Fiscal Health in New Jersey's Largest Cities 

Contacts: 
Irene O’Brien, Rutgers-Newark (973) 353-5262 
Dennis Gale, Cornwall Center (973) 353-1750

Release Date: July 9, 2001

On many measures of fiscal stability the City of Newark ranks at or near the top of New Jersey’s five largest cities, according to “Fiscal Health in New Jersey’s Largest Cities,” a study released by the Joseph C. Cornwall Center for Metropolitan Studies at Rutgers-Newark. The author, Public Administration Professor Gerald J. Miller, examined public financial data for Newark, Paterson, Jersey City, Elizabeth and Trenton for the years 1998 and 1999.Using standard measures employed by public finance professionals, Miller found that Newark was particularly effective at managing its debt, while keeping its total tax burden per city resident relatively low. By not over-relying on a single revenue source, such as property or payroll taxes, Newark also exceeded the other cities in the diversity of its revenue base. Newark had the second lightest total tax burden per resident after Paterson. And, it ranked second only to Elizabeth in its level of budgetary surplus and in the amount of cash on hand for paying ongoing financial liabilities.

These findings bode well for Newark as the city struggles with efforts to revitalize its downtown and neighborhoods. Still, the fiscal picture is not entirely rosy and shows that the city has big challenges facing it. In particular, Newark’s much-criticized property tax system is in need of an overhaul, said Professor Miller. New Jersey’s largest city ranked last among the five cities in the study in terms of the share of its total assessed 'valuation collected in property tax revenues. Miller found that Newark had to levy about one-fifth of its potential revenues, the largest amount among the five cities. This is due to the mismatch between the city’s estimated market value of taxable real property and the outdated values shown on the city’s assessment records. Further eroding Newark’s fiscal soundness was its bottom ranking on fiscal delinquency. Newark is doing the poorest job of collecting taxes owed by its property owners.

A third area of fiscal vulnerability, Newark relies on its ten largest taxpayers for almost one-fifth of its property tax revenues. This means that if any one of those ten chose to relocate outside of Newark, the city would suffer a sizeable dent in its budget. Doubtless, Paterson, Jersey City, Elizabeth and Trenton would love to have some of Newark’s largest property tax payers. But fiscal experts generally agree, the more widely distributed a community’s tax burden is, the less likely it is to suffer serious financial damage in the event that a few taxpayers are lost.

The study also sounds a cautionary warning about Newark’s relatively high unemployment and poverty rates. Both threaten the stability and soundness of the city’s overall revenue base. At the same time, these problems challenge officials to finance the broad welfare net necessary to move the able-bodied from welfare to work. As Newark continues efforts to improve its fiscal health through redevelopment, it will be critically important for community and business leaders to link economic growth to household self sufficiency. In addition, the city’s prospects for attracting continued new investment in its revitalization will no doubt hinge in part on investors’ confidence in Newark’s fiscal stability.

To view the complete report, please visit our Publication Series or contact:

The Joseph C. Cornwall Center for Metropolitan Studies 
101 Warren Avenue, Smith 236 
Rutgers-Newark 
Newark, N.J. 07102 
973-353-1750 
accousti@andromeda.rutgers.edu.

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