“Frisby said he felt many pools were ‘concrete, ugly spaces.’ The YMCA pulled out beach chairs and lawn chairs to ‘make it look like a country club, but not a country club,’ according to Frisby. ‘When the pool area looks better, people treat it better. We want to give residents what they deserve: a stellar, safe and self-inviting pool.’” – Trenton YMCA CEO Sam Frisby, June 23, 2015
– # –
“When the pool closed, they would come in around midnight and party. We would have to come in to repair the fences, clean up the condoms, beer bottles and other stuff and then get ready to open up the pool for camps at 10 a.m.” – Sam Frisby, July 21. 2016
Trenton’s public swimming pools are in the news this week, and not in a good way. Last night, City Council ratified the recommendation by the Eric Jackson Administration to cancel the contract between Trenton and USA Management, a Georgia- based company that had been awarded the management deal for the pools this summer. Although the pools had been open for only around 4 weeks this season, the City had already fallen two weeks behind in its payments to USA, and the company could no longer float (sorry) their payroll expenses until Trenton paid its bills. The Company requested to be let out if its contract, and the City agreed. Taking over for the remainder of the summer will be the Trenton YMCA, which managed the pools in 2014 and 2015. The “Y” was the only other organization to bid for this contract. Its proposal was about 40% more expensive than USA’s.
Add one more disgruntled business to the list of those unhappy with their experience working with this town. In the flurry of media articles over the last few days, LA Parker of the Trentonian reported that USA had provided to him a recording of a phone call, allegedly from Trenton’s recreation director Fiah Gussin. Parker reports the recording as saying, “I was calling in regards to not speaking to the media in regards to what’s happening here in the city of Trenton with our pool program.” Mr. Parker calls that recording, if it is from Ms. Gussin, an attempt at a cover-up. I won’t disagree.
Why might the City’s Rec Director want to cover up “what’s happening here?” Why might USA be disgruntled and unhappy about their experience with the City of Trenton? Apart, that is, from not getting paid, which is plenty reason enough to me.
Thankfully for us, USA ignored this alleged advice in regards to not speaking in regards to what’s happening. A spokesperson for the company spoke to Cristina Rojas of the Trenton Times, who suggested that their company had been set up by the City. Elle Anderson of USA told Ms. Rojas, “We did get a source that had communicated that (the city) had no intention of paying us and that we were considered their budget relief so they could let us go and pick up with the YMCA who they wanted to use in the first place, but could not afford,”We did get a source that had communicated that (the city) had no intention of paying us and that we were considered their budget relief so they could let us go and pick up with the YMCA who they wanted to use in the first place, but could not afford.” That’s quite the allegation, for which Ms. Anderson offered no proof. But the Trenton “Y” will be running the pools from August 1 to September 12, for the reported sum of $158,160. This amount is only slightly less than the amount that USA had agreed to take to manage the pools for the entire summer.
Trenton once again is resolving its problems the way it always seems to: by spending its way out of them.
Why are the “Y’s services so much more expensive than the vendor it is replacing. According to Mr. Frisby, his workers provide more services than USA. As reported by Ms. Rojas, “The bid required one lifeguard for every 60 swimmers, but the YMCA’s standard ratio is 30-to-1.” So, despite what the City asks for in its Request for Proposal, the YMCA wants to provide twice as many staffers, whether the pools need them or not. “The YMCA’s standard ratio” apparently counts for more than the city’s specifications, I guess.
For another example, as quoted at the top of his piece, the Y crews spend time each morning cleaning up from unauthorized overnight use, when people “come in around midnight and party,” in Mr. Frisby’s words.
This troubles me a lot, and hasn’t yet come up in any of the news pieces I’ve read so far, not addressed by anyone in the City, the two vendors involved, or by the reporters. Mr. Frisby acknowledges this late-night activity as a matter of fact. It seems to be pretty regular all over town, and very well tolerated and accepted. It’s even built into the schedule, when pool crews “come in to repair the fences, clean up the condoms, beer bottles and other stuff and then get ready to open up the pool.” (So much for “When the pool area looks better, people treat it better,” by the way.)
What happens when something goes wrong? What happens when someone gets hurt? What happens when a midnight partier gets drunk, falls into a pool and drowns? What happens when someone gets assaulted, sexually or otherwise? Who is responsible? Who is liable?
Remember that in 2010, a 3-year-old drowned in a Trenton public pool. Four years later, the City settled with his family for $1.5 Million, admitting that the lifeguard on duty at the time of the accident had been distracted. That sad incident happened during regular public hours, with trained and certified lifeguards on duty. Who is liable for an incident that might happen during an overnight “party,” when the pool’s managers – and the City?? – have full knowledge that such parties happen on a regular basis? Not only does Mr. Frisby not seem to describe any actions to the press that he and the Y take to prevent such partying, he charges the City of Trenton a premium to clean up after overnight parties on a regular basis.
Does that sound right to you? Mr. Frisby admits he openly condones and accepts potentially dangerous breaking and entering on City property on a regular basis. On the strength of that statement alone, I think the YMCA has disqualified itself from being considered a responsible manager of public facilities on the City’s behalf. It’s probably to much to ask for the City to cancel the new contract with the Y and look for yet another vendor, but it’s certainly reasonable to ban the organization from any future contracts such as this one until it demonstrates a commitment to safety and security of the sites it manages.
This is all pretty upsetting. There are a lot of issues here to address, and as usual in this town, nothing will likely be done. Until something shocking and tragic happens. We can’t say we weren’t warned.
I’m surprised to hear about this sort of thing happening, with new problems the City is experiencing with its purchasing, contracting and accounting processes. It doesn’t seem that much has changed since all of the substantial management changes and business procedure upgrades implemented since the City was swindled out of $5 Million by its payroll vendor Innovative Payroll Services last year.
Oh, that’s right! Silly me! There have been no management changes nor business procedure upgrades since IPS ripped us off last year!!
So, in other words, same old, same old in the City of Trenton. Six years running, and no sign of any change in the future.
We have been here before, as a nation. As victims of this nation’s original sin, we will be here again. What we, as a civil society, choose to do now will determine how bad the next time will be.
Around 225 persons will have been murdered in the United States this week. Each of them had their stories ended too soon, violently and for no good reasons. Each and every one of those lives were treasured by their families and loved ones, their losses keenly felt by them but by few others. We hear about most of them, if at all, only in passing. Seconds of video over a local newsperson’s shoulder. A few lines in the news section of a local newspaper, a few more on the obituary page.
There are only three things that they all have in common with each other. They will no longer grace us with their continued presence, their passions, their souls. Their number will continue to rise. And they will pass and eventually be forgotten with the rest. As a nation, we have come to accept a butcher’s bill of 12,000 homicides each year as normal. We are numb, most of the time. I am, at least. There are too many, too often.
This week, seven of those 200 deaths have shocked me as few others have. One was in Baton Rouge, one in a Minneapolis suburb, and five in Dallas. I am of an age where to hear the words “snipers” “shots fired” “Dallas ” and “Dealey Plaza” together in news reports chills me to the bone. All of these deaths are shocking.
Earlier in the week, we saw yet more sets of cellphone videos showing African American men shot at close range by white American police officers. According to the Washington Post, Alton Sterling and Philando Castile are two of over 500 people shot and killed by police officers so far in 2016. So far, this year is on track to match the year 2015, when 990 citizens lost their lives. Of that number, 258 – a little over a quarter – were black, while the majority, 494, were white. However, blacks are shot and killed by police at a rate disproportionate to their numbers, and often in highly questionable circumstances and frequently by police officers with work histories of violent and prejudicial actions against African Americans. That many of these questionable slayings are, upon investigation, not prosecuted as criminal offenses or, if they are prosecuted, do not lead to convictions, can’t be contested. This is what has been happening in America.
