Storm Clouds Over New Jersey's Finances

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.

Mark 6:4

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.

Deuda Basura

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


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:

bond example

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:


-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:


-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:

cfo cert

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.

Resolution #16-170

council agenda 5-5-2016

[As emailed to City Council members, 4-29-2016]

Good Afternoon -

At your upcoming Council session of May 5, you will deliberate Resolution #16-170, authorizing an Emergency appropriation to pay the US Internal Revenue Service the funds embezzled in 2015 by individuals associated with Innovative Payroll Services. I understand the grave nature of this issue, and appreciate the urgency in resolving this matter. However, given how much about this entire episode has still not been disclosed to the public – and perhaps not even disclosed to Council – as of this week, I must express my opposition to this Resolution, and urge you to reject it at this time.

As stated on the Docket as issued today, April 29, by the office of the City Clerk, the agenda item fails to state the Dollar amount of the appropriation, which is unusual for agenda items generally, and specifically for this docket. All other Resolutions on your Agenda for next Thursday are itemized to the dollar, some to the penny. The lack of a similar Dollar number for Resolution #16-170 is notable and striking. Does the Administration intend to spring the number on the public only during the course of your Session?

That this matter is being handled on an Emergency basis is also notable and striking. That payments intended for the IRS which were not made in 2015 was known to the Administration at some point in Fall 2015. City Council was notified in January of this year. The Budget for the Fiscal Year ending June 30 was not approved until March 17. Surely, provision for these missing payments should have been made, deliberated and voted upon at that time, and not one month later.

As of this date, there are many unanswered questions about this matter that should be openly addressed before you authorize appropriation of funds to replace the money stolen by IPS. Namely:

  • Has the internal audit and process review by the City’s outside Labor Counsel announced by Mayor Jackson on March 14 been completed? Has a report been written? Have you on Council seen that report?
  • What are the findings of that review and audit? What recommendations have been proposed to ensure this situation cannot be repeated? Have those recommendations been implemented?
  • Was this review and audit a truly unbiased and independent effort? What assurances do you have that this was the case?
  • What changes have been made in City Hall – in policies, procedures and personnel – that will prevent reoccurrence of this? Who in the Administration is assuming accountability?
  • We still do not know the chronology of how this episode unfolded: we don’t know what failures of procedures, communication and oversight led to this? How can we be confident we have made the right fixes if we don’t know how things failed?
  • This Resolution covers payments due to the Internal Revenue Service. What is the current status of payments due to the State of New Jersey?
  • What are the actual amounts due to be paid to the Federal Government and the State? How are these emergency appropriations being funded?

Unless these questions are fully addressed and answered in the intervening week, I believe there is no way that Council could conscientiously and ethically approve Resolution #16-170 next Thursday.

Frankly, the treatment of this matter as an Emergency Resolution authorizing an appropriation of an undisclosed amount of money, when so many questions remain unanswered, strikes me as an attempt to sweep the whole distasteful episode of the missing IPS money under the rug.

This is not the right way to be resolving this entire sordid affair. I urge you to vote down Resolution #16-170 unless there is more credible information forthcoming to you on or before Thursday than we have seen for all of the last four months.

Thank you.


Kevin Moriarty

Es inaceptable

Number 2 in an experimental series. Thanks, Jeffrey Quinones-Diaz

La Junta Escolar de Trenton aprobó anoche su presupuesto por un total de $
299 millones. Según el reportaje de Cristina Rojas en el *Trenton Times*
los estados financieros suman a una diferencia de $ 5,9 millones de gastos
por encima de los ingresos. Como resultado de ello, la Secretaría de
Educación aprobó un plan que, lamentablemente, dará lugar a la cesantía de
164 puestos de trabajo. La señora Rojas explica que de “las posiciones
eliminadas – una décima parte son empleados a tiempo completo del distrito
- incluyen 92 profesionales, 43 maestros, 23 secretarias, cuatro
administradores y cuatro empleados técnicos y de negocio.” Además, un
puesto preescolar también estará eliminado. La acción tomada por la Junta
se produce un año después de una gestión similar que fue aprobada como
resultado de la adopción del presupuesto anterior. Enfrentando un déficit
de $ 17,3 millones
las escuelas de Trenton perdieron 226 puestos de trabajo.

Son momentos difíciles para las escuelas de Trenton, sus profesores y el
personal, y sobre todo, para sus estudiantes.

