who move to Mercer County every year? “

A developer in our group corrected my thinking, and pointed to the REAL upside for Trenton.  Trenton can attract new residents not just from the pool that plans to settle in Mercer County, but rather from the entire New York and Philadelphia metro region.

The few developers active in Trenton are already drawing buyers from Philly and New York that can’t or don’t want to afford to buy in those cities but still want an urban lifestyle.  They are also drawing buyers from the suburbs who have grown tired of the sameness of strip mall life.  Furthermore, new residents to Trenton are typically middle income professionals with no children.  Also they won’t need jobs in Trenton.  These people exist in the two adjoining metro regions in vast numbers.  30,000 new residents is a small objective given the size of the potential market for housing in Trenton.

We need an aggressive plan to make this happen

Trenton’s development community needs both help and company.  They need help from a city administration that takes away ALL roadblocks to development.  The Inspections Department needs to take 4 hours instead of 22 days to approve a plan.  Developers should be able to easily buy city owned land not wade through a cumbersome process.  Owners of vacant private land (i.e. speculators) need to be forced to sell.  Politicians need to stop demanding that developers hire a quota of Trenton residents.  We need a revenue neutral property reassessment to lower our tax rate and make Trenton a better deal for new construction.  We need targeted infrastructure and police investment in neighborhoods being revitalized by developers.

If our city government, with the support of the citizenry, can force an overhaul of our development regime and effectively market Trenton’s relative attractiveness, new developers will enter the market to take advantage of the opportunity.  These new developers will join the existing ones in marketing their projects to buyers throughout the region.

Trenton does have upside potential, but so far you’ve not heard our 2010 candidates talk clearly about it.  Perhaps no one has explained the math to them.  I hope this article helps. But if it doesn’t, I hope residents can start asking how our politicians plan to close the $70 Million budget gap and the $18,000 per capita income gap.  I hope you’ll ask about how they propose to help developers attract 30,000 new residents to Trenton in the next five years.

Share and Enjoy:
  • Print
  • Digg
  • StumbleUpon
  • Facebook
  • Yahoo! Buzz
  • Twitter
  • Google Bookmarks

13 Responses to “The “Up” side for Trenton”

  • Could you please explain your calculation for “the $70 Million budget gap”? Are you including state aid, COMPTRA, what else?

    Also, 15,000 new homes is a bit pie in the sky, no? Wouldn’t it be better to come up with a plan that addresses the possibility that such a plan is not 100% successful? Some people would think it unreasonable to expect more than 1K new homes over any 5 year period.

  • I guessed at the $70M as I said. Our group needs to weigh in on that as we discussed on Saturday.

    The point is, what’s pie in the sky. I’d rather aim at 15K and work on taking down roadblocks for that kind of success than never try.

    That said a realistic strategy needs to look at the capacity of a well functioning inspections department on the “build” capacity end. On the demand side we need to check that we’re wildly more attractive than other options.

    Plan B is a slower pace, which we may get away with. Obviously, reinventing the government is a good first step and we don’t know what that will yield. However we can be pretty certain that we’ll continue to have a structural problem as long as we have such a large income gap. I’m hopeful all this will be illuminated with our research into the budget.

    My main objective now is for the candidates to have their own thoughts on the size of the structural deficit and the remedy for it. So far, they are all just mentioning it rather than describing it.

    Some of the candidates like the sitting council members and the Public Works director should, if we’re to believe the experience claim, have a very well formed thought on this topic.

  • “Guess” isn’t quite the right word.

    I took the total state aid number which is $87,000. Subtracted the Capital Cities Aid (I take this to be the PILOT money, but I maybe wrong). That’s about $50M. Added back the $20M increase in taxes over last year. Then I rounded.

    That gets me to $70M.

    We need the authoritative view of our state aid package + a realistic view of what our property taxes should be given our ratables, to figure out a better estimate of the gap.

  • I view the “structural” deficit as being the difference between expected revenues and what is being spent on the essential services. Currently Trenton receives about $42 million from CMPTRA and another $10 million from an Energy Reciepts Tax. CMPTRA is essentially the replacement for taxes on the government buildings and should be expected to stay in place in one form or another. Our administration claims that it is underfunded, but the amount of that is debated. For some unknow reason, CMPTRA, instead of being flat this year, actually decreased 3.5 million.

