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In Woodbridge, Borrowing Doubled Under McGreevey
Originally appeared in the New York Timeson October 18, 2001
WOODBRIDGE, N.J., Oct. 17 — In his campaign for New Jersey governor, James E. McGreevey presents himself as the candidate of fiscal common sense. He derides the major proposals of his opponent, Bret D. Schundler — to eliminate tolls on the Garden State Parkway and allow parents to use tax dollars for private school — as risky and outlandishly expensive, while portraying himself as a disciplined budget manager.
To persuade voters, Mr. McGreevey and his aides rely on a neatly tailored summary of his record as mayor here in Woodbridge for the last nine years. He arrived at Town Hall in 1992 to find chaos and malfeasance — uncashed checks stuffed in a drawer, $650,000 in missing health insurance funds under investigation by federal agents, and a $60 million budget that they say masked a $24 million deficit.
As mayor, the story goes, Mr. McGreevey cleaned it all up. He maintained services, kept property taxes stable and held spending in check. The end.
But the story is not so simple. A review of a decade's worth of town budget records as well as interviews with current and former Woodbridge officials, residents and business owners show that while Mr. McGreevey clearly restored fiscal confidence and stability, the town's financial situation was never as dire as he has suggested.And though he could have chosen a number of strategies to fix problems and meet new goals, Mr. McGreevey has mostly favored borrowing money rather than raising taxes or cutting spending. In the decade since he took office, Woodbridge's borrowing has nearly doubled to about $176 million. This includes $16 million in notes issued just this year to build a long-promised recreation center that was on the verge of becoming a boondoggle.
Mr. McGreevey's propensity for borrowing stands in contrast to his repeated criticism of former Gov. Christie Whitman for increasing state debt during her two terms. It also raises the question of whether Mr. McGreevey, if elected, can keep his pledge to reduce state debt at a time when New Jersey is facing a deficit of perhaps $1 billion or more.
Mr. McGreevey defends his record by pointing to the town's current fiscal strength. "Moody's Investor Service praised the township for taking the necessary steps to restore fiscal discipline," he said in a recent interview. "We have a Aa-3 bond rating, top 20 percent in the nation."
Supporters say he should not be held responsible for the largest sum borrowed during his tenure — $34 million that they say was mostly used to correct problems left by his predecessor and to adjust to a new fiscal calendar. They point out that he has paid down nearly as much debt as he incurred. Still, they agree that Mr. McGreevey's reliance on debt reflects his traditional approach to public finance.
If Mr. Schundler, the Republican, is something of a financial maverick, wheeling and dealing through two terms as mayor of Jersey City, a close examination of Mr. McGreevey's financial record shows that he prefers to play things safe. Among his most creative deals was an auction of old town vehicles and equipment last year that generated about $135,000 in revenues.
Recently Mr. McGreevey started offering tax abatements to corporations willing to move to Woodbridge and clean up polluted property. In one such deal, FedEx Ground donated $1 million for computer networking in Woodbridge schools.
"I think Jim McGreevey learned sometimes the less you do, the less things that are going on in town, the less people question," Barbara Wyatt, a Woodbridge resident who battled Mr. McGreevey over the demolition of the old Town Hall to make way for a new building.
In public finance, as in nearly everything else, Mr. McGreevey's pre- eminent skills are political, supporters and critics say. He has artfully used Woodbridge's underlying economic strength to budget with an eye toward his future. He has never raised taxes in an election year, for example. At the same time, his close political allies have profited from his spending and hiring decisions.
Throughout this year's campaign, Mr. McGreevey has said that anyone wondering how he will manage state finances need only look at how he ran Woodbridge, the state's fifth-largest municipality. But he has also preferred to discuss the failings of Mr. Schundler and Jersey City than his own record.
Woodbridge Township, population 97,000, is a suburb at the intersection of the New Jersey Turnpike and the Garden State Parkway. It is home to the things that define New Jersey for many people: neatly carved subdivisions, huge malls, big manufacturing plants and office parks.
Buoyed by a robust economy and healthy local tax base, Mr. McGreevey never had to sweat to put the financial ledgers in order, records show. But he did have to clean up a few things. The town's auditors in 1992 found five "material weaknesses" in the budget and made 99 other recommendations. Their only complaint this year was that dog tags were not issued in sequential order.
