Op-Ed: The High (and Hidden) Costs of Lawsuits against Local Governments

Marcus Rayner | May 26, 2011 | Opinion
It's time to recognize the role that municipal lawsuits play in the crushing burden of New Jersey's property tax

In New Jersey, the arrival of spring doesn’t just mean warmer weather and the smell of fresh flowers, it’s also the time of year when our state’s 566 municipalities draw up their budgets. And most of us, busy with daily life, fail to take note of our town council’s agenda — until we see the increase on our next property tax bill.

Everyone acknowledges that property taxes in New Jersey are crushing. Senate President Stephen Sweeney (D-Gloucester), Assembly Speaker Sheila Oliver, (D-Essex) and Gov. Chris Christie have been vocal about the need to address the property tax crisis New Jersey has been battling for a generation. There are many reasons for the high tab we pay for local government services. And disagreements about public school funding, contracts, pensions, benefits and shared services are all but assured as each party makes its case.

Yet there is at least one cost-driver that’s relatively uncontroversial but has been nearly absent from the debate: we need to get a handle on lawsuits against our local governments.

Unfortunately, lawsuits are part of municipal budgets’ new normal in New Jersey. The Municipal Excess Liability Joint Fund, which is the largest insurer of local governments in New Jersey, reports that our towns’ and cities’ litigation costs have increased 104 percent over the past ten years. Most of this increase occurred in just the past five. That’s largely because trial lawyers — like the ones you see on TV instructing you to call their 1-800 number if you’ve been hurt by “anything” — have learned that local governments are an easy target.

Most towns have only a municipal attorney, not a large legal department of in-house lawyers, at their disposal. Legal work is frequently contracted out to more expensive private firms, particularly if it’s highly specialized. Needless to say, it’s expensive. You and your neighbors end up paying the cost of the settlement or claim and attorney’s fees — often for both parties. Plaintiffs’ attorneys know from experience that sometimes it’s not financially worth it for a municipality to fight the more frivolous claims at all.

As a result of this new normal in the municipal realm, we now surrender over $350 million from our local budgets each year in liability costs. This is especially painful, because this comes directly from the pool of resources our local governments spend on educating our children, maintaining public safety and responding to emergencies. And personal injury claims account for $200 million of that total.

In Trenton alone, it is easy to see why litigation came to be a strain for municipal budgets. At one Trenton city council meeting earlier this year, members and the public were apprised of more than two dozen civil actions being filed against the city. This doesn’t even include the tort resolutions for review, which totaled tens of thousands of dollars. Most contained few details, but “personal injury” was a recurrent theme. Larger law firms representing the plaintiffs made multiple appearances on the docket as well. This particular council meeting wasn’t an anomaly. At the council meeting two weeks prior, eight of its fourteen “Communications & Petitions” were to inform those present of new civil actions being taken against Trenton. When a city is in such dire distress that the cash-strapped state needs to come up with rescue funds to keep it solvent, tens of thousands of dollars spent in a single night is a heavy price for us to pay.

It’s not just Trenton that has to absorb high litigation costs into its annual budget, either. The Atlantic City Board of Education budgeted $1.16 million for legal services for the 2009-2010 school year. Six other school districts budgeted at least $500,000. Still stinging from a school year in which they spent $1.5 million on legal services, the Atlantic City school district’s new budgetary normal is akin to having each child walk through the door on the first day of school with a $142 litigation price tag.

Fortunately, we don’t need to sit idly by as our property tax bills rise and services decrease in order to fund costly municipal lawsuits. Attend your town council meeting. Go online. Find out how much you’re paying for legal services. Urge your legislators to support a package of bills introduced by Assemblyman John Burzichelli (D-Gloucester) to give municipalities immunity from lawsuits for incidents beyond their control. Together we can put a stop to this nonsense and make progress on reducing New Jersey’s property tax burden.