For the decade from 2005 to 2015, of the roughly 1000 annual police-related killings, only an average of five officers per year faced charges; in 2015 that number was 18. Fewer still are convicted. According to reporting in the Huffington Post, over that same decade, the average number of convictions for murder or manslaughter per year is one. For 2014 and 2015, that number was zero.
Confronted frequently with images and video such as we’ve seen this week from Louisiana and Minnesota – and the dozens before that in the last year – compounded with the facts of the numbers, is it any wonder that African Americans feel especially vulnerable to death by police, deaths for which there will likely be no accountability? I don’t think so. Which goes a long way to explain the mass of protests, demonstrations and organizing around the country known collectively as Black Lives Matter. “Life, Liberty and the pursuit of Happiness” are promised to us in our national Declaration of Independence as inalienable rights endowed on all of us by the Creator. I don’t begrudge the black community for feeling that the first of these might be kind of tenuous whenever they deal with law enforcement. Of course, most daily interactions between police and citizens end, if not always well in the case of those arrested, peacefully.
In the grand scheme of things, in the hundreds of millions of daily interactions we have in this country, most people are law abiding, as most law officers are professional, well-trained and honest in dealing with citizens. But it’s out at the margins, at the bleeding edge, where people can get killed.
Dallas shows us that. A peaceful demonstration in Dallas last night turned into chaos, as at least one gunman and perhaps more assassinated five police officers and wounded several more. Officers Brent Thompson, Patrick Zamarripa, Omar Cannon, Misty McBride, and Jesus Retana were killed, allegedly by a former US Army Reservist, if current news reports hold up, quoted by the Dallas Police Chief as having “told police he was ‘upset at white people. “The suspect stated that he wanted to kill white people, especially white officers.”
Dallas is still reeling, as the city tries to cope with last night’s shock. The families of officers killed and wounded should be in our thoughts and prayers, as they should be with the families in Baton Rouge and Minnesota coping with the loss of their loved ones. In this, Dallas takes the place in our heart that Orlando filled such a short while ago. Who will be next?
It’s impossible to look at the events this week outside the context of America’s original sin of historical and ongoing racism towards African Americans. The problem predates by a century and a half the independence of this country under the principles of the Declaration, mentioned above, that still remain aspirations for many of our citizens, and not guarantees. After weeks such as this, tempers are raw, racial tensions are high, and we must grieve.
It would be a mistake, in my opinion, to react to the murders this week as proving we are in a new spiral of racially-motivated violence and reprisals, especially focused on police. There is, for example, no “war on cops,” as irresponsibly charged today by Executive Director William Johnson of the National Association of Police Organizations. Policing is an inherently dangerous profession, and always has been. But historical trends over the last 85 years, since the Great Depression, have shown significant decreases in police line-of-duty fatalities. Those decreases, as reported last year in the Washington Post, are in several categories: absolute numbers, fatalities per capita of population and per capita of police officers. Graphs in that report show a major spike in the late 1960’s and early 1970’s, but since around 1975, the numbers have shown major improvements. Over the last few years, police deaths have been at low numbers not seen since the 1950’s, when the US population was half what it is now. Mr. Johnson said on Fox News today, “It’s a war on cops. And the Obama administration is the Neville Chamberlain of this war.” But that doesn’t make it so.
In fact, it would also be wrong, irresponsibly so, to call political violence against police as being exclusively or even largely racially motivated by revenge-seeking blacks. Remember that eight federal law enforcement agents – along with 163 others – were assassinated by Timothy McVeigh and Terry Nichols in 1995’s Murrah Office Building bombing in Oklahoma City. And it is Cliven Bundy, his two sons and two others who are under Federal indictment for “launching a ‘massive armed assault’ on federal officials, gaining hundreds of followers by spreading lies on the Internet, and encouraging their supporters to take sniper positions on highway bridges above government agents, unarmed adults and children.” In that last incident described in the quote, around 50 federal law enforcement agents were literally under the sights of up to 200 “patriot militia” members, looking for a fight, and ready to kill police. That that day did not turn out as bloody or worse than Dallas last night is only due to the fortitude of the federal agents on the scene, who deliberately avoided any actions that could have turned that day tragic.
As these incidents show, if there is in fact a war against cops, long-running and ideologically intense, it’s almost – but not entirely – directed mainly against the Federal government and its law enforcement agents. And it’s on the part of “Patriot Movements” such as those associated with McVeigh, Nichols, and the Bundys, and many of the 998 anti-government groups identified this year by the Southern Poverty Law Center. It would most definitely not be waged by Black Lives Matter.
So what can be done, after we mourn our dead this week, and dread the next ones to die?
Well, perhaps one place to start is the one suggested by Nancy Tourneau in the Washington Monthly yesterday. As incidents far afield as Louisiana, Minnesota, Texas, and South Carolina show, ours are national problems. Our pain is felt across the country, the blood spilled is spilled from sea to shining sea, and new graves are dug in all 50 states. Tourneau suggests a national approach:
Throughout our history, all of the major gains we’ve achieved in civil rights have come because of federal action. It started with ending slavery via the Civil War, but continued with everything from the Brown v Board of Education decision by the Supreme Court to the undoing of Jim Crow laws via the Civil Rights Act and the Voting Rights Act. None of these things would have happened if change had been left up to individual states.
Today we must face the civil rights issue of our time – both the over-incarceration of black and brown people and the police abuses that have been capturing the headlines once again. One of the reasons so many people are frustrated is that most of the control over these issues is currently in the hands of state and local governments. Progress is – at best – a patchwork, and tends to come in jurisdictions that are probably already in the lead on addressing them.
If we are to learn anything from our past, it is time to start thinking about how the federal government should be enabled to respond.
It’s a tall order. And one that will take time, and hard work, and good will. After a week such as this one has been, the latter may be in short supply. But it’s the only way that I can think of to make an honest effort to ensure that the anguish caused by these seven deaths this week is not cruelly repeated, again and again and again, into our shared future.
Over the six-year (!) life of this space, I’ve found myself being critical of the way the City of Trenton has been governed, more often than not.
No, seriously. I know it’s a shock. I have found on a pretty regular basis that much of what the City has done or failed to do in the last half dozen years has been poorly conceived, executed, managed, and communicated. Time and money have been squandered, momentum toward stabilizing and re-building this place blunted or reversed, and trust and confidence in the ability of this town to manage its own affairs evaporated.
But when the City does something right, something perhaps very small in the grand scheme of things but yet fundamental to the promise that someday, somehow, the folks who are entrusted to govern this city might get their heads out of their asses, well then I have to stand up and take notice. Such an action took place a few weeks ago, when the Administration of Mayor Eric Jackson announced its selections of grant recipients for federal US Housing and Urban Development (HUD) funds awarded by the Community Development Block Grant (CDBG) program.
In the recent past, such as during the plague years of 2010-2014, CDBG funds were treated as slush funds by the City. For example, in 2013, without the approval of City Council, Tony Mack spent $200,000 of funds to support his mis-begotten zombie libraries, the “Mayor’s Learning Centers” opened on some of the sites of the neighborhood branches of the Trenton Public Library closed in 2010. That same year, then-Business Administrator Sam Hutchinson was called out for charging the fulltime salary of one of his staffers, $38,000 plus fringes, to the city’s CDBG grant, in violation of federal guidelines. Finally, also in 2013, the Administration used $450 of CDBG money to pay for the annual City Hall Christmas tree.