    Now here’s the fun part:

    In 2009 we received about $14.8 million last year from a Municipal Revitalization and Economic Recovery Act. Most of the justified costs for this funding is project based, so I don’t believe that this effects our structural costs or is considered a structural revenue. As I understand it, this money isn’t used to pay police, fire dept, muni workers, fill potholes, etc.

    Also last year we received $17.2 million in “Special Municipal Aid”. This is really part of the makeup between money we raise and what we spend.

    In this years budget, both of the last two items are lumped together in one amount labeled “Capital Cities Aid”. The total amount actually went up about $2.85 million, but which part went up, its anybody’s guess. Why they do nonsense like this is beyond me.

    In any case, the structural deficit is currently the $8 million this year minus the $3.5 million in police OT. In general we should consider that amount (~$7 million) plus the $17 million in the municipal aid as our overall structural deficit. True, the energy tax could end and the state could totally not pay us any relief for municipal services, but at that point I would bulldoze down the capitol and sell off the property.

    I would add that our structural deficit could be lower as I am sure we could find some other fairly easy places to cut once the books and all of the budget maneuvering is laid out in full.

  • OK Mike.

    Your analysis is exactly what we need to as part of our effort to sort out the State’s PILOT money.

    Cynthia is leading that but we all need to be clear about what’s what in the budget.

    My suggestion is to leave out cost savings for the moment and just worry about the gap between proposed spending and state aid (not PILOT) + the tax increase (i.e. assume we’re still spending $50M / year).

    Fair enough?

    Perhaps its the $8M + $17M in state aid + $20M tax increase (the tax increase isn’t sustainable) = $45M. I leave out the police OT and put that in a bucket called potential savings along with all other wasted, unneeded programs etc.

    I was looking at the Municipal Property Tax relief ($41M)+ $9M in increase in misc. aid + $20M tax increase = $70M.

    If I’m wrong then that proves why we need to real thoughtful view.

  • One more thing …

    It doesn’t make sense to me that we could have only an $8M structural deficit. That would be around 4% of the total and percentage wise small. This doesn’t feel right given that our CPI is less than half the NJ average.

    Of course we’re also not counting schools where are deficit is $125M given Missy Balimer’s assertion that the budget will be $290M, we’re paying only $20M and the NJ average is that towns pay half their school budget. We should be paying $145M but are only paying $20M.

    A reasonable person might wonder whether a school + municipal budget of $500M ($212M + $290M) makes sense for a town of 80,000. That’s $6250 for every man, woman and child or roughly $15,000 per household.

    The budget brigade’s crack analysis team is busy comparing this to other towns.

  • You said: “$8M + $17M in state aid + $20M tax increase”. What $20 million tax increase? Taxes didn’t go up $20 million last year.

  • Tax revenue in the 2010 budget is $70M. It was closer to $50M last year.

  • The difference is $16 million ($54 million last year vs. $70 million this year). The $8 million in the above equation is part of this number. Also in that number is the $3.5 million in Police OT. That leaves about $4 million that is unknown, but partially made up of the makeup money for the 16.5 million we took several years ago and some extra payments for debt that I am not positive on. Taking the highest number, the gap would be $17M in state aid + $16 million for about a $33 million structural gap, but I would believe that part of the latest tax increase (the missing $4 million) isn’t really part of our structural debt either.

  • patricia stewart:

    Hi, Dan: Great piece. Who is on your committee? I suspect Michael McGrath is not a member. Regards, PHS

  • take a long look at Houston, Texas. they had crime and poverty. they did something about it.
    2.1 billion dollars to Haiti, nothing changed but the date!
    if you fertilize and water weeds, you will continue to have weeds.

    it takes more than money. “money is the root of all evil!”

  • money, money, money !! there are some who steal it and there are some who give it away ! they steal the money from the taxpayers and then give it to family and friends. in America the only thing changing is the date…

    history, social security….
    medicare, ……..

    billions of dollars, the old entitlement shell game !!!

    the hard working taxpayer is given the shaft.
    the taxpayers pay for just about everything….
    we buy the tickets and settle for being red caps !!!! amen.

  • march madness, a very appropriate definition for the entitlement bill that just passed. have you asked, where are they going to find all of the money to support this ?? or are you more interested in the phillies and the world series ??
    a hint… all of the gold eggs are gone, and the politicians are looking for the goose……

Leave a Reply