Gateway Regional Chamber of Commerce
Past President’s Messages - 2008

President’s Message – January 2008

Many mornings my son is afraid to go to school. Sometimes it’s because he hasn’t finished his homework. Other times its because he has a test. 

The granddaughter of a friend also is afraid to go to school. She’s afraid she might get beaten or shot if she wears the wrong color. 

My son goes to a nice suburban boys high school. My friend’s granddaughter goes to school in Elizabeth. 

The City of Elizabeth is in a state of denial about gang violence. The mayor would have us believe there are no gangs in the city. He would have us believe that what problems do occur are the result of “outside influences.” He would have us believe that the city is a nice, safe place. Clearly Mayor Bollwage has his head in the sand.   

The fear of gang violence is palpable in the Elizabeth. In recent weeks there have been numerous shootings that are probably gang related, and there is a rumor circulating of a gang hit list with 30 names on it. Because of fear of reprisal, many people are afraid to go to the police. 

One only has to talk to a kid in town to find out how big the problem is. Lamentably, it is kids who are the most effected by gang violence and the least capable of fighting it. If you are not part of a gang you are a potential target. If you are part of a gang, you are a definite target. No one escapes unscathed.  

Why the Elizabeth city administration is denying and consequently ignoring the problem is beyond me. Surrounding towns like Linden have very active anti-gang initiatives and a gang taskforce within the police department to prevent gang violence, much of it coming in from Elizabeth-based gangs. 

The Elizabeth Police Department, on the other hand, in deference to the mayor does not have a gang taskforce. Recently, the police even disbanded their community policing unit that was responsible for dealing with the petty quality-of-life crimes that allow gangs to flourish. 

Not surprisingly, the most dangerous area for kids is around school right after dismissal. Even back in my days in high school, dumping thousands of kids on the street, many whom belong to the different gangs, can create a lot of tension. Fights, harassment, vandalism are all commonplace. One would think that at this time the police would be out in full force to prevent a possible explosion. 

Well, they are and they aren’t. If you drive by Elizabeth High School or the junior highs, you will see a lot of policemen. They are not there representing the police department, however. They are there as off-duty officers paid by the Elizabeth Board of Education. The police department says it does not have adequate resources to prevent violence at the schools, and it is up to the school to provide the policing.   

I called several other towns but found no other that so shirks its civic responsibility to protect its citizens. I have never been so incredulous as when this was brought to my attention. 

The mayor and the City of Elizabeth need to take serious action and take it soon. Denying that there is a gang problem does not make it go away. There are enough kids who have died, and no kid should go to school with more fear than about the test for which they didn’t study.

James Coyle

President

                  Limiting Options Limits the Democratic Process

Why does everything in New Jersey have to be so difficult? We are deep in the presidential primary season. In fact, on February 5 the nominees for each party are likely to be determined when New Jersey and almost half the country vote. 

This has been the most exciting presidential primary I can remember. For a change we actually have some candidates who are worth voting for. Unfortunately, here in New Jersey, voting for the candidate you like can be quite a challenge unless you happen to be a party fanatic who does not cross party lines. 

New Jersey excels at disenfranchising voters in primary elections. And for anyone who understands the election process, or simple statistics, it is the primary that is actually the most important election. This is especially true on a local level where so many towns and legislative districts are controlled by one party. 

Here is the way the system works in New Jersey. There are three kinds of registered voters in the state: democrats, republicans and the undeclared who sometimes are referred to as independents. When you register to vote you can declare a party affiliation, though most people do not; they are “undeclared.”  

The manner by which most people affiliate with a party is by voting in a primary election. If you are undeclared and want to vote in a primary you simply go to your polling place and tell them you want to vote in that party’s election. In New Jersey from that point onward you are a member of that party, and only by jumping through numerous hoops can you change your affiliation. And this is the problem. Years ago my wife voted in a republican primary. As a result she was labeled a republican. This year she would have liked to have voted in the democratic primary, as there is a certain candidate whose vision really impresses her. 

Now in many states that like to encourage voting, she would have simply shown up and said she wants to vote in the democratic primary. Not in New Jersey, however. Here she would have had to submit an official request to change her party affiliation way back on December 17. That is 50 days before the election! 

So why is this process so draconian? Well, obviously if people voted it could change the finalists that come out of the primary, a result that the party leadership likes to dictate. While this is frustrating in the case of the presidential primary, it is of critical importance in a local election in a town or district that basically has one-party rule. 

In towns where one party dominates, it is the party that puts forward the official candidates. They are given “the line,” or made part of the official party group of candidates. This process makes it hard for the unanointed to compete, as they are not part of the official group, and because not very many people vote anyway. 