As is my wont, I took the Administration to task for the latter two of these ill-considered use of federal CDBG monies, both Mr. Hutchinson’s foibles and (perhaps a little more enthusiastically!) the Xmas tree debacle.
So, with those instances as background, I am encouraged that the Jackson Administration is taking its stewardship of these CDBG federal funds more seriously than its predecessor did. At least by the most recent instance.
In its June 2 meeting, City Council deliberated the Administration’s recommendations to award $553,797 of funds from its fiscal year 2016-2017 CDBG program to local non-profit service groups for a total of 11 projects. These numbers represented a small portion of what had been proposed to the city. According to Cristina Rojas’ report for the Trenton Times, “42 applications requesting a total of $1.7 million were submitted.” Clearly, not every application from every group was going to be funded. Three out of every four submitting organizations were going to be disappointed, guaranteed.
One of those groups, Meals On Wheels of Mercer County, was quite disappointed, and very vocally and publicly so. Upon being rejected for funding for the second year in a row, Executive Director Sasa Olessi Montano called shenanigans. Ms. Rojas quoted Ms. Montano telling City Council, “(The mayor) has chosen to blatantly disregard the needs of the homebound adults in Trenton … for reasons that at this point can only be described as a political agenda perhaps. We will make sure that, come election time, they will not forget that their city has abandoned them.”
Ms. Montano that evening failed to substantiate her charge of “a political agenda perhaps,” at least as reported in Ms. Rojas account. But her position was supported by at least a few members of City Council. As quoted in the Times, “‘This is not about Meals on Wheels; this is about somebody not liking Sasa Montano,’ Councilwoman Phyllis Holly-Ward said. ‘She spoke up, she embarrassed people and it has been decided that she will never get funding.’” Although less conspiratorially-minded than Ms. Holly-Ward’s comments, Members George Muschal and Marge Caldwell-Wilson also spoke in support of the failed Meals on Wheels application.
At the Council meeting, the Administration’s acting Director of Housing and Economic Development Diana Rogers defended the City’s decision to deny the Meals on Wheels application, instead awarding $10,000 to the other applicant in the “Nutrition” category of grants, the Trenton Area Soup Kitchen (TASK). Referring to the evaluation and scoring process used to rank all of the proposals, the Times reported “They [Meals on Wheels] and Trenton Area Soup Kitchen were the only two applicants in the “nutrition” category. Neither scored above 70, but because the city felt it was an important category, $10,000 was awarded to TASK, which had the higher score between the two.”
Although I was unfamiliar with the two organizations involved or with their specific applications, the charges of political favoritism in the competitive evaluation and scoring process rang some bells with me. Over the last several months, in the instances of the awards of city contracts for its information technology services and – more notoriously – its payroll services, the city’s management of these services has to me been anything by objective and above-board. I found severe problems with the evaluation and scoring process that led last fall to the selection of the under-qualified and over-priced FCC Consulting Services for the City’s IT work. And, even though the contract process happened much earlier, initially back in 2009, the process by which the City awarded its payroll contract to the criminal enterprise Innovative Payroll Services (IPS) was badly flawed.
So, reading Ms. Rojas’ account of the charges raised by Ms. Olessi Montano, I was skeptical that the City had acted professionally and ethically in its treatment of the Meals on Wheels application. In the Times account, neither Ms. Rojas nor the Council Members quoted referred to actual applications submitted by both organizations. Perhaps there, I thought, the allegations of political favoritism and political vendetta made by Ms. Olessi Montano and Ms. Holly-Ward might be substantiated.
I have to admit, I was wrong. As a layman, looking at the actual proposals from both Meals on Wheels and TASK, I have to say I find the latter’s proposal to be stronger and more cost-competitive.
First off, I was surprised and pleased to find out, as directed by a City staffer, to find that all of the applications for the City’s CDBG funding were publicly available online. I didn’t have to file an Open Public Records Act (OPRA) request to pry the relevant files out of the City’s grasp, as I had to research the IPS boondoggle. All of the applications can be found at this link. Meals on Wheels’ submission is here, and TASK’s, here. Although the actual scoring sheets used to rank the two applications are not online (as far as I can tell), the differences between the two proposals is stark.
Using two crucial criteria, that of individuals benefited by the proposal and cost per individual benefited, the Meals on Wheels application is much less competitive relative to TASK’s:
- TASK’s proposal (Responses #17-19) requested $20,000 to serve 3,000 Trentonians, at an annual per person cost of $6.66.
- Meals on Wheels application (#17-19) requested $50,000 to serve a total of only 34 individuals, at an annual per person cost of $1,471.
That comparison alone would have led me to select TASK over Meals on Wheels. With dollars enough to support only 1 out of every 4 applicants generally and only 1 out of these two specific applications, the bigger bang for the buck is clearly provided by TASK. For a dollar request 1 1/2 times that of TASK’s, Meals on Wheels proposed to support only 3 dozen Trentonians, just about 1% of those proposed by TASK. Now it is true that TASK was awarded an amount that was half its request, so its actual impact will be less, and the numbers referenced above may change somewhat. But I think it is a safe assumption to say that the scale of TASK’s funded activities will likely still be substantially greater per dollar, and reach more Trentonians, than those that would have been undertaken by Meals on Wheels for more money.
TASK’s application also suggests a broader and more robust range of activities throughout the course of the grant year that would be supported by the City’s CDBG funding. TASK’s Project Timeline (excerpted from their application) shows this:
Here is Meals on Wheels:
Elsewhere in their proposals, both institutions describe their activities and their mission to under-served residents of the city in extensive and persuasive detail. I find it unfortunate that both institutions were unwittingly set in competition with each other, but that was the inescapable result of a process that had too many applications chasing too many dollars. In that environment, the application from Meals on Wheels was simply, sadly, too expensive and served too few individuals compared to TASK’s. And that’s what the decision-making process boiled down to.
Both organizations are vitally important to the residents of Trenton, and do crucial work to improve the daily lives of its citizens. But at least as suggested by these two proposals when set side by side, I believe the City made the right call by granting the award of its limited resources to TASK and not Meals on Wheels. The City’s evaluation process, at least in this instance, was professionally and ethically managed. Politics, or a personal vendetta against Sasa Olessi Montano, had little or nothing to do with it, at least as substantiated by the actual proposals themselves.
By publishing those allegations of political favoritism without reporting the actual content of the two proposals, both the Times and, in a similar account by David Foster, the Trentonian failed to supply the needed context to this issue, and instead just served to politicize the CDBG process. Lord knows, in the past – and who knows, perhaps again in the future – CDBG monies have been ripe for politicization and municipal abuse in the City of Trenton. But not this time, looks like.
This time, at least, I think the City of Trenton got it right. For a change.
I’m tired of bringing this up, again and again. But, it’s still relevant, each and every time.
In 2014 Eric Jackson was elected Mayor of Trenton in very large measure because he promised to be the Anti-Tony-Mack. Whereas Mack was ethically and morally-challenged to the point of criminal prosecution and conviction, Jackson presented himself as Mr. Squeaky Clean, Mr. Ethics, Mr. “Zero Tolerance” as described in a Trenton Times opinion piece published during the spring election:
Cronyism and corruption. These are not words that should ever be associated with public service and yet, too often, they are.
Politicians elected by their fellow citizens to improve the quality of life for their constituents too often end up taking advantage of their office for personal gain.
Taxpayers who believe their hard-earned money is going toward improving schools, roads and public safety instead learn that it is being spent to line the pockets of the connected few.
