Martindell letter calls savings “paltry” and says “why bother” with consolidation

Kate Warren writes, “The Consolidation Commission would have us believe that two-thirds of the savings from the proposed consolidation will come from a phased-in 20% reduction in police protection that will happen in an orderly fashion by simple attrition.  Opponents of consolidation question the credibility of that claim and apparently so does Councilman Roger Martindell.

In a May 11, 2011 letter to the Commission Chair (copied to Mayor and Council), Councilman Martindell wrote in part: ‘With a new governing body not experienced in management of a consolidation municipality, it will not likely have the political will to resist police administrators who will most likely try to fill vacancies created by attrition.’

He goes on to state, ‘The Report assumes that there will be an evolutionary change in any consolidated police department that will result, ultimately, in a reduction in force from 60 to 51 sworn officers by year 3.  Apparently, the Commission concludes that the command structure will change in year 1, year 2, and year 3.  However, based on my experience in local government, changes in command structure will be a constant source of tension
within the department, with the stakeholders resisting change and engaging in intra-departmental political maneuvering.  The result will be a department that is less likely to ‘evolve’ in any thoughtful way over the near term and therefore less likely to achieve the
savings anticipated by the Report.’

He closes his letter by stating: ‘If the total savings projected by consolidation is as paltry as the Report projects – and those savings themselves are by no means certain – the very legitimate question arises: unless there are more substantial efficiencies contemplated by consolidation, why bother?

Research conducted by Preserve Our Historic Borough (POHB) uncovered empirical research done in March 2009 on behalf of the State that cautions against ‘…drawing simple conclusions about the cost-effectiveness to be gain through consolidation.”   A May
2009 report found “…a considerable body of literature that does not support consolidation…cost savings are not assured [and] implementation of consolidation is costly and time consuming…’  The study found ‘…no clear answers about whether consolidation works.’ “

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IT transition cost estimate of over $2M cut by 90% in 22 minutes; Commission lowers estimate because it “exceeded the funding” available from the state; more realistic estimate over $5M

Emails from May 24th, 2011 obtained through OPRA* requests show that the Commission gave municipal employees less than 24 hours to estimate transition costs and then slashed the one careful estimate they received by more than 90% because the state would not reimburse a realistic estimate of costs.  See Patience Haggin’s Daily Princetonian article for  more details on the 90% transition cost reduction and responses by Township Mayor Goerner and Commission Chair Lahnston.

Just before 3 pm, an email went out from Commission Chair Anton Lahnston to Boro and Township administrators Bob Bruschi and Jim Pascale asking them to come up with transition cost estimates for transfer of titles, severance and retirement incentives, signage, and moving costs by the next morning.  Estimates for other transition costs came from “information from other municipalities,” wrote Lahnston. In an email to his counterpart Pascale in the Township that afternoon, Bruschi comments that “this is going to be almost impossible to come up with by tomorrow night.”

Robert McQueen, Chief Information Officer, Township, was the only municipal employee who was able to come up overnight with a worked-up estimate of $2.1M that included computer software, phone and computer system upgrades, and communications for police.   Transmitting his estimate to Pascale at 9 am the next morning, McQueen wrote “I probably should not have slept on this, but many more thoughts came to my mind, I have been in since 6 am working on this.” At 10:34 am that morning, Township mayor Chad Goerner emailed McQueen “I heard from Anton that you came up with a $2.5M estimate ?!?!?!?!!?!?!?!?!?”  Twenty-two minutes later, Goerner sent another saying that he had cut the IT estimate down to $255,000, a cut of 90% of estimated costs.  A reconciliation with transition costs already included in Commission police estimates shows that $106,500 of expenses in the IT estimate had already counted by the Commission. Taking this and the amount from IT that did end up in the anticipated
transition costs (3 unnumbered pages at the end of the Final Report), $160,000, the total amount of the $2.1M quote that made it into the anticipated costs is $266,500, still about only 10% of the total amount of the IT estimate.