La semana pasada, el Ayuntamiento de Trenton aprobó su presupuesto de $
207.7 millones de dólares para las operaciones de la Ciudad. Los números
incluidos en el presupuesto aprobado de la Ciudad no requieren el tipo de
despidos masivos experimentadas por el distrito escolar, a pesar de que las
finanzas “siempre frágiles” de la Ciudad aparentan que no será necesario
este tipo de acciones en el futuro. El presupuesto, sin embargo, contempla
un aumento en los impuestos sobre la propiedad para los dueños, ya
sobrecargados de Trenton, en un 1,5%, para un valor total de $ 1,7
millones. La tasa de impuestos de Trenton representa $ 3.95 por cada $ 100
del valor de tasación, la cual es por mucho la más alta entre los
municipios en el Condado de Mercer, alrededor de 3 veces la tasa más alta
que el municipio vecino de Ewing, y alrededor de 10 veces mayor de aquella
con la tasa mas baja, Hopewell Township.

Este es el asunto, la Junta Escolar de Trenton aprobó el presupuesto para
el próximo año fiscal 2016-2017, que habrá de comenzar el 1ero de julio,
el Ayuntamiento aprueba su presupuesto para el año en curso – casi 9 meses
después – que habrá de terminar el 30 de junio.

Las escuelas de Trenton fueron capaces de proyectar el próximo año, vieron
los números desfavorables, y utilizaron su presupuesto como herramienta de
gestión para tomar las medidas necesarias ahora para poner un plan de
trabajo en curso, meses antes del comienzo del próximo año.

El gobierno de la Ciudad de Trenton aprobó su presupuesto después que casi
el 75% del año calendario ya ha pasado- habiendo gastado el 75% del
dinero. Cualquier circunstancia adversa que puedan enfrentar, a estas
alturas del año, según reconocido en el plan financiero de la Ciudad – como
por ejemplo, hablando hipotéticamente, la malversación de $ 5,000,000 de la
nómina – no deja ningún tiempo o la capacidad para responder de por sí,
ante medidas drásticas.

Haciendo una revisión rápida del proceso realizado por el Consejo
Municipal, celebrado la semana pasada, la señora Rojas reseñó: “Para el año
fiscal que comenzó el 1 de julio, a finales de octubre el gobierno presentó
un presupuesto de $ 216,4 millones, que ha estado en manos del Consejo
desde entonces. El comité de presupuesto ha llevado a cabo una serie de
audiencias y recortó en adición $ 8.6 millones de … el Departamento de
Asuntos de la Comunidad del Estado le dio al Consejo el visto bueno el 1 de
marzo ”

Para el Presidente del Consejo Municipal, Zachary Chester, esto es sólo la
forma en que las cosas son. Como le indicó a el *Times*, en la sesión del
17 de marzo”

“Para aquellos críticos que hablan de por qué nuestro presupuesto está tan
atrasado … no podemos completarlo sin la aprobación del Estado.
Trabajamos duro en este presupuesto, pero en algún momento, no podemos
seguir adelante hasta que consigamos su revisión por parte el Estado (Nueva
Jersey). Cada comunidad en transición tiene que pasar por el mismo proceso.”

Para poner esto en un contexto histórico, durante muchos años antes de que
se creara la ayuda de Transición como un mecanismo de ayuda financiera
estatal para Trenton y otros pueblos en Nueva Jersey, el ciclo
presupuestario de Trenton ha concluido repetidamente 8 o 9 meses después
del año fiscal. Pero, por ahora, vamos a tomar la declaración del Sr.
Chester a su valor nominal, y aceptar su argumento de que otras comunidades
que reciben esta ayuda, trabajan con el mismo calendario.

Mi pregunta hacia el señor Chester, el Ayuntamiento, la Administración, al
Departamento de Asuntos de la Comunidad los representantes legislativos
Estatales, y al Gobernador Christie es simplemente esto: ¿*Cómo puede ser
esto aceptable?*

¿Cómo es que el distrito escolar de una ciudad pueda preparar su
presupuesto anual, que el Estado lo apruebe, lo presentan para su
escrutinio y comentarios del público, lo revisan y lo adoptan tres meses
antes del comienzo del año fiscal; mientras que la Ciudad en la que está
ubicado el distrito no pueden hacerlo hasta tres meses antes del final del

Tanto la ciudad como el Distrito operan en el mismo Estado, ¿no? ¿Cómo
puede el Departamento de Educación del Estado ser más eficiente en sus
prácticas – casi un año entero procesando un presupuesto – que el
Departamento de Asuntos de la Comunidad?