It does not have to be this way…
Most important, the next mayor has to lead by example. Municipal government is only as strong, ethical and transparent as its leader.
The mayor must make it clear to every employee working for the city and its independent agencies that there is zero tolerance for corruption, personal enrichment or dishonesty. [Emphasis, as always, mine - KM]
Remember? Good Times! Good Times!
I will not take long to make my point today. I will simply say that if Mr. Jackson truly, sincerely meant what he wrote in 2014, he would recognize that the appointment of his sister to a well-paying position at the Trenton Housing Authority, a position for which she appears to have neither relevant experience nor training, just does not look or smell right. It’s a situation that sends off a strong perception of nepotism, a perception that Mr. Jackson would have been better off to avoid.
In today’s article by David Foster in the Trentonian, Mr. Jackson denies he had anything to do with the decision to hire his sister:
I’m a hands-off guy like that. I didn’t get involved in their process at all, didn’t recruit her, none of that.
Taking him at his own word, Mr. Jackson is just a “hands-off guy,” I guess.
Just as he was “hands-off” during the process that saw the son-in-law of his Chief of Staff reinstated as a police cadet – an action without precedent – after being expelled for cheating.
Just as he was “hands-off” during the process that led to the award of Trenton’s Information Technology contract to an inexperienced vendor working out a private residence that was the 3rd MOST expensive out of 12 companies that bid on the contract.
Just as he was “hands-off” in the aftermath of the $5 Million Dollar rip-off of the City by its former payroll service. To be fair, everyone in his Administration from City Comptroller Janet Schoenhaar on up has been “hands-off” of this one. “Hands-off” during the months when the IRS and State of New Jersey were sending up multiple red flags that something was wrong, and “hands-off” in the aftermath of the theft, when it appears that nothing is going on in City Hall to make sure that no similar crime happens again. No one has been held accountable. No administrative changes of policies and procedures have been introduced. No results of a supposed audit have been released or even spoken of. Everyone is very, very “hands-off” on this one.
And still very “hands-off” when it comes to his own election finances. The last quarterly financial report required by the state Election Law Enforcement Commission (ELEC) was submitted by Mr. Jackson in October of 2014, for the period ending September 30 of that year. The Mayor is now about 18 months behind on his legally-mandated reporting.
Mr. Jackson is pretty “hands-off” on a lot of things, it looks like. Kind of begs the question: When, exactly, is he “hands-on?”
Going back – as I often do – to his March 2014 “Zero Tolerance” op-ed, I still agree with Mr. Jackson on this one point:
Most important, the next mayor has to lead by example. Municipal government is only as strong, ethical and transparent as its leader.
If that is Mr. Jackson’s self-described yardstick, then just how “strong, ethical and transparent” is Trenton’s municipal government?
Not damned much at all.
Con artists choose you very carefully. They are only interested in those people who can be turned around to believe in them without question, who can be manipulated to believe in their illusions. They don’t merely seek out the greedy or the weak or the stupid. Not at all. They seek out the needy. They sniff and snuffle around until they find someone who has an unfulfilled desire that even you yourself may be unaware of until the carrot is dangled in front of your face.
Con artists will stalk anyone whose weaknesses or strengths can be used to advantage. Scan through the character traits below, and you will see the con artist’s menu. As far as he is concerned any character trait can be exploited and manipulated once your needs have been established. No one is immune.
Character traits: Pride, Ego, Anxiety, Ignorance, Ageing, Youth, Dreams, Security, Insecurity, Fear, Greed, Loneliness, Popularity, Assumed knowledge, Success, Failure, Illness, Self-Confidence, Desperation, Vulnerability, Ambition, Laziness, Wisdom, Hateful, Loving, any trait will do.
Scam victims: Yuppies, Volunteers, Attorneys, Wannabes, Stars, Do-gooders, Malcontents, Authority Figures, Politicians, Law Enforcement Officers, Single Moms, Students, Officials, Bankers, Sports Figures, Professors, Scientists, Psychologists, Blue Collar Workers, Unemployed, Doctors, Nurses, Physically Challenged, Elders, Children, Corporate Executives, Insurance Agents, Accountants, Real Estate Agents, … You name it!
You can also safely add “Municipal officials” to this list. Seems to me that they, at least in this town, definitely seem to possess a lot of these character traits. Pride? Check! Ego? Ditto. Ignorance? Uh huh. Self-Confidence? Boat loads! Needy? Don’t get me started!! You get the picture.
In light of last night’s meeting in Trenton’s City Council, we know a few more details about the whole Innovative Payroll Services (IPS) mess that has brought the City to seeking to finance nearly Five Million Dollars in debt to replace funds that IPS stole from Trenton last year. And those details are enough to demonstrate that we got scammed. Royally. We weren’t alone in being victimized by IPS and its principal John Scholtz.
But we are – by far – the biggest victim that IPS conned. Because we were probably the easiest among all of their clients from whom they could steal. They did so, repeatedly for months! months! right under our noses, despite many warnings and red flags from the state and federal governments. I’d almost say we deserved to get taken like that, except I – along with every other Trenton taxpayer – have to shoulder the burden of digging the chuckleheads who run this town out of this mess.
One other thing we learned last night is that the Eric Jackson Administration seems to be taking no action to ensure that the scam we fell for with IPS won’t happen again, in some other way with some other con artists. In the absence of any real, visible changes, the City of Trenton is still a ripe, plump chicken ready to be plucked. And plucked. And plucked.
According to the account in today’s Trenton Times by Cristina Rojas, “Between Aug. 15 and Jan. 15, the city’s payroll provider, Innovative Payroll Services, failed to pay $4,697,528 in taxes to the Internal Revenue Service ($4,076,845) and the state ($574,256) that had been withheld from employees’ paychecks.” So at least we finally know the figure for taxes owed to the State. Along with the IRS funds, IPS ripped us off by a few bucks under $4.7 Million Dollars.
According to the Complaint filed by the US Attorney’s Office against IPS’ John Scholtz on March 15 of this year (which you can find here), “The investigation to date shows that, as a result of SCHOLTZ’s scheme, more than 50 IPS clients sustained over $5.6 million in losses based on federal tax deposits that IPS failed to make, as well as associated penalties and interest. [Emphasis mine - KM]”
Let’s restate that. Fifty clients were victimized by IPS to the tune of $5.6 Million Dollars. Of that total, close to $4.1 Million was scammed from Trenton. The rest of that total, about $1.5 Million, came from the remaining 50-odd clients. That averages out to around only $30,000 each for all of the other victims. Now, I’m sure that most if not all of IPS’s other clients were likely a lot smaller than the City of Trenton, and a loss of $30,000 may hurt as much to them as $5 Million hurts to Trenton. I do not mean to their losses mean less than Trenton’s.
Fifty other clients only lost about $30 Grand each. Trenton, the soft touch, the easy mark, the unsuspecting rube, was cleaned out of FIVE MILLION DOLLARS.
I don’t know about you, but in addition to the anger and outrage I’ve about this crime, I can add a profound sense of embarrassment, at being such gullible victims
I read all of those emails from poor city business analyst Mary Henry – all of them copying City Comptroller Janet Schoenhaar, remember – to IPS, asking, “Um, we’re getting all these notices from the IRS about missing payments,” and I have a mental image of the folks at IPS snickering and laughing behind our backs as they wrote, every time, “Oh, we got this. We’re working on it! LOL”
OK. We still don’t know the details of what happened in City Hall last year, that allowed Millions of Dollars to be stolen under our noses. As of last night, it seems that City Council will not hold the Administration accountable for providing either an explanation of past failures OR plans for preventing things like this in the future. That doesn’t look like it will happen. The Administration is stonewalling, and Council will, once again, cave. They will probably end up rubber-stamping the issuance of long-term debt to just make this tax problem just go away.