The IT estimate was the only one received by the Commissioners in response to their overnight request.  Other estimates that did surface in the OPRA documents are (1) $100K for training of Borough police to same level of first responder training as Township police maintain (2) phone system estimate of $631K (total phone system transition costs are listed at $80K in the Final Report) (3) a discussion of costs to expand evidence room and dispatch center upgrades, but no costs were given for that (4) signage estimate for $110K which was reduced to $25K in Final Report.  No cost estimates came in from Public Works, Finance/Tax, Court, Engineering Department, or Zoning departments. It may also be that police transition costs were understimated because in a letter to Township residents, the Township police PBA write, “Transition costs for the police department alone will be significantly higher than reported in the commission’s report.” Commission Chair Lahnston also requested “legal fees associated  with the consolidation of collective bargaining agreements” and “severance pay packages and some possible retirement incentives”, but it was not possible to provide these in the limited time given.  Discussion at an October 26th Joint Meeting suggested that retirement incentives and severance pay packages may not be used, but it is still not clear how 16.5 staff positions will be cut over three years in a difficult economy without some significant incentives or layoffs.

Regarding the 90% reduction in the IT estimate by a municipal employee, an email sent by Lahnston on September 26th, shortly after Kate Warren put in an OPRA request for transition cost documents, show that the IT estimate was slashed in order to make the total estimate fit state expectations for what transition costs should be.  “The original estimate from I.T. was over $2.0M. That estimate was well-documented but exceeded the funding options available from N.J. for Princeton, in our view. Therefore, we closely reviewed [our italics]  I.T. estimates and realizing that some of the costs could be deferred — and that a significant number of the costs are part of the normal municipal budgets —we reduced the amount significantly to $160K.  We believe it was consistent with the guidelines provided by DCA and CGR.”

So the Commission estimate of transition costs was designed to obtain funding from the state, and there was no realistic estimate of transition costs made at the time. The largest omission in the Commission’s estimate is the cost of employee or consultant time to restructure, move, and to harmonize rules and regulations, standard operating procedures (SOPs), and standards, needed for police work, and to integrate IT, including phone. An idea of how much this might cost in one department is the $300K cost of attaining
accreditation (involving SOPs) for the police department based on 3 years full-time work at a sergeant level.  Another transition cost not included in the Commission estimate is the the shuttering of Borough Hall and the renovation to accommodate the near doubling of staff at Township Hall. Certainly a $1.7M transition cost is a severe underestimate; probably $10M is too high.  A  ballpark transition cost estimate, without any detailed studies, is $5M with $1M being spent yearly over the course of five years.

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Boro capital surplus over $4M last year; spending down justified

POHB began research into the Boro’s capital surplus after Unite stated as a reason for consolidation that “The Borough has depleted its capital surplus for the last several years in order to keep taxes flat.”  They have since modified that statement, although the statement still carries the suggestion that something is wrong with the way the Boro is using its capital surplus, when in fact, the Boro’s capital surplus has skyrocketed since 2007 and should be used as there is no need for our government to hold over $4 million dollars of cash.

Information on capital surplus and surplus (general) is readily available to private citizens through the New Jersey Open Public Records Act (OPRA).  Information on the capital surplus (also termed capital fund balance) and the surplus (general) from 2000 to 2011 was obtained through an OPRA request to Princeton Borough government.  See graph and table below with the data. The capital surplus is approximately 30 times greater than it was in 2002.  Furthermore, in 2009 and 2010, the last years for which data are available for the surplus (general), it was at its 2nd and 3rd highest value of the decade.  See graph below.

The capital surplus saw a large increase in 2010 due to improvements that were cancelled so for that year the capital surplus was unusually high. The capital surplus fund is replenished regularly during the year.  The Borough has been able to hold its taxes steady even as expenses have risen because it has large sources of non-tax income.  The Township has raised taxes the past several years to cover increasing expenses.

1. No data provided
2.  Current as of October 2011

* “The Borough is spending from its capital fund this year in order to keep taxes flat. Without consolidation, tax increases, fee increases and/or service cuts will eventually be needed to close the gap.” (Revised statement on capital surplus from Unite ad.)

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Princeton’s Downtown Benefits from Having Its Own Government

Princeton–and we include both the Borough and the Township in that word– is a very special town, particularly in the United States. It has a vibrant downtown, whereas most town centers have declined in favor of the surrounding suburbs and malls. We wonder if one of the reasons is our unique political structure where the dense town center and the
thriving suburb each has its own government. We wonder if one of the reasons that Princeton has a thriving walkable center and access to long-distance public transportation is the fact that the town center has its own municipal government and controls its own political destiny.

