Jersey City Is Growing Fast. So Why Is It in Such a Financial Mess? — WSJ

By Owen Tucker-Smith | Photography by Elizabeth Arvelos Coetzee

JERSEY CITY, N.J.-The glassy towers along the waterfront here are a reminder that this city of 302,000 is a rarity among its Northeast peers: It is a postindustrial town on a serious growth streak.

Yet Jersey City is in trouble.

Moody's downgraded New Jersey's second-largest city to a lower investment-grade rating in December, describing it as a "struggling city with a deteriorating liquidity profile." The transition team for then-incoming mayor James Solomon-who won his race the day before the Moody's move-estimated that the city was facing a $255 million deficit. Layoffs, loans and tax increases were all on the table.

"I knew, running for office, that the budget was in bad shape," said Solomon, formerly a city councilman, in an interview. "But I certainly did not think it was a historic level of crisis."

The city plunged into eight months of public finger-pointing and panic over a property-tax increase some feared they couldn't afford. Residents unpacked the city's financial statements on Reddit. Some disgruntled locals called for Solomon's recall on Facebook.

Homeowners have crowded local meetings, threatening to leave the city. Some blame the city for tax breaks that have helped spur high-rise development, but, they argue, have caused regular homeowners to shoulder a larger share of the overall tax burden.

Negotiations between city and state officials resulted in a $105 million loan and $15 million in grants, but it wasn't enough. Jersey City voted in late August to raise its municipal property-tax rate by more than 15% to help close the gap.

"I can't afford it," said Marquita Henderson, a 66-year-old renter who believes her landlord will inevitably wind up passing higher housing costs down to her. A retiree on a fixed income, Henderson said a significant cost-of-living increase could push her to leave Jersey City, her home of more than 13 years.

Some residents are baffled that a growing city is having such a money problem. Solomon has compared his conundrum to Detroit's fiscal crisis more than a decade ago, although that city plunged into bankruptcy. "We are a growing city," said Tom Zuppa, a Jersey City councilman. "There's no reason for this city to be in the condition it's in."

Jersey City's population collapsed in the mid-20th century, but a real-estate boom has since created an impressive skyline across the Hudson River from downtown Manhattan. Goldman Sachs, JPMorgan and Merrill Lynch set up shop; some started calling the downtown "Wall Street West." Young renters flocked across the river, seeking out a cheaper, but still New York-like, experience.

Jersey City's population grew 18% to more than 292,000 between 2010 and 2020, its fastest growth in more than a century.

Still, Moody's said the city has been too reliant on emergency borrowing to cover costs. An independent auditor this summer called the city out for sloppy bookkeeping and noted that it had spent more than what was planned for in previous budgets.

Solomon blames Steven Fulop, the former mayor, for leaning heavily on one-time money like pandemic-relief funds and land sales. "Jersey City's fiscal crisis was hidden through slick messaging and deceptive budgeting," Solomon recently wrote on his Substack.

"We obviously disagree," said Fulop, who now runs the Partnership for New York City and helps spearhead the business community's opposition to Mayor Zohran Mamdani, in a statement. Fulop has questioned whether the projected deficit was really as high as Solomon claimed and argued the new mayor is playing politics. "Had I run for re-election, we would have introduced another budget with no municipal tax increase, as we did nearly every year," Fulop said.

Most of the residents' tax burden is beyond city leaders' direct control, since the biggest portion of property taxes there fund the local school board, which sets its own budget.

Some see Jersey City's financial woes as the product of messy money management, arguing that the former mayor should have more aggressively raised taxes during his nearly 13 years in office. Instead, the city in 2021 cut property taxes while relying on temporary pandemic-related funding. That choice was "totally unjustified," said Marc Pfeiffer, a senior policy fellow at Rutgers University's Bloustein School.

Property taxes have become a flashpoint in the country's affordability crisis as cities' expenses rise. Voters in a handful of Republican-voting states are poised to soon decide on whether to rein in their property bills.

"The challenge that every municipality in New Jersey has is that the property-tax rate is often the single most important determinant of how people view their elected officials," Pfeiffer said.

Jersey City was a booming industrial hub in the 19th and 20th centuries, with manufacturing plants for toothpaste-maker Colgate and the American Can Company. The yellow No. 2 Ticonderoga pencil was made in a sprawling factory downtown.

The local manufacturing industry collapsed after World War II, and by 1980, the city was 29% smaller than it was 50 years earlier. It started regaining some lost ground that decade as developers set out to revive the waterfront.

When Brigid D'Souza moved to Jersey City in 2005 from Washington, D.C., she and her husband found a home in Newport, a waterfront enclave in the city's downtown. "We were walking by construction for years," she said. "We literally saw the skyline go up."

Christopher Cerrone and his wife left Brooklyn for a condo in Jersey City's Journal Square neighborhood in 2023, enticed by the fact they could get more space for the money there. A 42-year-old composer, Cerrone said their property-tax bill has continued to rise ever since. He estimates that this year's tax hikes, which include increases at the city, county and school-board levels, will add roughly $2,000 a year.

"We're going to save less, probably, for my son's future," he said. "We've basically decided to leave. It's just a question of when."

Solomon said his finance team first recommended a 25% tax increase, but that he worried such a dramatic rise would trigger an exodus. Still, Solomon noted that the loan agreement Jersey City reached with the state hinged on raising taxes at least 15%.

The city council recently passed its budget, closing this year's deficit with help from the tax increase, but also steps like reduced park maintenance and cuts to its ride-share transportation program. From here, Jersey City needs to pay off its debt to the state and persuade residents it's worth sticking around.

Henderson, the retired renter, likes where she lives. But she's already weighing how higher housing costs will affect her daily life. "It would be hard to get medicine," she said. "It's going to be hard for me to get food."

In search of a more affordable option, she said she just might move to New York City.

Write to Owen Tucker-Smith at [email protected] and Elizabeth Arvelos Coetzee at [email protected]