ANNUAL State of the City Address

1. MAYOR FRANK HUTTLE III ANNUAL State of the City Address

2. Englewood City Charter This address is delivered in fulfillment of Section 5.6 of the Englewood City Charter.

3. The overall purpose of this address is to have a full and frank discussion on the true economic conditions facing the City. Overall Purpose

4. Our assets are unlike any other municipality which can guide us out of any crisis, including: • One of a kind location – 10 miles from Times Square • Tremendous City Assets • Downtown • bergenPAC • Englewood Hospital • Flat Rock Nature Center • MacKay Park • Englewood Library • Stable Neighborhoods • Industrial / Commercial Sector • Active, informed and engaged residents • Strong and Active Communities centered around Houses of Worship • The Delivery of Services • Financial Condition The State of Our City

5. However, the City is coming out of a historic and sharp decline the Great Recession of 2008 and its lasting impacts. • The State of the City in 2009 was in a financial and infrastructural imbalance caused by: • INTERNAL FACTORS - Out of Control Tax Increases to support uncontrollable and wasteful spending. • INTERNAL FACTORS – True City deficits have been hidden by interest only bonds • EXTERNAL FACTORS - A Municipal Quagmire brought about by the Global Financial Crisis – the City, like so many others, was at a tipping point. • EXTERNAL FACTORS – A sharp cut in aid by the State of New Jersey and an increase in State mandated spending. The State of Our City

6. Municipal Government needs to re-invent itself to face the cold reality that a 4 decade real estate bubble has come to an end: • Mayor’s “Municipal Tipping Point” – Mayor Frank Huttle, Swearing in remarks, January 3, 2010 • “Local governments have been hit with a one-two punch – State aid and property taxes” - Pew Charitable Trust Report • “Cities are still going to be facing very rough waters for the next couple of years…” – Wall Street Journal, August 11, 2012 • “Municipal Tsunami” – Professor Raphael Caprio, Bloustein School of Planning and Public Policy, Rutgers University The State of Our City

7. As Margaret Thatcher said of Great Britain, I was not elected to manage the decline of the Great Britain. The State of Our City

8. Here in Englewood I can say, Neither I nor the Council were elected to manage the decline of the City of Englewood…and we have to make a plan now to work through the great recession by using the gifted assets of our City and its people. The State of Our City

9. We knew something was wrong, that is why I created the Mayor’s Commission on budget and Finance – to study the problem. • How did we get here? • Local – Mistakes of the past • State – vise grip of the State government on our budget and this Administration’s depletion of State Aid. • Economic – massive real estate downturn • And… The State of Our City

10. …WE ARE A MATURE ECONOMY. The State of Our City

11. The perfect storm has come and it’s why I’m here…to face the storm head on to meet these insurmountable challenges: • Drop in Real Estate Values – NO NJ COMBACK • Over reliance on property taxes throughout the State – National Average of local property taxes is 29% and in NJ it is 70%. • Rising Health Care costs. • Drastic Cuts in State Aid. • High statewide unemployment rates at nearly 10% • A historic and unprecedented number of tax appeals State mandated, historic uncontrollable pension cost increases • Reliance on short term borrowing – weakening the balance sheet The State of Our City

12. It becomes – in the real world outside of government an operational deficit. For the first time, I have embarked on projecting the true finances, and we have a multimillion dollar structural deficit (without resorting to tax increases.) We are faced with after four decades of rising real estate values and we have to plan and dig our way out. The State of the City

13. The State of Our City And Rising…. Projected

14. The State of our City

15. The Englewood Projections match with Prof. Caprio’s. • Upon taking office, I wanted to hit the deficit head on….But as I was told when I came into office: • “Don’t worry Frank in municipal finance, we don’t have deficits, we just raise taxes.” • I said no, this is a new day. The State of Our city

16. Now let’s drill deeper into the budget and dynamics that drive it because we have to understand where we came from before we know where we are going. State of the City