A good example of a town where the downtown does not have a separate government is Princeton Junction, which for decades had been the population center of West Windsor Township, now one of the wealthiest municipalities in New Jersey. In the past, Princeton Junction was a downtown with a real sense of place. How could West Windsor Township have allowed Princeton Junction, with its advantages of proximity to the
Northeast Corridor and Route 1, to become a run-down pastiche of semi-occupied
strip malls? Probably because most residents of West Windsor live miles away
and only drive through Princeton Junction or catch the train there. The current
redevelopment plan for Princeton Junction took many years to approve because
most residents of West Windsor saw the costs but didn’t see any benefit for
them because they live far away from the downtown. Would Princeton Junction have
been neglected if it had been the center of a smaller municipality, like
Princeton Borough? We doubt it.

Look at successful downtowns in the immediate area – Pennington, Hopewell, Rocky Hill, Hightstown, and Allentown – all are boroughs much smaller than Princeton.  Not very long ago, these towns were essentially similar to other communities in the region that are part of larger municipalities—Princeton Junction, Mercerville, Yardville, and Hamilton Square.  Over the years, the boroughs have retained their character while the other communities have lost most of what made them identifiable.

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Studies show there are no economies of scale in municipal governments

“In government, the whole idea of economies of scale is turned on its head,”  says Wendell Cox who has studied the benefits of merging towns across the country. The Wall Street Journal article where he is quoted reports on the lack of cost savings in government mergers.  Governors across the U.S., hoping local governments will save money, are prodding municipalities to combine.  According to the WSJ, “a number of studies—and evidence from past consolidation—suggest such mergers rarely save money, and in many cases, they end up raising costs.”  Smaller municipalities are more cost efficient and costs grow more slowly. Research in Illinois on the state’s 1,433 townships showed that the “tiny townships are the state’s most austere government operations”  Spending by those townships grew 17% from 1992 to 2007 while “spending by larger municipalities grew 50%.”  Consultant Cox has prepared reports for township organizations in New York and Pennsylvania as well as Illinois.  They “all found small governments cost less than big ones.  ‘Anyone who looks at the data is going to come to the same conclusion.'” FULL ARTICLE.

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Transition cost estimate based on what state may pay, not realistic analysis

Note: OPRA documents reveal that the Commission gave municipal employees less than 24 hours to turn around their request for an estimate of transition costs. Only one department made a careful estimate, the one described below. Emails show that that estimate was cut by 90% in 22 minutes. See Patience Haggin’s Daily Princetonian article for the emails and more details on the 90% transition cost reduction.

Phyllis Teitelbaum writes, “I am wondering whether the information in the Consolidation Commission’s Report is accurate. I began to wonder when a startling thing happened at the Joint Borough-Township Meeting on Consolidation on October 26. David Goldfarb, a Borough Council member who also serves on the Consolidation Commission, asked Anton Lahnston, the Chair of the Consolidation Commission, “whether the Commission intentionally underestimated the costs of transition in order to make our application to the state look better.”

Chad Goerner, Township Mayor and a Consolidation Commission member, intervened and accused Mr. Goldfarb of “making things up.”

Eventually, after Mr. Goldfarb had asked his question three times, Mr. Lahnston answered, “No, no, the answer is no.”

[A video of this incident can be found at http://vimeo.com/31376802 at 0:35:00 to 0:37:00 minutes.]

Later in the meeting, Kate Warren, a member of the audience, read aloud from a September 26, 2011 e-mail that had been given to her anonymously. The e-mail is from Mr. Lahnston and was sent to all members of the Commission. Mr. Lahnston confirmed that he had sent the e-mail.

The e-mail includes the following paragraph:

“Back in May and June 2011, the Commission prepared the submission for transition costs reimbursement to the DCA. It is important to point out that one area that was especially complex was I.T. The original estimate from I.T. was over $2.0M. That estimate was well-documented but exceeded the funding options available from N.J. for Princeton, in our view. Therefore, we closely reviewed the I.T. estimates and realizing that some of the costs could be deferred – and that a significant number of the costs are part of the normal municipal budgets – we reduced the amount significantly to $160K. Indeed this is a conservative estimate, but workable. However, we believe it was consistent with the guidelines provided by DCA and GCR.”

What do the verbal exchange and the e-mail tell us?