¿Será posible que a nivel estatal, los legisladores de Nueva Jersey y los
padres pueden considerar inaceptable que sus hijos sean educados por las
escuelas con circunstancias fiscales inciertas? ¿Es de alguna manera sin
complicaciones y rutinario que el procesamiento del presupuesto de Ayuda
Transitoria para las comunidades se retrase o este benignamente descuidado?
¿Por qué nadie se ha molestado por esto? ¿Por qué nadie – en la ciudad, en
la Administración del Estado, en la Legislatura – esta trabajando para
solucionar este problema?

Sinceramente, desconozco la respuesta. Pero, en lugar de aceptar que esto
es sólo la forma en que funcionan las cosas, como lo hace el señor Chester,
este tiene que corregirse. Si un distrito escolar puede cumplir con su
ejercicio fiscal frente al Estado, tres meses antes del comienzo del año
fiscal, tiene que ser muy viable que una ciudad pueda hacer lo mismo.

Cada miserable año terminamos en esta misma situación, casi a la misma
época exacta del año.

El año pasado, por ejemplo, el Consejo Municipal no dio su visto bueno a su
presupuesto 2014-2015 hasta el 24 de marzo de 2015. En esa sesión del
Consejo, algunos residentes presentaron sus quejas sobre el proceso. Un
residente vocal de Trenton, Dan Dodson, y este servidor le expresamos al
Consejo de que existen serios problemas con todo el proceso. De la misma
forma en que este proceso ocurre tan tarde en el año fiscal, el narrativo
del presupuesto también adolece de transparencia mínima, detalle y
descripción suficiente de lo que se pretende lograr.

Una reseña del *Times of Trenton* del año pasado concluyó:

“El Presidente del Consejo, Zachary Chester, había expresado previamente
que esperaba poder mover el largo proceso del presupuesto del próximo año
de manera más rápida. También dijo que McEwen le dijo *que esperaba iniciar
la recopilación de información para el presupuesto de 2016 en los próximos

El abogado de la Ciudad, David Minchello, explicó el martes que la ciudad
no podía tomar ninguna acción respecto al presupuesto hasta que comience el
nuevo año fiscal, *aunque puede comenzarse la planificación para el nuevo
año*. [El énfasis es mío - KM]

Bueno, ya sabemos cómo esas buenas intenciones han resultado para el 2016.
El presupuesto de este año se aprobó 51 semanas después que la del año
pasado, y con sólo 105 días antes de que finalice del ejercicio
presupuestario. Para actualizar lo que el Señor Dodson y yo dijimos en
marzo pasado:

“*Todavía* no hay una información o narrativa disponible que detalle lo que
se ha modificado desde el presupuesto se presentó en noviembre”.

“Estamos *todavía *muy por detrás de la pelota.”

“*Todavía *es vergonzoso e irresponsable”.

¿Alguien quiere comenzar las apuestas sobre cómo se realizará el proceso
presupuestario del año que viene?

*¿Cómo es esto aceptable?*


Trenton’s School Board passed its budget last night, totaling $299 Million Dollars. According to the account by Cristina Rojas in this morning’s Trenton Times, the financial numbers add up to a gap of $5.9 Million of expenses over revenue. As a result, the School Board approved a plan that will unfortunately lead to the layoff of a net 164 jobs. Ms. Rojas explains that “The eliminated positions — about a tenth of the district’s full-time employees — include 92 paraprofessionals, 43 teachers, 23 secretaries, four administrators and four business and technical employees.” In addition, a preschool will also be closed. Last night’s action taken by the Board comes one year after similar action was approved as the result of the previous budget adoption. Facing a shortfall of $17.3 Million, Trenton’s schools lost 226 positions.

It’s hard times for Trenton’s schools, their teachers and staff, and most of all, their students.

Last week, Trenton’s City Council adopted its $207.7 Million Dollar budget for the City’s operations. The numbers included in the City’s adopted budget did not require the kind of massive layoffs experienced by the school district, although the City’s always-fragile finances mean such actions will not be required in the future. The budget did, however, raise property taxes for Trenton’s overburdened property owners by 1.5%, for a total increase of $1.7 Million. Trenton’s tax rate of $3.95 per every $100 of assessed value is by far the highest for municipalities in Mercer County, around 3 times the rate of next highest Ewing Township, and around 10 times that of the lowest Hopewell Township.

