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NJ's Troubled Cities: Shrinking Tax Bases, Growing Need for Basic Services

Friday, May 20, 2016   (0 Comments)
Share | 05/20/16

It was just five years ago when the city of Trenton was forced to lay off more than 100 police officers -- a third of its force -- to close an $8.4 million budget gap.  The cuts, Jackson said, were caused by a “structural deficit” that many cities face, one created by the concentration of poverty in urban areas and the reliance on municipal property taxes to pay for local services. Cities like Trenton, he said, have limited and often shrinking tax bases but a growing need for basic services. That means either asking local property owners for more and more money or finding other ways to pay for services that many in the suburbs take for granted. Trenton’s story is not unusual, say the authors of “The Cost of Poverty: The Perpetuating Cycle of Concentrated Poverty in New Jersey Cities,” a report issued by The John S. Watson Institute for Public Policy at the Thomas Edison State University Jackson. The report was written in partnership with the New Jersey Urban Mayors Association and the Anti-Poverty Network of New Jersey.

The report, released Thursday, looked at four moderate-size New Jersey cities -- Bridgeton in Cumberland County, Passaic in Passaic County, Perth Amboy in Middlesex County, and Trenton in Mercer County -- in an effort to explain the “practical, budgetary consequences faced by urban centers that are characterized by high poverty levels.” What the report found is that residents in New Jersey cities pay more for fewer services, especially those that are best at addressing poverty. It calls for tax reforms to redirect money back to cities and an expansion of social service and quality-of-life programs to provide direct aid to the poor to address decades of public policy that turned cities into places of entrenched poverty, such as development incentives and highway construction.  The report recognizes that all New Jersey residents have been facing soaring local property tax bills, but it says the “burden is even greater” in urban areas.

“Because an ever-increasing reliance on property taxes is layered over a diminishing tax base, a counterintuitive scenario has resulted, whereby the most impoverished municipalities shoulder an unmanageable municipal tax burden – a greater burden than even their wealthy neighbors,” the report says.n addition, the report says, the ability of urban areas to spend on what the authors call “vital services that can alleviate poverty” -- physical and mental-health programs, social-support services, and youth programs, libraries, housing, and economic development -- is constrained, and most cities are spending less per capita than neighboring suburbs on these programs.  As the report points out, “budgetary pressures only allow a municipality to run in place,” and “as long as this basic relationship remains true it will be incredibly difficult for municipalities to escape structural budget distress and, thus, to deliver services that meet the needs of residents, which extend beyond police protection, fire suppression, and sanitation.”

This structural failure, Weiss said, is tied in part to the way we pay for government in New Jersey. The bulk of local government is paid for by local property taxes, which favors those communities that are rich in taxable property. At one time that was the cities. But as major employers moved from the cities to the suburbs, as the cities de-industrialized and the suburbs converted farmland into taxable properties, the tax dollars followed. “This is a structural issue that was built up over time and it will take a structural fix,” Weiss said, because revenues continue to fall even as necessary expenses rise. The solution, according to the report, is a stronger safety net, higher wages, more accessible sick and family leave, childcare, reentry services, and housing. More importantly, the report says, a new approach to taxation is needed so that more revenue is placed in the hands of urban communities. Among its recommendations are a greater level of need-based distribution of municipal aid, alternate forms of local taxation (such as local income, sales and use taxes) and usage fees that would place some of the cost of local government on those doing business and visiting in urban areas.

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