Trading Tax Dollars for the Key to the City

GOP governors have a deal for cash-strapped mayors

Tony Mack, the mayor of Trenton, N.J., fired a third of the city’s police force in September to help close an $18 million hole in the city’s budget. So when Governor Chris Christie offered him $22 million in state aid the following month, the Democratic mayor was in no position to turn down the Republican—even though the handout came with a long list of conditions that effectively strip Mack of many of his powers.

Under the deal, Christie gets to keep watch over nearly every penny that Trenton spends. If the city wants to negotiate a labor contract, officials at the state’s Community Affairs Dept. have to sign off on the details. The same goes for bond sales in excess of $1 million and the hiring of outside contractors such as lawyers, consultants, and engineers. No city employee, including Mayor Mack, can go out to lunch on the taxpayer’s dime, and out-of-state travel is banned unless Christie’s bean counters approve the trip.

“We’re going to help cities during struggling times like the ones we’re in, but we’re going to do it in a way that’s responsible,” Christie told reporters in July, saying he wants to end the “giveaway” of taxpayer dollars to cities that are often “fraught with fraud, waste, and abuse.”

Christie is one of several Republican governors who are putting the squeeze on Democratic mayors presiding over financially strapped cities. In Michigan, Governor Rick Snyder has granted emergency financial managers expanded powers to oversee elected officials in debt-ridden Benton Harbor, Pontiac, Ecorse, and Flint. State appointees are in control of city funds and have the authority to dissolve contracts with unions. As of October, any city in Michigan that receives funds from the state is required to show what it’s doing to cut costs and prove it is spending the money wisely.

In Pennsylvania, Governor Tom Corbett appointed a temporary receiver to take control of Harrisburg, the state capital, after it filed for bankruptcy in October. The city’s Democratic mayor, Linda D. Thompson, objected, saying she has her own plan to turn the city around. If approved by a state court, the receiver will have the power to run Harrisburg’s finances without consulting Thompson.

Christie has taken the toughest line. For decades, Trenton, Camden, Newark, and other distressed New Jersey towns relied on large payments from the state to make payroll and keep their city services running. The governor did not require local leaders to account for how a lot of that money, often vaguely earmarked for “revitalization” and “special aid,” was spent.

Christie scrapped that system last year and replaced it with “transitional” funding for ailing cities—money that comes with strings attached. To get the aid, mayors must submit a business plan spelling out precisely what the money will be used for. They have to reapply each year and can expect to receive less each time they do. The money is available only until 2014—when Christie’s first term ends and the program expires.

Many mayors have agreed to accept Christie’s conditions in exchange for the cash. Last year 22 local governments collected $159 million in state funds. This year, 17 cities applied, and 11 are slated to receive awards totaling $139 million. The cities receive 75 percent of the aid upfront and then must submit quarterly reports and meet with state overseers to collect the rest. “This sort of bartering makes sense,” says Chris Hoene, research director for the National League of Cities, a lobbying group in Washington—particularly in places where money is tight and mayors don’t have much choice.

Places like Trenton. The city of 85,000 received $34.9 million in state aid last year but is still in turmoil. Six budget directors have come and gone since Mack took office in July 2010. To get this year’s $22 million aid package, the mayor had to agree to yet another condition: The state will have the power to fill top jobs in the city, including the police and fire chiefs. Mack says he has been forced to make some “tough decisions” and admits he looks forward to the day Trenton won’t have to go begging to the governor. And when does he think that might be? “A year or so.”

— With assistance by Terrence Dopp


    The bottom line: In New Jersey, 22 cities received $159 million in state aid last year—and had to account for every penny spent.

    Before it's here, it's on the Bloomberg Terminal.