Here’s the thing: Trenton’s School Board approved the budget for its upcoming fiscal year of 2016-2017, beginning July 1. City Council approved its budget for the current year we are in – nearly 9 months gone! – ending June 30.

Trenton’s Schools was able to forecast the year ahead, saw the unfavorable numbers, and used its budget as a management tool to take action now to put a workable plan in place, months before the beginning of the year.

Trenton’s City government adopted its budget after nearly 75% of the calendar has passed- and 75% of the money spent. Any adverse circumstances faced at this late date in the year as recognized in the City’s financial plan – such as, strictly hypothetically speaking, a theft of $5,000,000 in payroll money – doesn’t leave any time or ability to respond other than with drastic action.

To quickly review the process that Council concluded only last week, Ms. Rojas wrote, “The fiscal year began July 1. In late October, the administration introduced a $216.4 million budget, which has been in council’s hands ever since. The budget committee held a series of hearings and slashed an additional $8.6 million… The state Department of Community Affairs gave council the go-ahead on March 1.”

For City Council President Zachary Chester, this is just the way it is. As reported in the Times, he said at the March 17 meeting,

“To those critics who talk about why our budget is so late … we can’t do it without the state’s approval. We work hard on this budget, but at some point, we can’t move forward until we get this examination by the state. Every transitional community has to go through the same process.”

To put this in some historical context, for many years before Transitional Aid was created as a vehicle for state financial aid to Trenton and other towns around New Jersey, Trenton’s budget cycle repeatedly concluded 8 or 9 months into the financial year. But, for now, let’s take Mr. Chester’s statement at face value, and accept his contention that other Aid communities in NJ work with the same calendar.

My question to Mr. Chester, to City Council, to the Administration, to the NJ Department of Community Affairs, to our state legislative representatives, and to Governor Christie is simply this: How is this acceptable?

How is it that a city’s school district prepare its annual budget, vet it with the state, offer it for public review and comment, revise it and adopt it three months before the beginning of the fiscal year; while the City in which that district is located cannot do so until three months before the end of the year?

Both the City and the District operate in the same State, do they not? How can the state Department of Education be more efficient in its practices – almost an entire year in its budget processing – than the Department of Community Affairs?

Is it possibly, that, statewide, NJ lawmakers and parents would find it unacceptable for their children to be educated by schools with uncertain fiscal environments? Is it somehow unremarkable and routine that budget processing for Transitional Aid communities to be delayed, benignly neglected? Why is no one upset about this? Why is no one – in the City, in the State Administration, in the Legislature – working to fix this?

I honestly do not know the answer to this. But, rather than accept that this is just the way things work, as Mr. Chester does, this needs to be fixed. If a school district can get its fiscal act together with the State 3 months before the beginning of the fiscal year, it should be pretty damn well possible for a City to do the same.

This is the same place we end up nearly every doggone year, at nearly the same exact time of year.

Last year, for instance, Council did not give its approval to its 2014/2015 budget until March 24, 2015. At that Council session, a few residents spoke to complain about the process. Outspoken Trenton resident Dan Dodson and I both told Council that there were serious problems with the whole process. Along with it happening so late in the fiscal year, there was also minimal transparency, detail and narrative description of what the budget was intended to accomplish.

Last year’s Trenton Times report concluded by saying,

Council President Zachary Chester has previously said he hopes to move the along budget process faster next year. He also said McEwen told him he hopes to start compiling information for the 2016 budget in the next few months.

City Attorney David Minchello explained Tuesday that the city couldn’t take any action on a budget until the new fiscal year begins, although planning for the new year may occur.  [Emphasis mine - KM]

Well, we know how those good intentions played out for 2016. This year’s budget was approved 51 weeks after last year’s, and with only 105 days before the end of the budget year. To update what Mr. Dodson and I said last March:

  • “There is STILL no information or narrative available that details what has been amended since the budget was introduced in November.”
  • “We are STILL way behind the ball.”
  • “It is STILL embarrassing and irresponsible.”

Any wagers on how next year’s budget process will proceed?

How is this acceptable?

Los 8 Pilares del fracaso

As an experiment, we’re trying to translate a few of these pieces into Spanish. The main post can be found here:

Thanks to Jeffrey Quinones- Diaz for the translation, and to Paul Perez for the idea. Let me know what you think. Since I don’t speak Spanish, Similar to Blanche DuBois I rely on the kindness of others.


