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Paterson council approves up to $70 million tax anticipation notes to cover early-year cash shortfall
Summary
The Paterson Municipal Council on March 25 adopted a resolution authorizing issuance of tax anticipation notes (TANs) not to exceed $70 million to bridge timing mismatches in state aid and cover large early-year obligations, including a $30.5 million pension payment due in April.
Paterson’s Municipal Council on Wednesday voted to authorize up to $70,000,000 in tax anticipation notes to stabilize city cash flow while state aid and other major revenues arrive later in the year. The measure, Resolution No. 26147, passed by roll call with seven votes in favor and two members absent.
The city’s business administrator told the council the move is a cash-flow mechanism and “just a mathematical problem,” not a sign of a structurally unbalanced budget. He said Paterson budgets on a calendar-year cycle while the state operates on a July-to-June cycle; the mismatch means large revenues tied to state transitional aid and energy receipts often arrive months after the city must meet early-year obligations. He noted a required $30,500,000 pension payment in April and an outstanding $7,200,000 in prior-year state aid that had not yet been received.
“We will be in this situation probably every year,” the business administrator said, describing the TAN as a short-term borrowing tool the city intends to repay later in the year when budgeted revenues are received.
Council members asked how often the city has used this tool; one member said he believed Paterson had not issued such notes since 2018. Supporters said the loan will allow the city to meet payroll, pay the board of education and vendors on time and avoid late payments. A council member also urged residents to pay property taxes promptly when bills arrive so the city can retire the TAN more quickly.
Resolution No. 26147 does not change the budget’s total revenues or expenditures; it authorizes temporary borrowing against anticipated tax receipts to cover timing gaps. The clerk announced the roll-call result as seven in favor and two absent, and the resolution was adopted.
Council members said they expect the administration to work with state legislators to seek a longer-term fix for the revenue-timing mismatch. The council did not detail specific repayment mechanics in the public discussion; the administration said it intends to repay the notes later in the year when revenues are collected.
Vote tally: 7 yes, 0 no, 0 abstain, 2 absent. The council adopted the resolution and moved on to the next agenda item.
