The West Windsor Township Council spent about four hours during the township’s earliest budget discussion on record to consider ideas for saving costs in the upcoming 2010 municipal budget.
Council members spent the most time examining a proposal by Councilman Charles Morgan for a nonprofit community foundation that he says would have helped raise money from corporate donors to help cover the costs of major projects, such as the senior center expansion and redevelopment. But the proposal was ultimately dropped by the council, when Morgan motioned to take an official vote of support for his idea, but no one offered a second.
“The fact is both of them have said you need to hire someone, you’ve got to invest money to make money,” Council President George Borek said about the presenters. “I don’t think at this time and juncture, that’s a place we all feel comfortable in going.”
Morgan had been pushing the idea during last budget season and council members said they would revisit the idea for the 2010 budget. Morgan kicked off the meeting with a presentation, including research to support his idea. He said that Township Attorney Michael Herbert’s concerns about the legality of having a government-sponsored nonprofit organization were “resolvable.”
“This is all about reducing the burden,” Morgan said. “We can’t afford these continuous increases in taxes,” he said, adding that 501(c)(3) organizations “have proven track records. Even modest effort can reap significant rewards.”
Morgan argues that the nonprofit organization can bring in revenues for West Windsor purposes, and that it is possible for revenue to be be anticipated in the township’s budget. He says that the township can use the money to offset costs associated with parks and recreation, facilities, such as the police and senior resource center, and for the redevelopment area.
In demonstrating to council why creating the nonprofit community foundation is legally acceptable, he pointed to IRS tax code, which defined a “charitable contribution” as a contribution or gift for the use of a state, a possession of the United States, or a political subdivision of any of the foregoing, “but only if the contribution or gift is made exclusively for public purposes,” Morgan said, pointing to the public projects like the senior center and redevelopment area.
And “charitable” gifts would include those that are used for “relief of the poor and distressed, or of the underprivileged; advancement of religion; advancement of education or science; lessening the burdens of government, and promotion of social welfare by organizations designed to accomplish any of the above purposes.”
Focusing specifically on the fact that charitable gifts would include those that lessen the burden of government, Morgan pointed to further IRS regulations in determining whether an activity lessens the burden of government. That depends on “whether the organization’s activities are activities that a government unit considers to be its burdens, and whether the activities actually lessen that burden,” Morgan explained.
And whether those activities lessen the burden depends on the interrelationship between the government unit and the organization, he explained. “An organization’s performance of activities that a government unit treats as an integral part of its programs is evidence that the organization is lessening the burdens of government,” he said.
There was a private IRS ruling in a case elsewhere that Morgan shared as an example that allowed a nonprofit organization to construct a redevelopment area, including a world-class aquarium with a marine education and research facility, a 110,000-sqaure foot spherical theater, four major exhibit areas, and a gift shop and restaurant. Another separate ruling allowed a nonprofit organization to construct a 200-room hotel next to a convention center with a 200-car parking garage, restaurant, bar, and retail shops.
“The IRS said it was a permissible 501(c)(3) activity since it would relieve the city and state governments from the burden of constructing, owning, and operating a public arena,” he said.
“It works if there is an objective manifestation by West Windsor that it considers the activities of the organization to be its burden, such as a working relationship between West Windsor and the organization, or the organization’s actual performance of activities that West Windsor treats as an integral part of its programs,” Morgan explained.
Morgan also said there are three New Jersey laws that affect a potential 501(c)(3) organization — the New Jersey Charitable and Registration Act, the New Jersey Nonprofit Corporation Act, and the New Jersey Local Budget Law, the last of which has created concern with Herbert.
But Morgan said according to the Local Budget Law, anticipated revenues in a municipality’s budget must be classified as one of a few categories — surplus anticipated, miscellaneous revenues, receipts from delinquent taxes, and amounts raised by taxes to support municipal budget appropriations. In this case, he suggested putting the revenue anticipated from the nonprofit into the miscellaneous category. Anticipated revenues in that category have to be “known and regular sources” from sources “reasonably capable of anticipation.”
Morgan pointed to three examples of successful nonprofit community organizations that were associated with government — the Mayor’s Fund to Advance New York City, run by the office of Mayor Michael Bloomberg; the Fund for Public Health in New York Inc., and the New York City Police Foundation Inc.