Por Kevin Moriarty.- (traducido al español por J. Q. Díaz)

Nota: Traducimos las siguiente columna del Blog de Kevin Moriarty, un comunicador interesado en  ilustrar al publico hispano los asuntos medulares administración municipal de la Ciudad de Trenton, Nueva Jersey.  Trenton, capital de ese Estado, tiene una población hispana significativa que ha sido tímida en participar en el proceso político.  Hace más de 20 años sufre del problema de ingobernabilidad, producto de la corrupción e incompetencia.  Vea el Blog en Ingles en

A partir de esta mañana – viernes, 26 de febrero de, 2016 – el más reciente comunicado de prensa en el sitio web de la Ciudad de Trenton es de febrero 5. Esa fecha pasó a ser el mismo día cuando escuchamos por primera vez noticias sobre lo que resultó ser el robo de millones de dólares de la Ciudad de Trenton por parte de su servicio de nómina privada.

El 5 febrero no es el día más reciente en que la ciudad ha sido noticia, pero es el día más reciente en que el Alcalde Eric Jackson y su administración se dignaron a ofrecer al público alguna información acerca de los asuntos públicos; es decir, cierto detalle respecto al desfalco en la nómina municipal, cuyas estimaciones mas recientes hacen que la cantidad total malversada ilícitamente bajo las mismas narices del Alcalde y su Administración se encuentre alrededor de  los $ 4 millones de dólares.

Entonces, ¿cuál fue la última pieza de Noticias y anuncio que hizo el grado, que la Administración decidió valía la pena el visto bueno municipal? Un anuncio titulado “Alcade de Trenton, Eric Jackson, se une a la convocatoria para detener las redadas de ICE”, en la que se lee “Alcalde Eric Jackson, su Consejo Asesor Latino (LAC), y una coalición de organizaciones cívicas y sin fines de lucro latinos, se han unido para responder al creciente miedo y la falta de información entre la comunidad inmigrante de la ciudad sobre la campaña de detenciones recientemente anunciada por el Servicio de Inmigración y Control de Aduanas de Seguridad Nacional (ICE, por sus siglas en ingles) “. El comunicado de prensa señala más adelante, “Ninguna de estas detenciones han tenido lugar en Trenton. Sin embargo, los residentes han expresado preocupación sobre un aumento percibido en la presencia de ICE en nuestra ciudad”.

Este es sin duda un área de gran preocupación para muchos en la comunidad latina de Trenton, al igual que muchas ciudades de todo el país. No obstante, al ser este un proyecto de  seguridad y de política nacional,  no es un asunto sobre lo cual el Alcalde de Trenton tenga ningún control o influencia. Su declaración de febrero de 5 es muy buena por si misma. Es un buen gesto de solidaridad y apoyo para muchos Trentonianos. Pero en la realidad no exactamente significa mucho en términos del impacto que pueda tener.

Cuál es el resumen sobre la Administración de Jackson hasta el momento: lindas palabras sobre asuntos que en realidad no tiene ningún control, sin efecto real o impacto sobre los asuntos en los que tiene influencia.  A manera de ejemplo, cómo 4 millones de dólares (o más) del dinero de la nómina de la Ciudad se desvanece durante todo un año.

Hay otro elemento destacado en la primera página del sitio web de la ciudad que vale la pena volver a visitar,  ante el (hasta ahora silencio) sobre la malversación de la nómina, lo que expone acerca de la trayectoria de esta Administración, a mas  de la mitad su término.

Tomado directamente de la pagina principal de la Ciudad  de Trenton,  justo a la derecha del retrato del Alcalde Jackson, hay un enlace al mensaje del Estado de Situacion de la Ciudad( en format Pdf) emtido el 22 de Octubre de 2015.

El alcalde esta muy orgulloso de su mensaje de Situación y de lo que entendía representaba para los residentes de la ciudad, así como para los que están fuera de Trenton, creyendo que demostró que esta ciudad atraviesa una reconstrucción después de  muchas décadas de declive económico y social, y más recientemente después de sufrir varios años de mala práctica gubernamental y la corrupción criminal.