The problem is compounded by the fact that very few people can vote in the primary even if they wanted to. The bulk of the votes tend to be from party loyalists, and even though undeclared voters can vote, the parties try to discourage them from doing so. Over the years I have seen campaigns put out information saying that you have to be a party member to vote, and I have seen poll workers enforce this untrue regulation. 

So in town after town, you get corrupt machines that maintain control by controlling the primary. It is a system that disenfranchises most of the voters.  

A far better system would allow open primaries. Since most voters are undeclared, why shouldn’t they have an opportunity to select the finalists? And just because you once liked a candidate in one party, why shouldn’t you be able to vote for a candidate from another party in a later election?

New Jersey’s politicians continue to use all the tricks to maintain their hold on power.

                               The Good, the Bad and the Ugly

Governor Corzine’s proposal to raise tolls and restructure the State’s debt burden is either bold or stupid, or perhaps both.

Corzine’s proposal can be viewed in two pretty distinct parts. First is the “why it needs to be done,” and second is the “how it is going to be done.”

The Governor would prefer that we focus on the why part of the equation. Except for a very few people, however, most of the focus, especially in the press and by the Republican Party, is on the how it is going to be done – i.e. through massive toll increases on the Turnpike and the Parkway.

The good part of the Governor’s proposal is in fact the why part. The way government does business in this state is in need of sweeping reform. We are being crushed by the massive debt that administration after administration has incurred in order to provide goodies without paying for them. This debt, which takes many forms, from pension obligations to municipal bonds, has become so great that the interest payments are eating up a huge portion of the budget, and preventing investment in critical areas like infrastructure.

The Governor’s plan is to pay down a big portion of the debt and to put in place restrictions that would prevent its reoccurrence. These include a freeze on spending at its current level; a mandate that spending cannot exceed current revenue; a requirement that voters approve any future debt obligations; and creation of a Public Benefit Corporation that will irrevocably secure revenues and make them unavailable for other purposes.

These are principals that the Gateway Regional Chamber of Commerce has long advocated. The New Jersey State Chamber of Commerce also has voiced its support for these aspects of the plan, and recommended that as long as we are reforming things, let’s throw in pension, health benefits and retirement reform, which the Governor and the legislature punted on last year. These are reforms that the Gateway Chamber also has endorsed.

So much for the good part of the Governor’s proposal, because what everyone wants to focus on is the bad part: how are we going to pay for this?

Well, in this state it is hard to come up with any justification for raising taxes. We are by far the highest taxed state in the country. Our whole system of government is so screwed-up that we can see inefficiencies and corruption everywhere. Just try to change home rule, though, and everyone is up in arms.

I think of it like the spouse who has abused the budget and spent the family into oblivion. We may not be happy about it, and we may want to change spending habits, but at the end of the day, we are responsible and we need to face up to the problem and do what is necessary to get back on sound footing.

Which takes us to the ugly part of the Governor’s plan – let’s finance it through massive toll increases. This is a very McGreeveyan (read Machiavellian) plan. Rather than share the pain across the whole population, let’s dump it on the few who actually use the roads regularly. And the more we can get from out-of-staters, the better. The fewer people affected, the fewer lost votes.

Jim McGreevey was a master of this technique. Remember the half-a-millionaire tax, or the dirty 30 corporations who were purported to pay no taxes?

Or maybe there is something at play here that is even more Machiavellian. Maybe the toll proposal is a setup to bring us to our senses and find a funding mechanism that is equitable. Something like an increase in gasoline taxes maybe?

 

Put Out the Fire First  

The house is on fire, but all anyone wants to do is rage about whose fault it is. No one seems to care about putting the fire out. 

As Governor Corzine points out on the other side of the page, New Jersey state government is in a bloody mess. For way too long, runaway spending and one-shot gimmicks have dug the fiscal hole so deep that many question whether we can ever get out of it. 

Governor Corzine seems almost embarrassed to admit that there is a problem. In fact, every governor whom I have lived under in my almost 20 years in New Jersey has only admitted to a little problem that could be fixed by doing something clever. Their “something clever” has only dug the hole deeper.

Our glorious legislators are still in denial. Oh, they may give some lip service to the problem, but all they really want is to get back to business as usual. 

It’s odd to realize there really are folks out there who do not realize the house is on fire. For any of us who pay taxes in the state and live under its crushing regulatory burden, we know the house has almost burnt to the ground. 

The Gateway Regional Chamber of Commerce has decided to join the water brigade. After long debate and research that went beyond reading a few Star Ledger stories, the Chamber decided that it is better to be part of the solution rather than part of the problem. 