The mayor’s fund relies on people, foundations, and corporations to support projects in the arts, parks, education, and health, Morgan said, adding that it is overseen by Bloomberg and that the members of its board are even appointed by the mayor. The public health fund was created by the city’s Department of Health and Public Hygiene and also obtains financial support from the private sector, he explained.
The police foundation was the first municipal foundation of its type in the country, formed in 1971. The fund supports NYPD programs that the city cannot readily fund, Morgan said.
At the conclusion of his presentation, Morgan argued his case. “If you have a 501(c)(3) organization and residents contributing regularly through United Way, it is doable,” he said. In New York, these organizations are raising billions of dollars, and while West Windsor’s budget is $36.5 million, “I don’t think it’s inconceivable that we can’t chop off 10 percent of the budget” with the funds raised by the organization, Morgan said.
Following his presentation, Nancy Kieling, a West Windsor resident and president and executive director of the Princeton Area Community Foundation, gave her perspective on forming a nonprofit community foundation. Kieling told the council that there are about 700 community foundations around the nation, with the “long term goal of building endowment funds to benefit a region.”
She said she has led the Princeton organization for 15 years and has worked with hundreds of nonprofits in the region. “I share your excitement that we can attract extra money into this township,” she said, pointing out that there are nonprofit organizations like the West Windsor Bicycle and Pedestrian Alliance, Friends of West Windsor Open Space, and the West Windsor Education Foundation.
However, “the gifted income into these organizations is modest,” she said. For the most part, these donations come from West Windsor residents, she said. “The act of philanthropy in this town is not large.”
She said the idea of creating a community foundation “could be an interesting undertaking, a difficult undertaking.” She said the only robust organization locally exists in Lawrence, the home to ETS and the Lawrenceville School, both of which make gifts to the township in lieu of taxes.
Kieling said that with locally high property taxes around Mercer County, “it’s an even harder sell to ask the residents of the town to give more than they’re already paying.”
Morgan pointed out organizations like United Way, which offer a list of nonprofits with various objectives for which people can donate money, including to those in their home towns. He said while he worked at Prudential, employees were strongly encouraged to donate a percentage of their salaries to charitable organizations — almost in a mandated manner. If the community foundation is in place, many of West Windsor’s residents who have good-paying jobs would be able to select it as an organization to which they could contribute part of their obligations. “If you’re not in the database, you’re not going to get any money,” he said.
However, Kieling said she read reports that locally and nationally, contributions are down, especially given the economic recession, and that large organizations are not engaging in as much “arm-twisting” as they once did. Kieling also said she was not a proponent of creating more and more nonprofits, especially since they require a lot of administrative work.
Councilman Kamal Khanna asked whether it is essential that the government get involved. “Philanthropy and government are difficult bedfellows,” Kieling said. “Locally, when the government gets involved, the response is less robust.”
Councilwoman Diane Ciccone said she was concerned that creating a community foundation would siphon off money raised by all of the local community groups. “I don’t feel like we’re getting the bang for our buck,” she said, adding that she did not see a point in asking taxpayers to shell out a few hundred dollars to only see it end in a reduction of a penny off the tax rate.
Kieling agreed, saying, “I think dollars would be better spent trying to make these organizations thrive than trying to start a community foundation.”
Other Discussions. Council members also discussed nearly a dozen other ideas during the meeting, including the zero-cent increase scenarios that have been called for by council members over the past few months. The surplus, as it relates to the township’s AAA bond rating, a controversial subject in this past election, was also discussed.
Council members said they wanted to be presented with different budget scenarios, the most important of which would be a budget with a zero percent increase, complete with data explaining which areas of the budget would have to be cut to have that zero-percent increase.
Morgan also questioned whether council members really got an explanation from the administration about why the surplus is so important. He said the main purpose of the surplus is to protect from surprises. He said he suspected the surplus was at a “very, very high level.” Morgan said he would just like administration to present all of the contingencies for which the surplus could be used in order to determine how much they would like to keep.
He also suggested the council examine the exact amount of money that needs to remain in the budget to maintain various bond ratings — from AAA down to A — just so the council can have the data before making its decisions.
Ciccone agreed, saying she wanted to see the data on all of the considerations. “If the administration is going up and saying, ‘We’re going to hold this much or take this out of the surplus,’ I want to know why, and include what basis they used that they came to that amount,” she said.
Ciccone said she was “not suggesting we drop down to an AA or an A, but I want to know why.” She also said that she would like to see the least amount of surplus that would still leave the township with a AAA bond rating.
