This week, Asbury Park City Councilwoman Kate Mellina hands the writing honors over to the city's official "budget keeper" - City Manager Terry Reidy.

AUGUST 26, 2004 -- Well, the 2004 municipal budget is complete. The governing body has once again adopted a budget, which has kept the city portion of the tax increase well below the cost of living. We started the budget process almost $4 million in the red and managed to adopt a budget which improves services without breaking the bank - this was not an easy task. To get a better sense of the Mayor and Council's accomplishments, you can check out our website at www.cityofAsburyPark.com.

To achieve this goal, the city had to maximize every penny of grant funding. Asbury Park was one of the most successful communities in the state in competing for grant money; we received $500,000 in extraordinary aid alone - the third highest award in New Jersey. We continued to find more effective ways to provide and pay for services; we brought some staff functions in house (engineering is a good example) as opposed to paying consultant fees. This strategy saved Asbury Park residents several hundred thousand dollars in 2004 alone. We used surplus that we earned during the year to keep the tax levy stable and we increased our tax collection rate to 100 percent.

This article will concentrate on the last method we employed to lower taxes - increasing our tax collection rate. It is a bold departure from how taxes have been collected in the past. The major innovation in our 2004 budget strategy is that we are not waiting until the middle of 2005 to collect outstanding taxes for 2004. By collecting all of our taxes in 2004, we were able to lower the amount of taxes that must be raised this year by over $1 million. Sound crazy? Well let me see if I can get this to make sense by the end of this column.

In order to appreciate the innovation, you must first understand the requirements that the State of New Jersey places on local budgets. By state law, we must collect 100 percent of the money that we need to fund all of our services and capital improvements for that year. So far, so good… right? But we also know that not everyone pays his or her taxes on time. As a matter of fact, that has been (up until recently) one of the biggest challenges facing Asbury Park. Just three years ago, almost 20 percent of the taxpayers failed to pay their taxes on time; now fortunately that number is down to about 6 percent. So, what do you do?

Well, you have to charge everyone a little extra to make up for the people who do not pay on time. Imagine that you go out to dinner with ten people. The bill comes and it's $200 - only two of the people say that they can't pay until next year. Well, until your two friends can afford to pay you back, you and the other 17 people have to pay $25 apiece instead of $20 apiece for your dinners. The same principle applies when the city collects taxes.

The state requires each municipality to strike a budget (like the bill for dinner) that will raise the money we need to pay all of the charges for one year. However, the state looks at how many people did not pay their taxes the year before and says: "Hey, you had 6 percent of your taxpayers who didn't pay last year, so you (Asbury Park) must increase your tax levy to pay for them in case they do it again this year". You as an individual can choose not to go out to dinner with someone who doesn't pay. A city does not have that choice, so the state addresses that by overcharging everyone who does pay his or her taxes on time.

The state calls this extra amount your "Reserve for Uncollected Taxes". The problem with this is that if this reserve is very large (and 6 percent equates to over $1 million in extra taxes), those of us who pay our taxes on time wind up bearing a much larger annual tax burden than is necessary. It's not like any one taxpayer started out with the intention of increasing the tax levy by $1 million - but that's exactly what happened. We also recognize that there are residents with special financial challenges; anyone with a legitimate hardship will receive special attention as this plan is implemented.

So, now that you have a sense of how this works, you are probably asking: "So, what's the big innovation this year and what does it mean to me?"

Traditionally, most municipalities wait until the following year (in this case 2005) to calculate what percentage of taxpayers did not pay on time. This year, we are going to identify all delinquent taxpayers and send out notices in December. At that point, a tax sale will be advertised and delinquent taxpayers will be asked to pay their bill or have a lien placed on their property. At this sale, investors compete to buy liens on the unpaid taxes. This means that the all of the taxes are received in 2004 and the delinquent taxpayer must then pay interest to the person who bought his/her tax lien. The interest payment can be as high as 18 percent, so it really does "pay" to pay your taxes on time.

So, that's it. Taxpayers don't get overcharged this year, we get to spend our share of the $1 million as we see fit and the city gets 100 percent of the taxes on time. Finally…..we get to do this all over again starting in October.