After a while, this incident, like so many others before it, will fade in the public’s memory, both in and outside the City. Individual employees and public officials may (or more likely, may not) be held accountable. Some might even be found to be liable for crimes as inside accomplices, although there has been nothing reported to date that might suggest this as a possibility. In that instance, guilty parties will be judged accordingly, move along to their fates, and be forgotten with the rest.
What will last a lot longer to fade away is the long-standing and persistent image of the City of Trenton as a place full of incompetence, easy pickings for con artists looking to pull their next scams.
Trenton. We Welcome Grifters.
The profound silence from West State Street about the City of Trenton’s misguided, stupid, irresponsible proposal to sell long-term debt to cover the short-term theft of millions of dollars in payroll tax payments by former vendor Innovative Payroll Services tells me that the State of New Jersey has at least tacitly given its blessing to the hare-brained scheme. The State’s effective endorsement of the City’s bond proposal will no doubt be touted tomorrow evening by the Administration’s representatives and Council Members alike as a Seal of Approval for this plan.
In order to put the State of New Jersey’s “advice” on this matter – if in fact that is what the State is offering – in some kind of meaningful context, I offer the following, without (much) comment. They all describe a very stormy future for New Jersey finances, on the state and municipal levels. Find an umbrella:
New Jersey Penalized in Biggest Muni Bond Sale Since 2013 -
“The New Jersey Economic Development Authority sold $2.2 billion of bonds at yields that were more than 2 percentage points higher than benchmark tax-exempt securities in the state’s biggest debt sale since 2013.
“The bond offering shows the penalty New Jersey is paying to borrow as it faces financial pressure from an $83 billion deficit in its employee-retirement system, which state leaders have shortchanged for years. The escalating bills to the pension funds have left New Jersey with the second-lowest credit rating among states after Illinois.
“’Unless the state can show that it can make long-standing strides in its pension and health-care obligations, the state should be prepared to be penalized when it brings new issues to market,’ said Neil Klein, senior managing director in New York at Carret Asset Management, which oversees $750 million of municipal debt. Carret didn’t buy any of the bonds.”
Investors, Just Say No to Illinois, NJ and PR Muni Bonds
“Social media makes a mockery of high profile people who lie and cheat. So why do investors let politicians get away with lying, skirting the truth and spending money the state or city doesn’t have? Certainly, adding to the mountain of unfunded pension and health care liabilities fits this category of untruths.
“If you feel anywhere as angry as I do about the mile high pension promises given to public employees—without a snowball’s chance of ever being paid—then do something. The current worst offenders are Illinois, Chicago and New Jersey…
“It is a relatively easy in concept to stop this abuse of investors—just refuse to purchase these bond issues. After all, the yields on Illinois, Chicago, Puerto Rico and New Jersey municipal bonds don’t even reflect the obscene risk they pose to investors.
“Oh sure, the municipal bond fund managers say these issues are money good. They’re just protecting the book of business that fattens their bond fund yield and their own wallets.
New Jersey Cut by Moody’s as Christie Gets Ninth Debt Downgrade
“New Jersey had its credit rating cut one level by Moody’s Investors Service, giving Governor Chris Christie the ninth downgrade of his tenure as he considers a 2016 presidential run.
“The reduction to A2, the sixth-highest rank, brings the Moody’s mark in line with those of Standard & Poor’s and Fitch Ratings. The move covers a combined $32.2 billion of debt, New York-based Moody’s said in a statement late Thursday. The company put a negative outlook on the state, meaning more rating reductions may be ahead.”
The Muni-Bond Debt Bomb
“State and local borrowing, once thought of as a way to finance essential infrastructure, has mutated into a source of constant abuse. Like homeowners before the housing bubble burst, states and cities have gorged on debt, extended repayment times, and used devious means to avoid limits on borrowing—all in order to finance risky projects and kick fiscal problems down the road…
“All these debt-enabled abuses—extravagant spending, concealments of budgetary problems, and risky investment strategies—came to a head in the second half of 2008, when spooked investors withdrew from the muni-bond market in droves. A downturn in tax revenues had revealed how little breathing room some local governments had left themselves to pay their debts; also, several insurers that typically backed muni bonds had exited the market, leaving buyers unprotected against defaults. The investors’ flight should have signaled to cities and states that it was past time to reform their debt practices.”
Look, there is a legitimate place for long-term debt in the financial strategies of cities and states, Even those whose finances are in permanent crisis mode, like Trenton’s. But that legitimate place for long-term debt should be tightly linked to purposes for which there are long-term benefits. Not a one-off short-term cash flow problem created by embezzlement.
What City Council will consider tomorrow evening, in the form of Resolution #16-170, is the wrong solution to this problem, whose origins are still un-examined and the probability for re-occurrence are still unknown.
Any representation made tomorrow evening by the Eric Jackson Administration that this is a sound plan, backed by the advice and Counsel of the State of New Jersey, should be skeptically considered through the perspective of the stories above, and the dozens and dozens of stories just like them.
Tomorrow’s plan to issue long-term debt by Resolution #16-170 is bullshit.
You know, that’s the one about the prophet without honor in his own town.
Yep, pretty much.
In the example I will discuss this morning, the Prophet spoke through a lawyer. He was no less clairvoyant by virtue of being represented by Counsel.
Today’s reading comes from select excerpts from the Letter of James Brady, Attorney at Law, to Trenton City Clerk Juanita Joyner, May 21, 2009. The full letter can be found here, produced by the City in answer to an Open Public Records Act (OPRA) request I filed with the City in March.
“On May 18 & 20, I consulted with Mr. [Joseph] Harris, President of ADPC regarding [the Award of Contract to IPS Payall Solutions, LLC by the City of Trenton]. As you know, Mr. Harris was part of the evaluation committee, which prepared bid specifications and reviewed the bids for a fully integrated Human Resources Information System, Payroll System, Benefits Management and Timekeeping/Labor Tracking System (’HRIS’ System) to be implemented for the City of Trenton. Pursuant to my meeting with Mr. Harris, I am providing this letter so that the position of Mr. Harris is protected in the event of any adverse consequences resulting from the action referenced above…”
The letter goes on to discuss many irregularities in this bid and contract process. Mr. Brady concludes,
“I have advised my client, Mr. Harris, that based on the information in my possession, the award to [sic] the contract to IPS is in violation of the ‘Local Public Contracts Law.’ Therefore I am submitting this letter, so that it may be recorded that the involvement of Mr. Harris (as outlined above) regarding this contract ended as of May 1, 2009, and that Mr. Harris played no part in any subsequent illegality. I trust that you will advise the Mayor, his Chief of Staff, and the City Council of the concerns expressed herein by providing each a copy of this letter.” [Emphasis mine - KM]
This is a remarkable document. We’ve known that the matter of Trenton’s Stolen Tax Millions and the involvement of Innovative Payroll Services (IPS) and its principal John Scholtz goes back to at least early 2015, thanks to documents released from an earlier OPRA request showing correspondence between IPS and the City discussing late payments and other irregularities.
Now we know that as far back as 2009, at the very beginning of IPS’ association with the City, there were serious concerns that this association and the process which created with it were so inherently flawed that a lawyer was hired to write a letter warning everyone he could think of of “adverse consequences” and “subsequent illegality” that would result.
