Why it's so tough to rescue Camden
Despite millions of dollars from New Jersey, the city is poised to lay off police and firefighters. State control made matters worse.
More than $1 billion.
That's how much state aid came to Camden, a city with fewer than 80,000 people, in the last decade alone. (Forget about the schools, which received far more.) That's just to run city government.
Despite this largesse, half of the Police Department and a third of the Fire Department could be laid off in the coming weeks because of a $26.5 million deficit on a budget of about $140 million.
How did this happen?
How did Camden become Camden?
The city's initial demise in the second half of the 20th century is well-known: Factories closed, and jobs, stores, and the American dream ended up in the suburbs. The drug trade took over. Three mayors were sentenced for corruption.
But less is understood about how Camden's financial collapse accelerated in the last decade - when the State of New Jersey controlled city government and had veto power over Camden's financial decisions. The associate deputy state treasurer even worked part time in City Hall.
Under these eyes, spending skyrocketed and the tax base virtually vanished, leading to a perfect storm of financial ruin, according to public documents obtained by The Inquirer and CamConnect, a nonprofit research group in the city.
Worse, the storm is likely to intensify.
From 2001 to 2004, state aid funded 51 percent of the city budget, compared with more than 80 percent this year. So far, Republican Gov. Christie has agreed to provide almost as much aid as his Democratic predecessor, but he is demanding that Camden wean itself off the dole in four years as a condition of receiving money.
To do that, the city would have to more than quadruple its property-tax base. Now, tax revenue, at $19 million, is less than the deficit.
There are several reasons Camden doesn't make enough to sustain itself:
♦ The state takeover, which lasted from 2002 until January, forbade tax increases. In addition, property hasn't been revalued since 1992, meaning land is undertaxed. The average tax levy per resident is $268; in Atlantic City, it's $710.
♦ With its churches, schools, nonprofits, government offices, city-owned vacant land, and 37 entities with tax abatements - including the for-profit Adventure Aquarium and the city's only high-rent apartment building - Camden is 58 percent tax-exempt. Only New Hanover, the site of two military bases, and Walpack, with 39 residents, have a higher percentage of exempt land in New Jersey.
♦ During the state takeover, a company was contracted to buy and sell tax liens. In 2004, officials predicted $13.9 million would come in from the sale of liens in that year alone. Six years later, only $8.8 million has been collected - in total. Last year, officials again overestimated revenue from the liens.
♦ The tax-collection rate was down last year, to 89 percent, compared with 99.7 percent in Cherry Hill. That's a double whammy for Camden. Not only does it lose needed revenue, but also the county and the city schools get paid in full first, and the city is left with the shortfall.
♦ Camden traditionally relied on as much as $8 million annually from the quasi-state agency that owns 285 acres of waterfront property, the South Jersey Port Corp. But Christie cut the payment in half for fiscal 2010, which ended in June. The city has yet to receive this money, however, and the city's fiscal 2011 budget is not yet complete.
In addition to the loss in revenue, Camden's expenses have gone up and up:
♦ Fringe benefits - from police and fire pensions to employee health insurance - have more than doubled since 2001, after being adjusted for inflation. The costs make up 28 percent of the budget.
♦ The number of full- and part-time city employees has increased from 1,131 in 2001 to 1,562. The Police and Fire Departments have increased by about 30 people each during that time, but they are still larger than the national average for comparable departments - police are 20 percent larger, fire 17 percent. Median police pay, though, is below the median for Camden County municipalities.
♦ Severance packages to retiring workers have sent millions out of the city coffers. From 2004 to 2008, $3.6 million went to just 159 retiring employees for accrued sick and vacation time and other benefits, according to a scathing 2009 report by the State Commission of Investigation. One deputy fire chief received $82,000 for unused sick days, plus a $74,000 annual pension, while a police chief collected $150,000 for unused vacation time.
♦ In preparing the budget for this fiscal year, Camden officials said they estimated $10 million in pension costs. It turns out they need to pay $17 million. The cost next year is estimated to be $23 million.
