No More Wimpy GovernmentBy Charlie McCormick | September 13th, 2010 | Category: 2010 Campaign, Budgets | Comments Off
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“I’ll gladly pay you Tuesday for a hamburger today”.-Wimpy
When I published my article on Debt, the 2009 numbers were unavailable but the state recently released them with some unsurprising results for Oakland.
Our municipal debt now stands at 15,293,117 dollars, an increase of nearly two million over the 2008 numbers- Again, this debt is not inclusive of school debt which actually decreased near half a million dollars between 2008 & 2009. The almost two million increase in municipal debt was accompanied by another near 3.5 million in “Self-Liquidating Bond & Notes” for Oakland. While the name of the debt makes it seems like it will go away by itself, it refers to debt taken on by a self funded utility such as water or sewer.
In comparison, Franklin Lakes managed to reduce their municipal debt while Wyckoff’s municipal debt increased $200,000 – still making giving it only about 1.5 million in debt. Neither municipality operates a utility, so there is no debt associated with that category. Still, while payments for Self-Liquidating Debt may come from the self-funded utility, it is still tapping into the same tax base of Oakland residents with fees & charges.
Leaving aside the Self-Liquidating debt which will assumedly be paid off through utility fees/charges rather than property taxes, the property owners in Oakland are responsible for about 15,300,000 in municipal debt and 9,000,000 in school debt – which was reduced about a half million between 2009 & 2008. This is $24,300,000, divided by about 4,400 homes, and each would on average owe $5,500 dollars….Again, these calculations do not include the 7,000,000 debt listed under Self-Liquidating Bond & Notes.
This brings the question of Debt Ratio…and raises some questions on fiscal conservatism. Oakland’s debt ratio now stands at .83%- which is significantly below what is allowed by NJ law. But it is almost double the debt ratio of Franklin Lakes…and compared to Wyckoff, forget-about-it…they’re debt ratio is about .03%. It’s not easy to find any explanation online as to how this calculation is arrived at, but in general one does not want to have a high debt ratio as in the private sector it normally compares assets to obligations.
A logical comparison to the private sector would be dividing total general obligation debt outstanding by property tax revenues, or total general obligation debt outstanding divided by total revenues.
Deferred charges, for a lay person unfamiliar with the esoterics of accounting terminology, would also fall into the debt category. As an individual, I may not be taking out a loan – but it’s money that I am not paying today and will need to pay eventually. It’s exemplified by those familiar by the cartoon character Wimpy from Popeye. Wimpy’s well known refrain is “I’ll gladly pay you Tuesday for a hamburger today”. Oakland in the 2010 budget deferred payment on $646,000 worth of hamburgers, Wyckoff deferred payment on about $96,000 worth of hamburgers, and Franklin Lakes new fiscal diet allowed for $23,000 worth of hamburgers……When Tuesday comes, Oakland will need to pay for those hamburgers, so I consider that debt.
Additional Reading: Comparing Municipal Budgets
The previous article on debt can be read here.