Vote “No” on April 25 Referendum
On April 25, voters will be asked whether or not to ratify a $142,500 bond, passed on December 27, 2016, primarily to pay an engineering bill of $55,000, which was not appropriated.
Unauthorized Expenditures
The history of how this bond originated is clear in the record of Council meetings. A single Council member privately authorized an engineering firm to perform $55,000 worth of work on our water/sewer system, after the existing appropriated funds had been expended. That Council member did not first obtain the approval of the full Council or the Chief Financial Officer who is required by law to first certify that sufficient funds are available to pay the bills incurred.
New Jersey Statutes (NJSA 40A: 4-57) prohibits elected officials from incurring any liability, or entering into any contract which by its terms involves the expenditure of money for any purpose for which no appropriation is provided, or in excess of the amount appropriated for such purpose. The statute further states that any contract made in violation hereof shall be null and void, and “no moneys shall be paid thereon.”
Our Borough Clerk and office workers were shocked when they received a $55,000 bill from an engineering firm. They scrambled in the Borough offices to see how to pay this unexpected bill for which sufficient funds were not available. A call to the C.F.O. confirmed that the expenditures had not been legally approved and no monies were available (encumbered) to pay the bills incurred.
A Loan Is Proposed to Pay The Unauthorized Bills
During the November 14, 2016, Council Meeting, Councilwoman Malkin, the Finance Committee Chair, reported these unauthorized expenditures to the Council and the public. This was the first time many of the Council members learned about the unauthorized expenditures. To say some were shocked is an understatement because the Council had not approved these expenditures.
The Council member who had ordered the work to be done, openly acknowledged that they did not know how the $55,000 bill would be paid, because the expenditures were in excess of the funds available. That Councilperson suggested that we could try to get a loan to pay for the unauthorized expenditures and the additional bills to follow incurred as a result of the work approved. The firm doing the work was hired on this Councilperson’s recommendation in order to save money, however it was learned later that their hourly rate was higher than the engineering firm they replaced.
On December 27, 2016, the week between holidays when almost no one would attend the Council meeting and days before a new Council member would be sworn in effectively blocking passage of the bond, the Council majority approved a $142,500 bond to pay for their unauthorized study and additional work. Although the bond ordinance on its face certifies that the plans for the work are on file with the C.F.O. and the Borough Clerk, the Borough Clerk has certified in writing that the plans for the work do not exist.
The Bond Is Challenged By Voters
Citizens have successfully filed a challenge to the bond. The bond cannot be enacted unless the voters in the April 25 referendum approve it.
The proposed bond is to pay bills which are “null and void” and cannot be paid.
N.J.S.A. 40A: 4-57 states “Any contract made in violation hereof shall be null and void and no monies shall be paid thereon.” Expending public funds without proper authorization is a very serious matter. It is a criminal offense to knowingly do so.
Under (NJSA 2C: 30-4) a person or member of a board or body charged with or having the control of a State office, division, department or institution or a member of a county or municipal governing body or a member of a board of education, commits a crime of the fourth degree if he purposely and knowingly: (a) Disburses, orders or votes for the disbursement of public moneys, in excess of the appropriation for that office, division, department, institution, board or body; or (b) Incurs obligations in excess of the appropriation and limit of expenditure provided by law for that office, division, department, institution, board or body.
New Jersey Statutes (NJSA 40A: 4-57) prohibits Councilmembers and School Board members from spending the public’s money on their own signatures. The law further states “Any contract made in violation hereof shall be null and void, and no moneys shall be paid thereon.“
Our Water and Sewer Utility Fund
What makes the proposal to float a $142,500 bond to pay for this unauthorized expenditure and future expenditures even more egregious (if that is possible) is that it was charged to our water and sewer utility fund, a very limited account funded by homeowners water and sewer utility payments.
An Increase In Your Water & Sewer Bill Will Be Needed To Pay For The Bond If Approved.
Before the Council approved the $142,500 bond on December 27, 2016, there were already plans in the 2016 budget to bond for $1.6 million to fund improvements in our water and sewer system. Presently, $105 of your bi-monthly utility bill is used to pay off debt.
Recently, our Chief Financial Officer informed the Finance Committee that utility rates would have to be raised to pay for the increased expenditures. He stated that the rate hike had nothing to do with election expenses or other miscellaneous costs. He said the utility rate-hike is needed to pay for all of the unauthorized bills incurred.
Won’t We Get Sued By The Contractor If We Reject the Bond?
Because of a borough official’s unauthorized expenditures, we are stuck between a rock (the law) and a hard place (a potential lawsuit). On one hand paying the unauthorized bills may be illegal, on the other, not paying the bill may result in our being brought to court for nonpayment of bills. New Jersey Statutes provides protection for municipalities that find themselves in such situations and states that refusal to pay an unauthorized municipal expenditure is a legal defense in such situations.
What Happens If Voters Reject The Bond?
If voters reject the bond, the contractor would have to decide whether or not to sue the town. Because the bills were not legally authorized, the contractor may very well lose in court and incur legal fees as well. For these reasons, they may very well decide not to sue and cut their losses.
There is always the possibility that the contractor may decide to sue and we may lose in court. If that happened, our ratepayers would have to pay for the unauthorized $55,000 bill and legal costs through a one-time utility rate increase in one year.
The best option for us if voters reject the bond might be to negotiate a reduced settlement with the contractor for the $55,000 unauthorized bill. This would save ratepayers money and avoid a lot of legal costs. The contractor knows that they may lose in court in which case they get nothing. This provides an incentive for them to settle before significant legal fees are incurred.
Michael Hamilton
The writer is a member of the Roosevelt Borough Council.