Read the full letter for all the details the Mr. Brady provides to substantiate the claims of his client Joseph Harris. To briefly summarize, Brady’s main points are that:
- The bidding and evaluation process undertaken to hire IPS was rushed, pushed along in less time than required by NJ law. Evaluation and recommendation reports required by law to be written and made public prior to action by City Council were not completed nor publicized.
- IPS’ submitted bid was incomplete and defective. IPS itself lacked the required qualifications to bid for Trenton’s business.
- The award of the City’s business to IPS was made on an “emergency basis,” although the basis for the “emergency” was not stated in the authorizing City Council Resolution, or even mentioned. Mr Brady writes, “Further, it is difficult to fathom just exactly what the ‘emergency’ might be as the City of Trenton already has a payroll system in place, and has been able to function without a fully integrated ‘HRIS’ System heretofore without imperiling the ‘public health, safety or welfare’ [one of the criteria necessary to justify an Emergency].”
As mentioned above, we know that the theft of multiple millions of dollars intended as tax payments to the Internal Revenue Service and the State of New Jersey which is being discussed by Council at its Thursday evening session covers losses incurred in 2015. Now we have to be asking ourselves, just how far back do these adverse consequences and illegalities really go?
This letter is one steaming hot load of accusation. Read in the context of what we know IPS did in 2015, this certainly qualifies as prophetic. Given the serious nature of the claims made here, this letter should certainly lead to a fuller audit and investigation, by outside prosecutors if necessary, into the entire term of the association of Innovative Payroll Services and the City of Trenton.
We have seen a lot of mischief and shenanigans in Trenton during these last seven lean, plague years. We can’t be certain that everything that went on during that time has been brought to light.
One more note, about the treatment shown by Trenton to Joseph Harris, of ADPC, the unwitting prophet whose lawyered-up cry of adverse consequence and illegality went unheeded by those who should have listened.
Just one year after Harris warned the City about IPS, the City in 2010 attempted to fire his company ADPC, which had provided Information Technology services to Trenton for nearly a quarter-century. In a seriously flawed bidding and contracting process, which was voided by a Superior Court judge, the City attempted to hire an unqualified vendor – Lynx Technology – to replace ADPC.
That well-recorded process was unsuccessful in dislodging ADPC. However, four years later the City tried again, This time, it succeeded.
In 2015, as the result of a seriously flawed bidding and contracting process – do we see a continuing theme here, perhaps? – ADPC was replaced as Trenton’s IT vendor by the obviously unqualified FCC Consulting Services. This action, although the subject of a lawsuit by Mr. Harris, has so far been unsuccessful in reversing the result of that process as 2010’s had been reversed.
After losing the City of Trenton as his main client, ADPC has reportedly been struggling financially. Mr. Harris at present seems to be suffering a fate common to many prophets whose words of truth fall to the ground unheard, their warnings unheeded.
There are more documents, several hundreds of pages worth, that were released by the City in response to my OPRA request, providing more detail in the RFP and bid processes in 2009 and 2012 which led to to contracts for IPS. I haven’t begun to review them all, but hope to do so soon.
When I do review them, they will be viewed through the prism of this Brady letter. The letter strongly suggests that the process that brought a criminal enterprise in to run the city’s payroll for seven years, and which has led to the loss of AT LEAST Six Million Dollars in 2015, was very likely illegal and very possibly corrupt from the very start.
Also viewed through this prism, the otherwise baffling treatment of ADPC in 2010 and 2015 – in which the Administrations of first Tony Mack and then Eric Jackson seemed almost to single out the company for dismissal, and took extraordinary measures to replace them – starts to make sense.
Was Joseph Harris and ADPC punished for raising the red flag about IPS in 2009? Was ADPC fired and sent to the wilderness as payback for Harris’ whistleblowing?
The plot, as they say, thickens.
Traducido por JQ Díaz
*Nota del traductor: *
*Estimado lector: Esta excelente columna de Kevin Moriarty es una excelente
advertencia sobre las malas decisiones que han históricamente tomado
diversos gobiernos municipales y estatales en tomar prestamos a largo
plazo para pagar deuda presente. Ya se han evidenciado los resultados en
los casos más recientes como los de la ciudad de Detroit, y al presente,
Puerto Rico. Haga su búsqueda en internet y compruebe los nefastos
resultados de esta práctica si no se evalúa con mesura. *
Ahora sabemos un poco más sobre el plan de la administración de Eric
Jackson propuesta para este jueves bajo la Resolución # 16-170. Como es
habitual en Trenton, lo que estamos descubriendo que no es bueno.
Tuvimos las primera noticias sobre esta resolución el pasado viernes, como
un asunto en la agenda para la reunión del 5 de mayo del Consejo de la
Ciudad. En el programa el tema de agenda fue llamado para realizar “una
apropiación de emergencia” para pagar al Servicio de Rentas Internas los
depósitos de impuestos sobre la nómina que ya habían sido pagados por el
Ayuntamiento a su antiguo servicio de nómina, *Innovative Payroll Services*
en el 2015, pero que habían sido malversados por el propietario de IPS,
John Scholtz. Yo tenía un montón de preguntas acerca de la resolución del
viernes. Entre ellos se encontraban: “¿Cuáles son las cantidades reales que
deben pagarse al Gobierno Federal y al Estado? ¿Cómo se están financiando
estos “créditos de emergencia”? Gracias a los reportajes de la periodista
Cristina Rojas del Trenton Times, tenemos algunas respuestas.
La Ciudad de Trenton tiene la intención de vender un bono – emisión de
deuda a largo plazo – cuyo valor es de $ 4.7 millones de dólares para
satisfacer la obligación pendiente con el Servicio de Rentas Internas
(IRS). Por ahora, al parecer, cualquiera que sea obligación que tenemos con
el Estado de Nueva Jersey – y todavía no sabemos cuánto es eso – se está
poniendo a un lado por ahora. El Tío Sam esta, probablemente, insistiendo
que la Ciudad pague, una vez más, lo que debe desde el año pasado.
El método utilizado por la ciudad – un bono de obligación general municipal
- elimina este deuda de $ 4.7 millones del presupuesto del año en curso.
Siendo este el penúltimo mes del año fiscal en curso, la perspectiva de
tener que llegar a casi $ 5 millones habría significado una evaluación
inmediata, drástica, no deseada de establecer un impuesto a la propiedad
especial contra los dueños de propiedades asediados de esta ciudad. Esta
posibilidad le habrá dado miedo al Señor Jackson y sus colegas, por lo que
en esencia han pateado el balón hacia adelante. Lanzar esta obligación como
un bono significara el pago de este pasivo durante un período de muchos
años – 10, 15, 20, 30 años. Las ciudades (y los estados y el gobierno
federal) suelen utilizar este tipo de financiación a largo plazo para
financiar inversiones como edificios o carreteras, con una perspectiva a
largo plazo y beneficiando a la comunidad. Repartir el costo para construir
una nueva biblioteca (ojalá!), por ejemplo, por un periodo de más de 20-30
años tendría sentido.
Emitir financiación para costear un solo asunto, como lo es impuestos
robados, de esta manera no tiene ningún sentido. Por muchas razones. Por un
lado, cuesta mucho, mucho más dinero en el largo plazo, de lo que sería si
fuere financiado mediante el presupuesto y los créditos del año en curso.
He aquí un ejemplo, desde un sitio web. Desconozco los términos específicos
que la Ciudad planea ofrecer bajo esta supuesta emergencia, así que elegí
unos términos al azar. Yo de entrada lo clasifico como una nota de $ 4,7
millones a 20 años al 7% de interés (Voy a hablar más sobre esto más
adelante). En adición de otros costos asociados con la emisión de la nota,
la Ciudad haría en este ejemplo pagos mensuales de $ 47,408. En un
presupuesto de 1 año ascendería a $ 568.896.