This means, broadly speaking, the Gateway Chamber supports Governor Corzine’s plan to fundamentally restructure government, pay down the state’s debt and permanently fund the Transportation Trust Fund. We have some reservations about the funding mechanism, the infamous toll increase, but we do not yet have a fully formulated alternative. 

In our view, to be successful, the Governor’s plan depends on a fundamental restructuring of government. All the other aspects of the plan pale in comparison. By restructuring, we mean cutting. Cutting the number of employees. Cutting the overly generous salary and benefits that state workers receive. Cutting the generous paybacks that state government gives to stay in office, like property tax rebates and municipal aid. 

The budget that Governor Corzine presented to the Legislature a couple weeks ago shows mettle. It does propose serious, even painful cuts. Are they enough? No, but they are at least a good start. 

So now we are in the requisite screaming and hand-wringing stage. This is not surprising from the Democratic side of the aisle; after all, it is the Democratic legislators who give out most of the goodies. It is surprising, however, from the Republican side. You would think they would get behind a spending plan similar to what they have been preaching for since they’ve been out of power. I guess it’s easier to be in opposition when you are in the minority. After all, why should you support a good idea that isn’t yours? 

Everyone talks about the lack of leadership shown by our elected officials. But the reality is that no one likes the tough decisions that a leader has to make because invariably there will be pain associated with those decisions. Governor Corzine is to be commended for having guts to finally start us down a path that does not dig the hole any deeper.

 Economists Debate; Consumers Consume – or Don’t

So what is a recession? And why is it important to know? If you read this month’s lead story, there seems to be some debate on whether or not we are in a recession.

Think of the economy as if it were a car. When the car goes forward the economy is growing. Then, it comes to a hill. Since it’s a big hill, the car starts to slow down and strain a bit. In economic terms, this is a slowdown, and in normal times the car will make it up the hill without much of a problem.

If the car cannot make it up the hill, and it dies and starts to roll backward, that’s when we have a recession. In a car this may happen because it runs out of gas, or because something broke as it hit the last pothole, or maybe it just overheated from being run so hard that the engine seized up.

The classic definition of a recession is two consecutive quarters of negative real economic growth, or the car rolling back down the hill. The National Bureau of Economic Research (NBER) is the private, non-partisan group that officially declares if the economy is in recession.  They make their determination using monthly data and additional indicators like employment, personal income and industrial production, as well as gross domestic product.

As of today, the NBER has not declared that the economy is in recession. The last two quarters of data from 2007 indicate that the economy was growing robustly in the 3^rd quarter, but slowed dramatically in the 4^th, indicating a slowdown, not a recession. 

Since the 1^st quarter of 2008 just ended and 1^st quarter data is not yet in, it cannot yet be determined whether we are still growing or starting to slide back. Thus, no matter what you read in newspapers, as we have all been doing for the last six months, a slowdown is not a recession.

So why is all this esoteric economic mumbo-jumbo important? Getting our definitions right is important because it is not the bursting of the real estate bubble, or the fall in the stock market, or the decline in the value of the dollar that is important in determining the vitality of the economy. Rather, the most critical ingredient is our own personal expectations.

What we think will happen determines what we do, and what we do in turn determines what will happen. Our expectations thus become self-fulfilling. And the more people believe something, the more likely it is to happen. 

Take me for instance. I really want to have garage door openers installed at my house. After all these years I am getting really tired of getting in and out of my car to open the garage door that is way too heavy because Home Depot doesn’t carry large enough springs for the door. But the job is not simple because I have a low ceiling. The proposals I have are actually pretty darn expensive. 

Since I keep hearing the economy is not in good shape and I don’t know what kind of financial year I am going to have, I will be putting off the job. The guy that was going to do the work had plans for the money he would earn. Now he can’t do whatever it was he was going to do. And the same thing holds true all the way down the line. My expectations have become many people’s reality.

During March, all of the several indexes of consumer confidence fell to new lows. With all of the bad news out there for such a long period, it is no wonder we don’t feel very confident. And this lack of confidence will surely make us undertake actions that will make things even worse. 

Personally, I think things are going to start getting better. The housing market, at least in this area, seems to be bottoming out, and more people are out looking for deals. Exports are surging because of the weak dollar, creating lots of jobs. And spring has just started, and the renewal of nature can’t help but raise our expectations.

There is a legend in New Jersey that taxpayers in the state’s large cities get off easy. So much state aid flows into Newark, Jersey City, Elizabeth and Paterson that the residents pay nothing for all the government services they receive.

The legend goes on to postulate that this is the underlying reason for the dominance of the Democratic Party in New Jersey. The story goes that the large, low-income voting blocks in the cities vote overwhelmingly for Democratic candidates because they keep the spigots open and the cash flowing. This means, or so the legend goes, that the suburban taxpayers end up paying the taxes for city residents. So, if you’re a city dweller, why wouldn’t you like a system like this?