17. Everyone is entitled to their own opinions, but not to their own facts. -Daniel Patrick Moynihan, U.S. Senator, New York State of the City

18. Financial Condition OF THE City of Englewood

19. Funding the City Government THE REVENUE SIDE OF THE CITY Budget

20. Revenue, Generally 1/5

21. Revenue, Generally 2/5

22. In 2011, the amount of money raised from Property Taxes had risen to 75%, while State Aid had declined to 50% of its 2005 number. The hole in State Aid shifted the burden directly to Property Taxes. The Governor should not balance the State’s own budget on the backs of municipalities. Revenue, Generally 3/5

23. Revenue, Generally 4/5 Revenue Detailed 2005 - 2011

24. Our revenues have increased due to out of control property taxes which we have put a stop to….for now. Revenue, Generally 5/5

25. Revenue Side of the Budget 1/2

26. Revenue Side of the Budget 2/2

27. Runaway Property Taxes disguise the City’s sustainable revenue base. Property Taxes could be raised to feed spending when real estate was appreciating. Now the reverse has happened and one consequence is the City must confront a massive amount of Property Tax appeals and refunds which at present totals $6 Million over a few short years. Property Taxes

28. Spending THE Appropriations SIDE OF THE CITY Budget

29. Appropriations, generally 1/5

30. Appropriations, Generally 2/5

31. Appropriations, Generally 3/5

32. Appropriations, Generally 4/5

33. Appropriations, Generally 5/5

34. Since 2005 to 2010, labor costs have ballooned and the City workforce, although having been lower in number, increased greatly in cost. In other words, we were paying significantly more for less workers. Labor Costs 1/3

35. Employee Related Costs 2/3

36. Employee Related Costs 3/3

37. Many of the expenses / appropriations the City must make are mandated by State Law. Those expenses cannot be controlled locally but must be paid locally out of our budget. Statewide, 50% of every Property Tax Dollar saved must go to pay for a loss in State Aid. Mandated Expenses 1/2

38. Mandated Expenses 2/2

39. Municipal State Aid 1/3

40. The State controls a large portion of our budget and also regulates how we spend it. Cuts in State Aid and Municipal mandates by the State created a vise grip on municipalities and are a recipe for disaster. State property tax caps with unintended consequences. Despite this municipal aid has been cut drastically and the Administration has increased our spending, another perfect storm. Municipal State Aid 2/3

41. Municipal State Aid 3/3

42. GOOD NEWS – debt Service vs. Budget

43. But every Silver Lining has its cloud. The City has used Bond Anticipation Notes (BANs) for short term borrowing (effectively the same as a home equity loan) disguising the real interest cost and principal amount without any real plan to repay the debt. This further fuels the fire. From 2005, a financial gimmick was used to kick the can down the road to this Mayor and Council. The Debt we took on was not used to fund any meaningful capital improvements. Bad NEWS – Short Term Debt

44. DEBT service 2011, 2012, 2013 Projected

45. The TurnaroundOF THE City of Englewood

46. When I came into office, I set goals from day one which we as a City government would accomplish to bring the best practices from the business sector to the City government. Here are the points of the Recovery Plan… The Turnaround

47. New management team in place to function as one cohesive strong management unit effective in running the operations of the City, including: • New City Manager • New CFO • New Human Resources Director • Construction Code Official • And more… Management Restructuring

48. Doubled the number of Council Meetings and increased Workshop sessions – Council monitors City operations if there is an issue, Council can fix it. Council workshops were created to discuss important Council business prior to regular voting meetings. This was to improve accountability and transparency of City government. Governing Body

49. Englewood Economic Development Corporation (EEDC) reorganized and redirected as planning body. Reorganization of the Environmental Commission. All Boards and Commissions will report quarterly to the Mayor and Council to promote accountability, responsibility and ownership. Boards and commissions

50. Residents have clamored for a Community Center for years, maybe even decades. The first step is to provide service programming utilizing existing City facilities from MacKay Park to Liberty School. Community Programming 1/3