On April 25, voters will be asked whether or not to ratify a $142,500 bond, passed on December 27, 2016, primarily to pay an engineering bill of $55,000, which was not appropriated.
Unauthorized Expenditures
The history of how this bond originated is clear in the record of Council meetings. A single Council member privately authorized an engineering firm to perform $55,000 worth of work on our water/sewer system, after the existing appropriated funds had been expended. That Council member did not first obtain the approval of the full Council or the Chief Financial Officer who is required by law to first certify that sufficient funds are available to pay the bills incurred.
New Jersey Statutes (NJSA 40A: 4-57) prohibits elected officials from incurring any liability, or entering into any contract which by its terms involves the expenditure of money for any purpose for which no appropriation is provided, or in excess of the amount appropriated for such purpose. The statute further states that any contract made in violation hereof shall be null and void, and “no moneys shall be paid thereon.”
Our Borough Clerk and office workers were shocked when they received a $55,000 bill from an engineering firm. They scrambled in the Borough offices to see how to pay this unexpected bill for which sufficient funds were not available. A call to the C.F.O. confirmed that the expenditures had not been legally approved and no monies were available (encumbered) to pay the bills incurred.
A Loan Is Proposed to Pay The Unauthorized Bills
During the November 14, 2016, Council Meeting, Councilwoman Malkin, the Finance Committee Chair, reported these unauthorized expenditures to the Council and the public. This was the first time many of the Council members learned about the unauthorized expenditures. To say some were shocked is an understatement because the Council had not approved these expenditures.
The Council member who had ordered the work to be done, openly acknowledged that they did not know how the $55,000 bill would be paid, because the expenditures were in excess of the funds available. That Councilperson suggested that we could try to get a loan to pay for the unauthorized expenditures and the additional bills to follow incurred as a result of the work approved. The firm doing the work was hired on this Councilperson’s recommendation in order to save money, however it was learned later that their hourly rate was higher than the engineering firm they replaced.
On December 27, 2016, the week between holidays when almost no one would attend the Council meeting and days before a new Council member would be sworn in effectively blocking passage of the bond, the Council majority approved a $142,500 bond to pay for their unauthorized study and additional work. Although the bond ordinance on its face certifies that the plans for the work are on file with the C.F.O. and the Borough Clerk, the Borough Clerk has certified in writing that the plans for the work do not exist.
The Bond Is Challenged By Voters
Citizens have successfully filed a challenge to the bond. The bond cannot be enacted unless the voters in the April 25 referendum approve it.
The proposed bond is to pay bills which are “null and void” and cannot be paid.
N.J.S.A. 40A: 4-57 states “Any contract made in violation hereof shall be null and void and no monies shall be paid thereon.” Expending public funds without proper authorization is a very serious matter. It is a criminal offense to knowingly do so.
Under (NJSA 2C: 30-4) a person or member of a board or body charged with or having the control of a State office, division, department or institution or a member of a county or municipal governing body or a member of a board of education, commits a crime of the fourth degree if he purposely and knowingly: (a) Disburses, orders or votes for the disbursement of public moneys, in excess of the appropriation for that office, division, department, institution, board or body; or (b) Incurs obligations in excess of the appropriation and limit of expenditure provided by law for that office, division, department, institution, board or body.
New Jersey Statutes (NJSA 40A: 4-57) prohibits Councilmembers and School Board members from spending the public’s money on their own signatures. The law further states “Any contract made in violation hereof shall be null and void, and no moneys shall be paid thereon.“
Our Water and Sewer Utility Fund
What makes the proposal to float a $142,500 bond to pay for this unauthorized expenditure and future expenditures even more egregious (if that is possible) is that it was charged to our water and sewer utility fund, a very limited account funded by homeowners water and sewer utility payments.
An Increase In Your Water & Sewer Bill Will Be Needed To Pay For The Bond If Approved.
Before the Council approved the $142,500 bond on December 27, 2016, there were already plans in the 2016 budget to bond for $1.6 million to fund improvements in our water and sewer system. Presently, $105 of your bi-monthly utility bill is used to pay off debt.
Recently, our Chief Financial Officer informed the Finance Committee that utility rates would have to be raised to pay for the increased expenditures. He stated that the rate hike had nothing to do with election expenses or other miscellaneous costs. He said the utility rate-hike is needed to pay for all of the unauthorized bills incurred.
Won’t We Get Sued By The Contractor If We Reject the Bond?
Because of a borough official’s unauthorized expenditures, we are stuck between a rock (the law) and a hard place (a potential lawsuit). On one hand paying the unauthorized bills may be illegal, on the other, not paying the bill may result in our being brought to court for nonpayment of bills. New Jersey Statutes provides protection for municipalities that find themselves in such situations and states that refusal to pay an unauthorized municipal expenditure is a legal defense in such situations.
What Happens If Voters Reject The Bond?
If voters reject the bond, the contractor would have to decide whether or not to sue the town. Because the bills were not legally authorized, the contractor may very well lose in court and incur legal fees as well. For these reasons, they may very well decide not to sue and cut their losses.
There is always the possibility that the contractor may decide to sue and we may lose in court. If that happened, our ratepayers would have to pay for the unauthorized $55,000 bill and legal costs through a one-time utility rate increase in one year.
The best option for us if voters reject the bond might be to negotiate a reduced settlement with the contractor for the $55,000 unauthorized bill. This would save ratepayers money and avoid a lot of legal costs. The contractor knows that they may lose in court in which case they get nothing. This provides an incentive for them to settle before significant legal fees are incurred.
Michael Hamilton
The writer is a member of the Roosevelt Borough Council.