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N.J.’s largest city faces takeover threat

Newark confronted with big budget and credit woes

NEWARK — New Jersey’s largest city is hitting some roadblocks just months after its rising-star mayor went off to Washington. A bold reform plan for the state-run school system has hit a snag, the Police Department is facing federal oversight over citizen complaints, and the state is threatening a takeover of the city’s finances after several key deadlines were missed.

An official who oversees city compliance with state obligations warned the City Council and the interim mayor last month about the state’s growing concern over Newark’s “extraordinary level of fiscal distress.”

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“We don’t want Newark to stagger through 2014 like it staggered through 2010 and 2011, absent state oversight,” Thomas Neff wrote in a letter. “Every day that goes by is a day that the city is not fixing its budget problem, is also a day that the problem gets worse.”

The city has failed to produce an on-time budget or indicate whether it will apply for state aid, Neff said. And officials haven’t addressed how they plan to tackle a $34 million budget gap for 2014, a deficit that could grow.

The state has hired an auditor to review Newark’s finances, and a review is expected to be done soon. And Moody’s Investors Service is reviewing the city’s credit rating for a possible downgrade.

The current mayor, Luis Quintana, is in office until a new leader is elected in May. He has said Newark isn’t the only city facing challenges and arguing that a state takeover would not be in its best interest.

“The priority of my transitional administration has been and continues to be the achievement of long-term fiscal sustainability for our city,” Quintana said in the statement.

‘The priority of my transitional administration has been . . . the achievement of long-term fiscal sustainability.’

Mayor Luis Quintana 
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The two candidates vying for Booker’s old seat on May 13, Ras Baraka and Shavar Jeffries, both oppose a state takeover.

Booker was Newark’s mayor from 2006 until October, when he was elected to fill the seat of longtime Senator Frank Lautenberg, who died in June.

While in office, he touted the millions of dollars he attracted from celebrities and new investments he brought to the perpetually cash-strapped city of about 277,000 residents only 10 miles from Manhattan.

He pointed to investments by Panasonic Corp., which moved its North American headquarters from nearby Secaucus, and Prudential, a longtime Newark tenant, which is constructing a massive building downtown. He also took credit for a $100 million donation from Facebook founder Mark Zuckerberg to the city’s schools.

Booker insists he left the city on solid footing with a balanced budget after inheriting a $118 million structural budget deficit — or the amount that expenditures exceeded tax revenues — from the Sharpe James administration that preceded him. James was convicted of fraud in 2008 and spent more than a year in prison.

“When we came in, people told me Newark’s problems were literally impossible to solve,” Booker said in an interview. He said his administration, in fact, turned the city around — improving revenue collection, identifying new revenue streams, renegotiating contracted services, and downsizing the municipal workforce.

But officials acknowledged in February that they were in discussions with the Department of Justice to place the Police Department under a federal monitor. The move stems from an investigation into allegations that residents’ complaints about excessive force and unlawful arrest were routinely mishandled or ignored.

In another setback, a school overhaul has stalled because of a dispute over a new teacher contract.

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