La relectura de ese mensaje en Octubre – un momento en el  que ahora sabemos,  donde atravesaba la peor parte de la malversación de la nómina por  parte de Innovative Payroll Services (IPS, por sus sigla en inglés), dirigida por John Scholtz y sus dos hijas – el lenguaje autocomplaciente ahora suena un poco más hueco. Por ejemplo:

“Nos hemos centrado nuestros esfuerzos en restaurar de nuestro gobierno municipal, colocar sus finanzas en orden, atender asuntos críticos de personal y una marea de tareas que nuestros empleados deben completar de manera profesional.”

A tal fin, estamos llevando a cabo una estrategia de gobierno que está sustentada por ocho pilares: la restauración, la colaboración,las comunicaciones, la rendición de cuentas, la evaluación comparativa,medición de los resultados, la transparencia y la innovación.Los residentes de Trenton esperan nada menos, y como Alcalde, es mi responsabilidad cumplir con esa promesa cada día, cada minuto, cada hora.”

Gracias a la labor de Administrador de Empresas Terry McEwen y el personal del Departamento de Administración, preparamos un presupuesto de 188 millones de dólares que abarca 11 departamentos separados. Y con la ayuda del Consejo de la Ciudad, que aprobó ese presupuesto. Debido a la renovadaconfianza en que Gobierno del Estado tiene en nuestro equipo de gestión,hemos negociado con éxito un aumento de 2 millones de dólares ennuestra ayuda transitoria.”

Uf. Si el estado aumentó nuestra ayuda transitoria por $ 2 millones, “debido a la confianza renovada de que el Estado tiene en nuestro equipo de gestión,” ¿ qué pasará ahora, después de que el mismo equipo de gestión supervisó el hurto de más del doble de los $ 2 millones, de los cuales Alcalde estaba tan orgulloso? ¿Vamos entonces a agradecer el trabajo del administrador de negocio de Terry McEwen?

Aparte de la indignación que produce esta malversación en sí, lo que más me molesta acerca de esta estafa en la nómina de este mes, es como ésto ilustra la amplia grieta que existe entre lo que la Administración dice y promete, remontándonos a la campaña del 2014, reclamando transparencia, rendición de cuentas y ética; y la realidad de los últimos dos años. Al releer el texto del mensaje del Estado de la Ciudad,  que con orgullo pauta en la página web de la Ciudad para el día de hoy, sólo refuerza esta salvedad.

¿Qué tan bien, por ejemplo, utilizó el Alcalde sus “ocho pilares de la estrategia de gobierno” – específicamente, Comunicaciones, Responsabilidad y Transparencia – durante el asunto IPS? No los usó en lo absoluto.  Sirvieron más como pilares de la insuficiencia de gobierno, si me preguntaras. Esta Administración falló durante el asunto de IPS, en formas que aún no sabemos porque esta administración es cualquier cosa lejos de ser comunicativa, responsable y transparente.

A grandes rasgos, sin embargo, este incidente terminó, a quedado atrás. El dinero se ha perdido. Un pleito civil ha sido iniciado para tratar de recuperar la mayor cantidad de dinero de la Ciudad como sea posible. Las investigaciones criminales han empezado a nivel estatal y federal que seguramente dará lugar a procesamientos y enjuiciamiento de los responsables en el IPS.

El Alcalde y su administración tienen ahora la oportunidad de hacerlo mucho luego del desastre de IPS. Lo que sea, y el como, que no pudo evitar la pérdida – políticas, procedimientos, estructura de la administración o empleados individuales – necesita ser descrito, analizado y arreglado para que nada como esto vuelva a suceder.

¿Cuán confiado estoy de que esto va a suceder? ¿Qué piensas? Exacto, me lo imaginaba…

Por otra parte, Eric Jackson tendrá provocar que algo positivo suceda. Él tendrá que decir algo bueno en su próximo mensaje de Estado de la Ciudad, sobre todo.


USA Hispanic no se responsabiliza del contenido de los artículos de opinión, siendo cada autor responsable de sus propias creaciones.

Dear Mayor Jackson

As e-mailed this morning, 3/15/16

Dear Mayor Jackson -

News reports today tell us that in a press conference yesterday, you announced that “the city’s outside labor counsel is reviewing its internal controls and any steps that can be taken to ensure there is no repeat of its payroll fiasco.” I am glad that you are finally taking this action after several weeks during which this story has developed in the absence of any substantive information from your office or elsewhere in the Administration of the City of Trenton. As I and others have said on multiple occasions since the news of the City’s payroll theft first became public, action must be taken and information publicly shared that will not compromise the integrity of any current civil and criminal investigation. Recovering from this event will require a hard look at processes, personnel and systems to make sure nothing like this will happen again. I am pleased that you and your Administration recognize this, however belatedly.