Es cierto, eso es mucho más aceptable para un presupuesto anual de $ 4.7
millones en un solo pedazo de una sola mordida. Pero se pagaría cada año
durante los próximos 20 años. En este ejemplo, los futuros Alcaldes,
Concejos y Principales Oficiales Financieros futuros tendrían que pagar $
568, 896 cada año por el error garrafal del 2015 hasta el 2036, para un
total de $ 9.937.920.
¿Acaso es justo encerrar las próximas administraciones y contribuyentes
ante el fracaso de la administración de Eric Jackson?
¡Lo dudo mucho! Aquí están los números que he utilizado:
En la actualidad los términos reales de la Ciudad puede conseguir esta
emisión en realidad puede ser más favorables que esto. Por supuesto,
podrían ser peores.
Además, aparte de los problemas que pueda causar la emisión de un bono,
habrá un efecto dominó. La calificación de los bonos de la Ciudad, los
comentarios atribuidos a todas las emisión de financiación a largo plazo de
la ciudad, se ha deteriorado mucho durante los últimos años. Las pobres
finanzas de Trenton han sido suficientes para hundir las calificaciones de
bonos de la ciudad por sí solas, pero esta tendencia se ha visto muy
agravadas por las malas calificaciones dadas al Estado de Nueva Jersey
durante los últimos años.
Cuanto menor sea la calificación de bonos de una ciudad, más riesgosos son
considerados sus bonos por la comunidad de, y por lo tanto una ciudad con
bajas puntuaciones en sus bonos tendrá que pagar mayores tasas de interés a
los compradores de bonos. Las últimas financiaciones de la Ciudad de
Trenton han recibido una calificación baja de *Baa1* por Moody’s, uno de
los dos servicios de calificación más grandes. Baa1 está a sólo unas breves
clasificaciones antes de Ba1.
El término común que se asigna a los bonos – y sus emisores – la
clasificación de Ba1 o menor (hay muchas calificaciones más bajas que eso,
pero que no quieren saber de ellos), se clasifican basura o chatarra. Los
bonos basura. No sé qué tasas de interés los bonos basura municipal tienen
que ofrecer con el fin de atraer a los compradores, pero no creo que el
ejemplo he usado anteriormente, un 7 por ciento, está muy lejos de lo que
sería la tasa real.
Los cambios en las calificaciones de bonos a una ciudad hace que todos sus
préstamos, para cualquier propósito, sea mucho más caro. Durante el último
par de años, la ciudad ha visto algunas rebajas en sus calificaciones, la
más reciente por Moody’s en abril de 2015. ¿Qué puede afectar los cambios
Moody’s ofrece algunos consejos. En un aviso publicado en noviembre de
2015, el servicio dijo lo siguiente:
¿QUÉ podría hacer para que la Clasificación pueda subir?
-Una gestión exitosa respecto a los recortes en las ayudas estatales con
soluciones presupuestarias recurrentes [No se ría. ¡¡Podría ocurrir!! OK,
probablemente no lo hará! - KM]
-Una mejora en las reservas actuales y un saldo del fondo de liquidez
-Una baja en la deuda y en la carga sobre las pensiones
También dijo lo siguiente:
¿QUÉ podría hacer para que la clasificación baje?
-Reducción en la flexibilidad financiera y la liquidez para compensar
posibles disminuciones de ayuda estatal
-Incapacidad para adecuadamente y oportunamente atender la reducción en las
ayudas estatales y federales
-Necesidad de endeudamiento para manejar el flujo de efectivo
No suenan familiares esos factores negativos? Sí, así pensaba.
Primero, Trenton no está en condiciones de absorber las reducciones de la
ayuda transitoria que provee el estado. El Estado parece estar de acuerdo,
ya que durante los pasado años que no ha dejado de financiar a la Ciudad a
niveles aproximadamente similares. Pero las finanzas del Estado se han ido
por el inodoro también. ¿Cuánto se podría absorber una repentina reducción
en la ayuda por parte del Estado? De ningún modo.
Y, segundo: Moody’s nos dice que el uso de bonos a largo plazo para
resolver un problema de flujo de efectivo actual hará que nuestra
calificación baje. En otras palabras, PRECISAMENTE LO QUE LA CIUDAD PROPONE
HACER CON LA RESOLUCIÓN # 16-170. Usar financiación a largo plazo, en la
forma en que la Administración está proponiendo para este jueves,
definitivamente nos hará daño en el largo plazo.
Me parece cada vez más precisa la primera impresión que tuve a esta noticia
del viernes: “esto es un intento de barrer debajo de la alfombra todo lo
relacionado al episodio de mal gusto del dinero malversado por IPS.”
Yo le escribí una nota al Consejo el viernes para expresar mi oposición
para con esta medida en este momento, sobre la base de todo lo que todavía
no sabemos. Como ha sido costumbre de este Consejo, no he recibido casi
ninguna respuesta. Uno de los miembros me escribió para decirme que el
Consejo, al menos como un cuerpo, no tenía ninguna notificación previa de
que la Administración estaba tratando de resolver el problema IPS / IRS a
través de un bono flotante. Ellos colectivamente (es posible que uno o dos
miembros de los Niños cool en el Consejo consiguieron un mano a mano, pero
no todos los miembros escucharon la noticia) se enteraron en los
periódicos, y de su copia de la agenda del día para la reunión del jueves.
El viernes, hice muchas más preguntas acerca de todo este asunto que siento
es necesario abordar públicamente antes de que el Consejo apruebe ACCION
ALGUNA para resolver esto mediante una medida de emergencia. Aparte del
consabido “¿Cómo?” ¿y cuánto?” todavía estamos críticamente desinformados.
A partir de esta mañana, tengo una pregunta más. He aquí el texto de la
resolución, cortesía de la señora Rojas de *The Times*, que el Consejo
deliberará el jueves. En el texto, la Principal Oficial Financiero de la
ciudad, Janet Schoenhaar, está tutelada a ejecutar la nota de emergencia de
$ 4,7 millones, junto con el Alcalde. La Sra Schoenhaar también esta
obligada a supervisar el proceso por el cual se ofrecerá los bonos para la
venta. Aquí está su firma en la Certificación de Necesidad del
financiamiento por bono:
Usted recordara que fue Janet Schoenhaar, que fue copiada en toda la
correspondencia entre la Ciudad de Trenton y IPS durante la segunda mitad
de 2015. La misma correspondencia que tomó nota de las frecuentes noticias
del IRS y el Estado sobre los desaparecidos pagos sobre impuestos. La misma
correspondencia descrita por *The Times* como “alerta roja sobre los
problemas en la nómina de Trenton.”
Si la Señora Schoenhaar está siendo enviada a formar parte de la solución
propuesta por la Ciudad para este asunto, entonces ella tiene que abrirse a
describir y rendir cuentas por su papel respecto a todas las “señales de
Más aún de lo que pensaba el viernes, creo que esta resolución que se
propone, es una solución equivocada en el momento equivocado. La Ciudad se
está acometiendo para barrer este asunto bajo la alfombra. El Alcalde
Jackson y su administración sigue negándose a responder a muchas preguntas
acerca de cómo todo este asunto aconteció. Su propuesta de “solución” es
una que sobrecarga que habrán de pagar los contribuyentes de esta ciudad
por los próximos 15 o 20 años. Y el uso de la financiación de bonos a largo
plazo para resolver este problema de una sola vez el flujo de caja actual
amenaza la integridad financiera general de la Ciudad.