Of all these factors, the tax abatements known as PILOTs, or payments in lieu of taxes, have become a lightning rod for criticism. These negotiated tax deals increased from eight in 2004 to 37 in 2010. They are given as an incentive to locate in Camden to companies that often would otherwise pay higher taxes.
But last summer, the state comptroller issued a report saying tax abatements result in "significant forgone revenue" and "introduce tax inequities." Camden was singled out in the report.
The worst part of PILOTs, critics say, is that no money goes to schools or counties. Camden's public schools are among the lowest-performing and most dangerous in the state, and they are regularly blamed for Camden's inability to retain its middle class. Without middle-class property owners to attract stores and commerce, Camden's tax base can't grow.
City Council continues to approve PILOTs - at least three this year alone. Council President Frank Moran did not return a call for comment.
Most of the PILOTs are concentrated downtown, in an effort to jump-start redevelopment. The Susquehanna Bank Center waterfront concert arena began paying the city in 2006, more than 10 years after it opened. Through a complicated arrangement between operator Live Nation, the largest live-entertainment company in the world, and the state Economic Development Authority, which owns the property, almost $1.4 million has been sent to the city since that point.
That amounts to less than $100,000 a year since the arena, which attracts 500,000 concertgoers annually, opened.
But that financial information isn't available in Camden's budget. Some PILOT agreements are not even on file in City Hall, while others incorrectly identify the taxed property.
Despite the state oversight and a long line of consultants, bad budgeting is pervasive, CamConnect found: "Anticipated budget figures are often 'calculated' simply by copying the prior year's perceived value into the current year's 'projected' column."
For example, even though the for-profit Adventure Aquarium pays about $300,000 annually in a PILOT, in 2009 the city budgeted for more than $1 million in anticipated revenue. That led to an unexpected $705,000 "shortfall," and a need to run to the state for more funding.
Some PILOT agreements extend over decades; the Susquehanna Bank Center gets its deal in perpetuity.
In the meantime, the city's deficit continues to grow. To close it and avoid some of the 180 police and 67 firefighter layoffs, Mayor Dana L. Redd has asked for cuts that the unions say amount to at least 30 percent of paychecks.
Redd wants to cut longevity pay, which provides a percentage of money as length of service increases, while reducing wages 20 percent, according to letters from the city attorney obtained by The Inquirer. The departments also would face a doubling of contributions to health insurance, to 3 percent, along with an increase in co-pays.
Redd also is talking to neighboring Pennsauken about having that town handle part of Camden's fire coverage.
Camden over the last decade has often shed responsibilities to save money. Both tax and tax-lien collection have been privatized. A private company handles water service. Animal control will soon be privatized, since all animal-control officers are due to be laid off.
But none of this will solve the structural deficit underlying the city's problems, critics say.
"The decisions of the past have brought us here, and the decisions of today either get us on the right track or put that point of self-sufficiency further away," said Raymond Lamboy, who has studied Camden's budget woes as president of the Camden County Hispanic Chamber of Commerce.
Lamboy says "the gap" - the difference between money Camden needs and money Camden earns - is so big that the city would have to build 99,000 single-family homes assessed at $100,000 apiece to earn enough tax revenue to sustain city services. Instead, the city should build high rises on the waterfront, just as Hoboken and Jersey City have done, and add mixed-use spaces downtown, like the Piazza at Schmidts in Northern Liberties.
Another longtime student of Camden's fiscal issues, school board member Jose Delgado, said the governor should create a commission to study how to rejuvenate cities in a way that benefits the entire state.
"You redefine the narrative as not so much, 'We're going to help Camden, oh, poor Camden,' but 'We're going to help Camden because it's going to help the state,' " he said. "It has to be a strategy that looks at the cities as a resource."
Cities can create jobs, provide culture, and address environmental concerns, he said. They can be saved "not for altruistic reasons, but for business reasons."
Delgado said he did not have the expertise to know how to do something like that. "But I know that passing legislation throwing more money at Camden hasn't worked in the past," he said.