The article by Cristina Rojas in this morning’s Trenton Times which describes your statements made during yesterday’s press conference is informative, but begs several questions. I respectfully request you to provide some further information about this effort now under way.

You stated, “Not only are we taking an internal audit, but we’re having an outside legal firm look at the processes that not only took place during that period, but the organization that’s set up so we can avoid having similar things.” Does this statement indicate that there are two parallel processes taking place?

Is there an internal audit taking place? That is, a functional accounting and management audit to be undertaken by the City’s Finance and Business Administration offfices, with the assistance of the City’s regular outside independent audit firm, or another independent CPA firm? Is that the work to be undertaken by the City’s outside counsel?Or will that counsel be working on a separate but parallel project?

If the latter is the case, how is the scope of work to be constructed for each task? How will they report? What is the timeframe for this effort?

Frankly, the selection of outside legal counsel to lead an investigation into what was essentially a failure of financial, accounting and management systems strikes me as an interesting choice. What are the qualifications of this firm, and of the specific attorney leading this effort that suggests that they are singularly qualified to perform this work?

News of the selection of a legal firm to be involved in this kind of investigation and audit brings to mind the work performed by the law firm of Gibson Dunn & Crutcher for Governor Chris Christie last year in the aftermath of the Bridgegate incident. The integrity and independence of that effort has been challenged on several counts, including cost, the lack of notes and work product, and the general sense that the Governor always intended that effort as a piece of political theatre with a pre-determined outcome favorable to him.

In order to avoid those kinds of charges to this effort, Mr. Mayor, you need to publicly lay out several ground rules for this effort.

First, you should announce that attorney-client privilege will not apply to any reports and work product that is prepared and delivered to you from the audit and/or attorney review. Everything should be made public, with the exception of any materials that may be determined to be of material relevance in potential criminal investigation.

Oversight of this extraordinary audit and management review should be inclusive of members of City Council as well as independent parties from outside the City having professional background and experience in NJ municipal administration. Former Business Administrators and/or City Attorneys from other NJ municipalities would be excellent candidates.

As referenced above, the Scope of Work for this effort should be made publicly available, as well as a timetable for the effort. News reports have revealed over the last couple of weeks indicates that multiple warnings from the State and Federal agencies were ignored for a period of at least nine months, which suggest several problems. All of the notes written to IPS by the single accountant in the Finance Department fail to suggest any sense of the urgency of the matters at hand. Although the City Comptroller was copied on these notes, there has been up until now no evidence that she involved herself in further investigation of these matters. Nor did she – as far as we know – include or notify anyone further up the administrative chain of command in City Hall from April 2015 until December.These failures suggest problems with internal communications, training of financial personnel, and even common sense judgment. This management audit must describe how these problems will be addressed, and when.

This effort should also produce a full chronology of the sequence of events since last April. In yesterday’s press conference, you and Mercer County Acting Prosecutor Onofri both said that the City “acted very quickly,” when the scale of the theft was discovered in December. Since statements like this are at odds with the fact that serious delinquencies with tax deposits were made known to the City at least eight months prior, these contradictory facts can be resolved via a definitive chronology that tells us Who Knew What When, and What They Did About It.

You also stated yesterday that “depending on how the litigation turns out, next year’s budget could be impacted. ‘They’ll take that into consideration as we build toward next year’s budget depending on where we are in litigation to figure out where we have to balance that out at.’” This loss occurred during the first 2 quarters of the current fiscal year ending June 30. Generally Accepted Accounting Principles (GAAP) require expenses to be recognized in the period in which they are incurred. That is, any loss to the City as a result of this theft should be recorded in the current year. What makes you believe that we can defer any fiscal impact of this crime for the next year’s budget cycle? On what authority are you depending for this advice?

Mr. Mayor, this is an opportunity to get to the root causes of the problems within the City’s Administration that allowed this crime to take place. To attempt to rebuild confidence in your Administration on the part of the public and other stakeholders in the City’s future, this effort needs to be comprehensive, transparent, and independent. We do not need allegations of another Bridgegate whitewash to tarnish this effort and the City’s reputation.

I am sure you understand.

Thank you, Mayor Jackson.