“But are you confident you lose more than you save?” Morgan asked. “What are we saving, what are we costing, and what are we netting?” Khanna agreed to sit down with Morgan and examine these numbers and data.
Another area the council discussed was Councilwoman Linda Geevers’s idea to push state legislators to pass legislation to correct what she says is an unfair burden to West Windsor taxpayers, who solely foot the bill for inspection and construction fees associated with expansion projects at any school located within township borders, such as the community college and district schools.
Because West Windsor is the host community for the college and school district, it is required by state law to pay for all of the fees associated with construction and expansion. During the meeting, Geevers pointed to $65,485, that as of August, the township has had to already waive this year. In 2007, the number reached as high as $255,000, and in 2008, it was also over $200,000.
Geevers said that the county should pay for the fees, or that a system similar to that of the West Windsor-Plainsboro Regional school district — which divides the cost to taxpayers between West Windsor and Plainsboro based on the number of students each sends to district schools — should be implemented.
“It’s absurd the West Windsor taxpayers have to subsidize these costs,” she said. She suggested the council pass a resolution to urge the legislature for a “fair solution to this problem.” She offered to draw up the resolution and present it during an upcoming meeting.
Ciccone suggested asking Princeton University, which also has parts of its campus located within West Windsor borders, to increase the amount of money it donates to the township each year in lieu of taxes. She says she has heard the Princeton municipalities asking for an increase in the donation, but “I haven’t heard about West Windsor asking for them to up their contributions.”
Council members seemed to agree to look into asking the university for more money. In the meantime, Geevers volunteered to have the resolution drafted in time for the council’s next meeting on Tuesday, September 29.
Council also discussed doing an energy audit, conserving energy and shared services in order to reduce expenses, and Ciccone suggested creating a policy that states that as township appliances and equipment get older, they should be replaced by more energy-efficient items that could save money in the long run. However, Geevers expressed concern that holding the township to a strict policy could hurt it if some of the energy-efficient and more sustainable purchases were put off into the future, when they might be cheaper. Morgan agreed, saying the problem could be solved by including a phrase “to the extent feasible” into whatever language is drafted.
Ciccone also said she wanted to set up a task force to look into green energy initiatives and to work with administration to create an overall plan. Building on this, Khanna said he wanted to create a task force that would force the department heads to look at their budgets and see what they can individually cut to reach a zero percent increase.
However, questions about council overstepping its powers and interfering with those given to the administration under the Faulkner Act were raised. Khanna said he did not understand why something similar to the Citizens Finance Advisory Committee in Princeton could not be established. Geevers suggested, that it be a standing committee, rather than a task force.
Business Administrator Robert Hary assured the council that the administration has heard the council and that “our goals are the same as yours,” he said, adding that he was taking a lot of notes during the meeting. “I’m getting a lot of good ideas.”
He said that he would not feel comfortable with other entities, like a task force, examining the budgets of the individual departments, saying it was the mayor’s job to create the budget. “It’s administration’s budget until it’s given to council,” he said.
Fewer than 10 residents turned out for the meeting, but some offered their opinions on the discussion topics.
Andrew Hersh, who is running for election against Ciccone, volunteered himself as a consultant to work with the department heads in looking at areas to reduce costs. In response to the concerns over the Faulkner Act responsibilities in the council-mayor government, he said he felt it was “time for council to start showing its independence.”
He also suggested two ways in which the council could cut costs right off the bat. The first was through strategic sourcing of all services and operation and maintenance items of the town. He said the township should go out and look at its purchases and go through a bidding process or look at ways in which it can combine with other entities to obtain greater purchasing power. He said that this could save 5 percent in the service and operations and maintenance costs. His second idea was with regard to expenditures on new projects. He referenced Princeton’s budget, which had a zero percent increase. There, officials trimmed their capital spending budget from $3.5 million down to $1.65 million by prioritizing spending.
“If we cut $1.6 million or $1.7 million out of what we’re spending, that’s half the battle,” he said.
Resident Bob Akens urged the council to keep the pressure on and get to the individual department heads. Regarding the council concerns about overstepping the boundaries, Akens said, “Perhaps you can’t tell the mayor what to do, but you can pass a formal resolution” stating ahead of time that it will not approve a budget with any sort of increase, he said.
CBorek said the administration will look at the rest of the discussion items and come back with report. As for the council, Borek says council members will wait about a week to see if there is any feedback from the community and whether new ideas are submitted. The items on the list will become future items on the agenda as time progresses.