Paul Mulshine of the Star Ledger is one of the great proponents of this theory, but it is a constant refrain in Republican politics, and a chuckled secret in Democratic political circles. And a great number of people believe it true and vote accordingly.

A close look at the data, however, shows that inner-city voters are really getting scammed. Property taxes are the basic means of support for local government and, as we all know, they are way too high in New Jersey. As a rule of thumb, about half a town’s collections goes to support the schools, about a quarter goes to the county and about a quarter goes to the town.

The difficulty is in comparing one town to another because taxes are paid on the assessed value of the property, not the market value, and some towns go decades before they reassess the value of their property.

However, county tax authorities do publish an equalization ratio of assessed value to true value, and this ratio can be used to do town-by-town comparisons. When this ratio is used to calculate the real tax rates on a town-by-town basis, the results are fascinating.

Take my town of Maplewood, for instance. As long time readers of my column know, I pay an outlandish amount of property taxes in Maplewood, nearly $25,000. The nominal tax rate is about $4.00 per $100 of assessed value. When equalized to the actual market value, my overall rate is about $2.30, of which $0.39 is for county tax, $0.56 for municipal tax and $1.34 for schools.

Now, compare this with the City of Elizabeth. On an equalized basis, Elizabeth property owners pay a total rate of $1.96, of which $0.47 goes to support the schools, $0.33 goes to the county, and a whopping $1.14 goes to support municipal government. When you look at it historically, Elizabeth has also had one of the fastest rates of tax increase over the past several years in the state, over a 60 percent increase since 2000.

Maplewood has an unusually high rate of municipal tax but it is still less than half of Elizabeth’s. The cost of municipal government in Westfield and Mountainside is about a quarter of Elizabeth’s.

Another rule of thumb is that towns with a large percentage of commercial property usually have lower tax rates because the value of commercial property is so much higher than residential. Elizabeth has one of the highest concentrations of commercial property in the state, as do most large cities, another indication of just how expensive the municipal tax rate actually is.

While there is a great deal of state aid that flows into New Jersey’s large cities, their taxpayers are not getting any sort of deal and, in fact, pay some of the highest taxes in the state.

Once, a long time ago, the Union County Alliance was a proud, important and influential organization. It was conceived to bring the Union County business community together with the Freeholders and labor and educational interests to promote economic development and growth in Union County. It is now a shell of its former self, perverted and bastardized beyond recognition.

In 1996 when I became president of the Union County Chamber of Commerce, the precursor of the Gateway Regional Chamber, the Alliance was an active, influential force within the county. It was founded in the 1993 and worked effectively to promote port dredging and port redevelopment, ensuring that Port Newark/Elizabeth continued to remain a major economic development engine for the region.

That initial success did not last, unfortunately, and the Alliance became a group in search of a mission. With the port issue solved, there was a great deal of debate on what should be done next, and although the Alliance claimed part of the credit for the building of the Jersey Gardens Mall, their role was really quite marginal.

Like kids with too much time on their hands, this dearth of mission allowed the Alliance to become prey for unsavory forces – in this case those who saw a great opportunity to use the organization for their own political ends. And the conversion has been complete.

The Union County Alliance is now an arm of the Democratic Party, and its whole mission is to promote the interests of the party.

The last issue of the Alliance’s publication, Union County Directions, clearly brings this home. The paper, which was distributed to every household and business in Union County on the eve of the June 3rd primary election, was a blatant, heavy-handed attempt to promote a political agenda and the democratic slate of candidate. So degraded has this publication become, that it even removed a listing of its board of directors. I guess this was done so as not to embarrass them.

Especially trite were the two columns written by Ray Lesniak. In one he claims credit for abolishing capital punishment, an issue to which he was Johnny-come-lately. In the other, he continues his destructive campaign against the Elizabeth Schools, probably the only decently run Abbot district in the state. Well, the Elizabeth school district is the only big pot of money in the county not controlled by the machine, so these mudslinging forays can certainly be expected to continue.

So why does this matter? Well, it matters for a couple reasons. First, the Alliance was established as a 501(c)(3) not-for-profit corporation. Not-for-profit entities are not allowed to promote political agendas or candidates.

Second, and more important, it that the funds that support publication of Union County Directions come from the county government. In fact, county funds pretty much support the whole Alliance, as no one else is foolish enough to put any money into the organization. So public funds, tax dollars, are being used to promote political agendas.

Over the years I have gotten to know most of the Freeholders pretty well, and all-in-all they are decent, committed representatives. I think it is time that they dumped the Alliance.