Edison’s fiscal health a matter of semantics
Auditor, mayor disagree on how to best describe town’s financial woes
BY JOHN DUNPHY
Staff Writer

Is Edison facing a deficit or not? It depends on whom you ask.

Last week, Robert Morrison, of Hodulik & Morrison of Highland Park, presented his official township audit of Edison for the period ending Dec. 31. He has served as auditor for 12 of the past 16 years.

Morrison said several smaller issues needed to be addressed — one of which included adherence to a state law that requires money submitted to the township to be deposited no later than 48 hours.

But his report concluded with an assurance that Edison is not in a fiscal crisis.

His summary contradicts what Mayor Jun Choi has previously said, as well as Gregory Fehrenbach and Marvin Corwick, financial consultants hired by Choi during the second half of December to provide an assessment of the township’s financial situation.

Corwick said then that Edison was “fiscally the worst community” he’d ever reviewed. Choi has repeatedly said the township is in dire financial straits and could face a deficit of up to $10 million in the coming months.

“Do you feel this township is in a deficit?” Joseph Petrucelli, a certified public accountant, asked Morrison at the Feb. 21 Township Council meeting

“We have no doubt this is not an issue in Edison Township,” Morrison replied, saying the township can function going forward over a projected 12-month period.

Morrison then discussed a projected municipal tax increase needed to fund the next budget cycle, which begins July 1. While Morrison said that projected increase was between $8 million and $10 million, he did not call it a debt or a deficit.

“This is the key to all the rhetoric,” he said. “It is not an operating deficit — a statutory excess of actual expenditures over actual revenues for a fiscal period. It is a projected tax increase. Depending on how things go for the township between now and June 30, that number could go higher or lower.”

Edison’s potential tax increase was not township specific, “but rather specific to the current system of funding government through the property tax.”

“When the costs of government increase, there are really no alternative financing sources to the property tax,” Morrison said. “In the current budget, as well as in past budgets, Edison has used surplus and one-time revenues to minimize tax rate increases. Some would argue that Edison’s tax rate is artificially low. The $8 million to $10 million includes somewhere between $2.6 and $3.5 million in one-time revenues that are no longer available.”

Because of the township’s extensive use of one-time revenues, such as the sale of liquor licenses, Morrison said unless revenues and the municipal surplus are replaced by other non-tax income sources, their elimination from future budgets will increase the need to raise property taxes.

Although the township only has $700,000 left in surplus, as long as the tax collection rate remains at its present high level of 99.7 percent and no major unforeseen problems arise, “Edison will continue to operate as it always has,” he said.

Choi said it wasn’t Morrison’s place to make statements regarding whether the township would need to raise taxes.

“Mr. Morrison’s expertise is in determining whether the finances of Edison are accurate or not,” he said. “It’s the governing body’s responsibility to determine whether the community should incur tax increases or not.”

Morrison’s comments are in contrast to the mayor’s continued claims that the township is in the midst of a fiscal crisis. Both sides seem to agree, however, that Edison faces a rough road.

“Edison is in a uniquely challenging situation when it comes to fiscal health,” Choi said. “I believe [Mr. Morrison and I are] using different language, but his comments suggest we face a very difficult fiscal situation in fiscal year 2007. Given the significant $10.1 million gap between expected revenues and actual costs, I would describe that as very serious.”

When Fehrenbach and Corwick presented their public assessment on the state of Edison finances Jan. 3, they didn’t have a lot of positive things to say.

Fehrenbach blasted the township’s use of nonrecurring revenues, a lack of fully funding known expenses for fiscal year 2006, and an exhausted budget cap as contributors to Edison’s financial woes.

Morrison considered terms like “fiscal crisis” subjective and undefined.

“The township had an 11-cent tax increase in the current budget and there are projections that indicate a similar increase is likely for next year if the underlying assumptions hold true,” he said. “Edison will also be faced with fitting its planned spending for fiscal year 2007 into the constraints imposed by the CAP (Corrective Action Plan) law, which generally limits spending growth for covered line items to 2.5 percent.”

“Put whatever label on them that you care to, but I cannot agree or disagree with any label that is not defined,” Morrison added.

Choi said he believed very few communities in the state right now were facing a financial gap as big as Edison’s, especially considering the township’s above-average tax collection rate last year.

He strongly disagreed with Morrison’s assessment that the $8 million to $10 million is not a debt and that it’s more an unfortunate problem for many New Jersey municipalities as a result of a lack of additional funding from the state.

Fehrenbach, who was recently hired by the township to serve as fiscal consultant at $9,500 a month, continues to go over the numbers pertaining to Edison’s fiscal health, said David Donnelly, Choi’s spokesman.

“We are certainly in a fiscal crisis that needs to be dealt with,” Donnelly said, noting Chief Financial Officer Rich Bobal’s recent announcement that sewer rates will need to be raised 57 percent to offset a potential deficit of nearly a quarter million dollars.

“The CFO projected that if nothing changed, the sewer utility would have a revenue deficit of $220,000,” he said. “That is just one small portion of the fiscal problems that have been passed on to this administration.”

Donnelly also said total costs for the recent snowstorm, which dumped 20 inches on Edison, totaled $98,974, a cost he said was not necessarily out of line.

“I think the budget is able to handle it at this time,” he said. “However, if we have another snowstorm, it could be problematic.”

Choi said a significant degradation in fiscal health in Edison government has developed over the last two years.

“If we didn’t have a fiscal problem, even in fiscal year 2006, why would the CFO of the township agree and there is a wide consensus that we need to raise our sewer utility tax and we need to borrow $2 million in a short-term borrowing of money to help with the cash-flow situation,” Choi said. “I’m a bit perplexed by [Morrison’s] comments.”

“He’s entitled to say what he feels, but on a couple of points, I strongly disagree,” he added.