• The Commission intentionally underestimated and/or deferred Information and Technology [I.T.] transition costs in order not to exceed NJ state funding guidelines.

• Since he participated in underestimating and/or deferring I.T. transition costs in order not to exceed NJ state funding guidelines, Mr. Lahnston knew that the truthful answer to Mr. Goldfarb’s question was “Yes.” But he answered “No.” So Mr. Lahnston gave a false answer to the question, at a public meeting.

• Mr. Goerner, as a member of the Commission’s Finance Committee, knew that Mr. Goldfarb was not “making things up”.

• The Commission decreased the I.T. transition cost estimate by a very large amount–from $2 million to $160,000. This is a decrease to just 8% of the original estimate developed by the I.T. staff.

• Transition costs will be significantly more than the $1.7 million projected by the Commission, since the I.T. estimate was decreased so much. Preserve Our Historic Borough, by contrast, estimates that total transition costs will be at least $5 million, and possibly much higher.

• “Deferred costs” won’t go away; payment is simply deferred. These costs will eventually have to be paid out of the municipal budget, even though they were not included in the transition costs estimate.

• High transition costs and deferred costs will result in property taxes actually going up, rather than down, if we consolidate.

• It is not too late for the Commission to give the public accurate information about the likely transition costs. The Commission could calculate and publicize a larger, more accurate figure before the election. If the Commission did that, Princeton residents would have a much better idea of how much it would cost to consolidate.

Considering what was revealed at the October 26 meeting, we have to wonder–what other information in the Commission’s report is not true?”

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Saving money by consolidating is the real myth

Note: The IT estimate was for $2.1M, substantially over the $1M dollars that Neilsen mentions below.  A reconciliation with transitition costs already included in Commission police estimates shows that only $106,500 of expenses in the IT estimate were already counted by the Commission.  Mayor Goerner reduced the IT estimate to $255,000 from $2.1M  only 22 minutes (!) after receipt of the estimate from Commission chair Anton Lahnston.  This is a reduction of almost 90%.  If one assumed that only the same 10% of actual transition costs were counted in other departments, then the actual transition cost estimate would by 17M dollars!  Certainly the absence of any cost estimate associated with employee time needed to restructure and harmonize rules and regulations, standard operating procedures, and standards (needed for police work) is a huge omission.  People’s time cost more than toys (equipment). See Patience Haggin’s Daily Princetonian article for the emails and more details on the 90% transition cost reduction.

Stalwart Princeton resident Ron Neilsen writes, “The real myth in the Consolidation debate is the belief that combining the municipalities will save us money.  This myth is promulgated by every pro-consolidation advocate except the mayor of the township.  To his credit, the mayor has repeatedly stated that, after transition costs (now publicly estimated to be $1.7 million), there may be NO net savings.  He is a member of the Consolidation Commission with the credentials (CFP, CIMA) to make that claim authoritatively.

Supporting evidence surfaced during the Oct. 26  meeting of the Commission, when it was publicly revealed that the original estimate by municipal employees of the transition costs of IT (computers and communications) substantially exceeded $1,000,000, but that amount had been reduced by the Commission to below $200,000 on the advice of the consultant, on the basis that the State had previously rejected another municipal merger reimbursement application because it deemed the cost too high. Thus our $1.7 million cost estimate, which includes only the reduced amount, may be substantially understated – by well over $800,000 in the IT category alone. And the reimbursement amount we receive will be much less than 20% of the actual transition costs, even if our leaders can convince the State to pay it.

We have been deceived by false promises before.  For example, the Borough garage was presented to us as a money-making venture. But with debt service, insurance, and all other costs included, it is losing money.  The politicians, however, report a profit by commingling the garage loss with parking meter income.  The difference between parking meter income and reported income is a garage subsidy which we would receive if the garage did not exist or were privately owned.

If consolidated, our government leaders will try to hide any loss, as they did with the parking garage.  However, if they are unable to conceal it, they will blame it on “inflation”, “deflation”, “unexpected transition costs”, or any other handy excuse.  Only the prospective mayor, the current Township mayor, need not resort to such subterfuge, because he has already warned us of this possibility.  In either case, we cannot expect our taxes to decrease during the 5-year transition period.

If controlling the cost of living in Princeton is important to you and you believe the warnings of the Township mayor, as I do, you should also vote NO on consolidation.”

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