Resolución # 16-170 no es más que basura.
Vea la columna original en inglés http://www.kevin-moriarty.com/blog/?p=6287
We know a little bit more about the Eric Jackson Administration’s plan for this Thursday’s proposed Resolution #16-170. As usual, this being Trenton, what we are finding out ain’t good.
We first heard about this Resolution on Friday, as an Agenda item on the docket for the May 5 meeting of City Council. The item on the agenda calls for “an emergency appropriation” to pay the Internal Revenue Service for payroll tax deposits that had already been made by the City to its former payroll service, Innovative Payroll Services (IPS) in 2015, but which had been embezzled by IPS’ owner, John Scholtz. I had a lot of questions on Friday about that resolution. Among them were: “What are the actual amounts due to be paid to the Federal Government and the State? How are these emergency appropriations being funded?” Thanks to reporting by Cristina Rojas of the Trenton Times, we have a few answers.
The City of Trenton intends to sell a bond – long-term debt – worth $4.7 Million Dollars to satisfy the outstanding obligation to the Internal Revenue Service. For now, apparently, whatever obligation we have to the State of New Jersey – and we still don’t know how much THAT is – is being put aside for now. Uncle Samuel is probably getting very insistent that the City pay, again, what it owes from last year.
The method being used by the City – a municipal General Obligation bond – removes this $4.7 Million liability from the current year’s budget. This being the next-to-last month in the current fiscal year, the prospect of having to come up with nearly $5 Million would have meant an immediate, drastic, unwelcome special property tax assessment from the city’s beleaguered private property owners. This prospect likely scared Mr. Jackson and his colleagues, so they have essentially punted. Floating this obligation as a bond will string out payment of this liability over a period of many years – 10, 15, 20, 30. Cities (and states, and the Federal government) typically use this kind of long-term funding to finance items like buildings or roads, with a long-term life and benefit to the community. Spreading the cost of a new library (I wish!), for instance, over 20-30 years makes sense, if you expect people to use the library for 30 years or more. That’s what long-term financing is for.
Financing a one-time cost, like the stolen taxes, this way does not make sense. For a lot of reasons. For one thing, it costs much, much more money over the long-term than it would if funded under the current year’s budget and appropriations. Here’s an example, from this website. I don’t know the specific terms the City plans to offer with this emergency issue, so I chose terms at random. I input this as a $4.7 Million Dollar 20-year note at 7% interest (I’ll talk more about that below). Adding in other costs associated with issuing the note, the monthly payments the City would make on that example would be $47,408. Over one budget year, that comes to $568,896.
That’s much more palatable to an annual budget than $4.7 Million in one hard-to-digest bite, true. But that would be paid every year for the next 20 years. In this example, future Mayors, Councils and city Financial Officers will be paying $568,896 each and every year for this 2015 fuck-up until 2036, for a total of $9,937,920.
Is it fair, to saddle future administrations and taxpayers for this failure of this, current Eric Jackson Administration?
I highly doubt it! Here are the numbers I used:
The actual terms the City may get for this may actually be more favorable than this. Of course, they might be worse.
Also, apart from the concerns with this one bond issue, there will be a ripple effect. The City’s bond rating, the reviews granted to all of the City’s long-term financing, has deteriorated greatly over the last several years. Trenton’s poor financials have been enough to sink the city’s bond ratings all by itself, but this trend has been badly exacerbated by the poor ratings given to the State of New Jersey for the last several years.
The lower a city’s bond rating, the riskier their bonds are considered to be by the investment community, and therefore a city with low bond ratings has to pay the bond buyers a higher rate of interest. The City of Trenton’s latest financings have been assigned a rating of Baa1 by Moody’s, one of the two biggest rating services. Baa1 is just a few short ratings above Ba1.
The common term assigned to bonds – and their issuers – rated Ba1 and lower (there are many ratings lower than that, but you don’t want to know about them), is Junk. Junk bonds. I don’t know what interest rates junk municipal bonds have to offer in order to attract buyers, but I don’t think the example I used above, 7 percent, is far off from what the real rate would be.
Changes in bond ratings to a city makes all of their borrowing, for whatever purpose, much more expensive. Over the last couple of years, the City has seen a few downgrades in its ratings, the most recent one by Moody’s in April of 2015. What might affect future changes?
Moody’s offers a few tips. In a notice issued in November 2015, the service said this:
WHAT COULD MAKE THE RATING GO UP
-Successful management of cuts in state aid with recurring budgetary solutions [Don't laugh. It could happen!! OK, probably won't! - KM]
-Improvement in Current Fund balance reserves and liquidity
-Decline in debt and pension burden
It also said this:
WHAT COULD MAKE THE RATING GO DOWN
-Reduction in financial flexibility and liquidity to offset potential state aid declines
-Failure to adequately and timely address additional state and federal aid reductions
-Need for cash-flow borrowing
Do those negative factors sound familiar? Yep, thought so.
One, Trenton is in no position to absorb reductions in state Transitional Aid. The State seems to agree, since it has continued to fund the City at roughly similar levels over the last few years. But the State’s finances are in the toilet as well. How much can we absorb a sudden reduction in state Aid? Not at all.
And, two: Moody’s tells us that using long-term bonds to solve a current cash-flow problem will make our rating go down. In other words, PRECISELY WHAT THE CITY IS PROPOSING TO DO WITH RESOLUTION #16-170. Using long-term financing in the way that the Administration is proposing for this Thursday will hurt us in the long run.
Seems to me the first impression to this news that I had on Friday is looking more and more accurate: “an attempt to sweep the whole distasteful episode of the missing IPS money under the rug.”
I wrote a note to Council on Friday expressing my opposition to this measure at this time, based on all that we still do not know. As has been typical with this Council, I received almost no replies. One member wrote to tell me that Council, at least as a body, had no prior notification that the Administration was seeking to solve the IPS/IRS problem by floating a bond. They collectively (it’s possible one or two members of the Cool Kids on the Council got a heads-up, but not all members apparently heard the news) found out in the newspaper, and from their copy of the Agenda for Thursday’s meeting.
On Friday, I asked many more questions about this whole matter that I feel need to be publicly addressed before Council approves ANY action to resolve this by emergency measure. Apart from the “How?” and “How Much?” we are still critically uninformed.
As of this morning, I have one more note. Here is the text of the Resolution, courtesy of the Times’ Ms. Rojas, that Council will deliberate on Thursday. In the text, the City’s Chief Financial Officer, Janet Schoenhaar, is directed to execute the emergency $4.7 Million Note, along with the Mayor. Ms. Schoenhaar is also directed to oversee the process by which the bond will be offered for sale. Here’s her signature on the Certification for the need for the Bond:
It was Janet Schoenhaar, you will remember, who was copied on all of the correspondence between the City of Trenton and IPS during the second half of 2015. The same correspondence that noted the frequent notices from the IRS and the State about missing tax payments. The same correspondence described by the Times as “red flags over Trenton’s payroll problems.”
If Ms. Schoenhaar is being directed to be part of the City’s proposed solution to this matter, then she needs to open up to describe and be held accountable for her role in missing all the “red flags.”
Even more so than I thought on Friday, I think this proposed Resolution is the wrong solution at the wrong time. The City is rushing to push this matter under the rug. Mayor Jackson and his Administration is still refusing to answer too many questions about how this whole matter came to pass. Their proposed “solution” is one that will burden taxpayers for the next 15 or 20 years to pay off. And the use of long-term bond financing to solve this one-time current cashflow problem threatens the City’s overall financial integrity.
Resolution #16-170 is nothing more than Junk.