Marvin Corwick, a consultant to local governments, said Mr. McGreevey's predecessor, Joe DeMarino, had left town finances in "total disarray." But Mr. Corwick, who worked for Mr. McGreevey during his first year in office, acknowledged that Woodbridge was better positioned than most places to make a quick recovery.
The town budget has increased to $80 million from $60 million in 1991. Since 1992, taxes have risen by about 2.4 percent a year, within the rate of inflation. And even with added borrowing over the last decade, the town is well within its legal debt limit.
By far, Mr. McGreevey's most important financial decision has came in his first year in office, when he decided to accept a state offer allowing municipalities to adjust their fiscal calendars. In exchange for switching to the state's fiscal year — giving the state a six-month break from providing local aid — the towns were permitted to borrow to cover their expenses.
Mr. McGreevey borrowed $34 million, saying that the money was needed to cover a $24 million deficit $34 million, saying that the money was needed to cover a $24 million deficit masked in the budget by his predecessor.
Mr. McGreevey sold the idea hard. "Without the transfer, Ernst & Young predicted that property taxes would have risen by as much as $600 per household, literally driving people from their homes," he wrote in a four-page letter to the community.
But not everyone was convinced. Robert F. Gawroniak, a Woodbridge councilman, quit the Democratic Party and became a Republican after he said the McGreevey administration could not prove that the deficit really existed.
The ultimate cost to taxpayers in interest and principal was estimated at about $60 million over 19 years, with the largest payments beginning in 2001. Since then, the town has refinanced the bonds twice, securing lower interest rates and pushing the large principal payments to 2003.
Whether the strategy is a long- term success will depend largely on how well the town's finances are doing when these payments start coming due. If taxes need to be raised, Mr. McGreevey will likely be held responsible.
At his State of the Township address in January 1998, Mr. McGreevey grabbed a hockey stick and slapped a puck into a portable goal in a light-hearted stunt to dramatize his announcement that a private company would build a $10 million recreation center, including two hockey rinks, on the site of a former landfill.
"Our goal is to drop the first puck by the fall or winter of 1999," Mr. McGreevey said. He outlined a plan that he said would not cost the township a cent. "We wanted corporations that would have the necessary available capital for self-financing," he said then. "The one we chose has excellent credentials and a proven track record."
The announcement of the project came less than three months after Mr. McGreevey lost his first campaign for governor and said that he would almost certainly run again. The recreation center is still not finished. The company selected to build it is bankrupt. For now, the town has picked up the $16 million tab.
The developer, Family Golf Centers, of Melville, N.Y., ran into financial problems shortly after work got under way, and the project nearly became mired in bankruptcy proceedings. The center is scheduled to open early next year.
But the deal is now quite different from what Mr. McGreevey promised in 1998. Instead of a private company paying to build the center, the town has covered the costs through $16 million in short-term bonds.
Under the original plan, the private owner was to pay to lease the land from the town. Now, the town will pay management fees to a local skating business to run the ice and roller rinks and to the Y.M.C.A. to run the swimming pool and other programs. Woodbridge will keep any profits, and has solicited private donations. The town also plans to sell billboard ads in the skating rinks.
Mr. McGreevey says the center will pay for itself. But if it is not profitable, the taxpayers will be stuck with the bill.
Still, many in town are optimistic. "For pretty minimal dollars, I think they pulled a rabbit out of the hat," said Ray W. Zirpolo, vice chairman of the Woodbridge Chamber of Commerce. He added that he thought Mr. McGreevey had been a good mayor.
Not everyone is a fan. Warren Larsen, who owns an auto parts store, said Mr. McGreevey "calls himself a full-time mayor, but he only spends 5 percent of his time at Town Hall."
Mr. McGreevey has also been criticized for allowing political allies to profit from town business. Until early this year, the town attorney was Paul M. Weiner, a law parter of Mr. McGreevey's political patron, State Senator Raymond J. Lesniak.
The Schundler campaign has charged that legal fees in Woodbridge have tripled since Mr. McGreevey took office. Rich McGrath, a McGreevey campaign spokesman, said that Woodbridge spends less than other towns its size but acknowledged that Mr. McGreevey had "taken a more activist approach to using the law department to recoup funds for Woodbridge."
If Woodbridge's relationship with the firm of Weiner Lesniak was born of political convenience, it died the same way. Mr. Weiner resigned as town attorney because of his financial interest in a plan to local a waste transfer station in Linden, N.J., a deal that Mr. McGreevey has staunchly opposed.
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