How Will the Tax Cap Affect Chatham Borough?

The borough council's liaison to its budget committee said a 2 percent property tax cap signed into law Tuesday by Gov. Chris Christie will make putting together a 2011 local budget difficult but said the exact circumstances surrounding the cap remain unclear.

Council President James Collander said a lot depends on the exemptions allowed under the law that would allow municipalities to raise taxes more than two percent.

Regardless, he said, the borough will have less free reign to raise taxes than it did in the past.

"There's no doubt it's going to make it more difficult," Collander said.

The property tax cap legislation negotiated by Christie and legislative leaders allows four exemptions to the cap: rising health care costs, pension payments, debt service payments and capital expenditures, including new equipment and public works projects.

The borough will soon begin putting together its 2011 budget—Borough Administrator Bob Falzarano will soon request preliminary budget plans from the municipality's department heads.

Collander said items the borough is unable to control—such as tax appeals—will likely cost it some capital. He called the matter "a creeping issue."

Regardless of how much the borough is able to cut from its budget, he said, tax appeals cost money, and the borough has to "raise the same amount of money every year," as Collander put it.

He said he felt the tax cap would not immediately solve the state's financial problems. But he did say it was a first step.

"The tax cap, as I see it, and I'm just an observer ...  is (it's) the begining of the process. It's not the end of the process," Collander said. "There's a lot of policies and procedures in the state that have contirubted to getting us to the point where we are."

Often, he said, municipalities are at the mercy of the state's decisions.

"It's far beyond us folks to really have a say in that," he said. "Would I rather see another system imposed? Sure ... I'd like to see the arbitration system changed."

He said it will be challenging for municipalities to live within the cap unless they get relief in other areas.

That's where, he said, the intended to provide budgeting tools to municipal, county and school officials for negotiating public employee contracts and handling other issues that affect budgets and tax levies.

The toolkit, however, he said, could be modified at any point. It will be debated in the state Legislature this summer.

"Right up until the end of the process, things are changing all the time," Collander said.