Kevin Moriarty

Business as Usual

The headline for Cristina Rojas’ story posted on The Times of Trenton’s website yesterday is “How many red flags were missed over Trenton’s payroll problems?” I am glad that the press is looking at the documentation coming available about the multi-million dollar theft of city funds intended for payroll tax deposits with the IRS and the State of New Jersey, and finding that the Administration of Mayor Jackson’s chronology about its “discovery” of the problem raises more questions than it answers.

I shared the documents that I received from the City in response to an Open Public Records Act (OPRA) request filed last month with Ms. Rojas, and which I also posted online. She, in turn, provided me the copy of the brief filed to support the City’s civil lawsuit against Innovative Payroll Service and its principal, about which I wrote yesterday. Looking at the same items leads Ms. Rojas to make the same observations as I have for weeks now:

The city says it first learned it was the victim of a fraud scheme in late December, but more than a dozen notices from the state and federal governments from as early as April reveal potential red flags about its former payroll company now under investigation…

[T]hroughout the year, there was no shortage of signs that something was amiss when the city repeatedly received notices about unpaid balances, penalties and interest.

“The minute you see a question, you should ask the provider what happened,” said Michael Pires, an industry expert and CEO of JetPay Payroll Services. “But if you see that as a pattern, that could raise a red flag — are my funds deposited in a timely manner and are they protected?”

Armed with this information, The Times – once more – sought a response from the City,  with the same predicatable result as similar attempts to pry information loose the from increasingly tight-lipped Jackson Administration: “City spokesman Michael Walker declined to comment for this story, citing the ongoing investigation and litigation.”

Of course. Despite Mayor Jackson’s promise several weeks ago that “we’re going to keep our own council and our community informed,” he has done nothing of the sort. Mr. Jackson, Mr. Walker and the rest of the Administration are hiding behind the veil of “ongoing investigation and litigation” to justify their refusal to talk about critical matters that have nothing to do with the ongoing investigation and litigation. This refusal is increasingly impossible to justify and increasingly maddening.

Nothing has changed in the last couple of weeks since I wrote, about IPS, John Scholtz, and his daughters:

The complete – and totally unnecessary – lack of transparency, candor and honesty shown by the City over this last month shows that the folks running this City are in deep denial about how badly they are fucking up. What will be next to go wrong? [Emphasis mine - KM]

We are now hearing about the next thing going wrong. Yesterday I heard a credible report from inside City Hall that the city’s office equipment vendor was about to repossess several copying machines leased to the City, for non-payment since December. The City hasn’t paid because of any shortage of available cash (at least, this time!), but because Trenton has simply ignored several months of billing.The vendor has had enough, and finally threatened to remove the machines to get some response from the City. Last I heard, City Hall was scrambling to get the bills paid, and the affected copiers were still in place.

Sound familiar? Multiple notices? Several months? Red flags? “No shortage of signs that something was amiss?”

The matter of a few copy machines is admittedly a small one, very small compared with the $5,000,000 at issue with the IPS scandal.

But to hear – well over a month after the payroll news broke, and nearly three months after the initial “discovery” of the embezzlement – of something like this copier nonsense proves that NOTHING IS HAPPENING IN CITY HALL TO FIX WHAT’S CLEARLY BROKEN. There is no sense that crooks were able to steal millions of dollars under the very eyes of the City because of flawed policies and of possibly incompetent employees,  appointed and elected officials. There is ZERO sense of urgency to address the frequent and repeated failures that are stacking up. No collective fire has been lit under the Administration’s collective butts to get their collective asses in gear to get their collective shit together.

As a result, having bill collectors and re-possessors figuratively standing at the City Hall doorway with their hands outstretched waiting for payment while city officials scramble to write a check is now Business as Usual.

Having the city’s computers operate without virus protection, or data backup, and paying millions of dollars more to a startup company working out of a guy’s garage than more reputable and established companies would charge for the privilege of providing those second-rate services, is now Business as Usual.

Being designated as “a high-risk grantee of federal funds” by the United States Department of Justice is now Business as Usual.

Having Millions of Dollars stolen over a period of months without paying attention to dozens of “red flags” is now Business as Usual.

Let’s be absolutely clear on this. NONE of this stuff has ANYTHING to do with “ongoing litigation” or “open investigations.”

ALL of this should be the subject of urgent and drastic action that needs to be immediately taken by the Mayor, his Administration, City Council, as well as the State of New Jersey.

But I don’t see anything happening. And I don’t believe anything meaningful will happen as a result of this disaster. Why?

Because this is now Business as Usual.

And we put up with it.