Governor Signs Bill on Prepayment of Property Taxes

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correct size blogOn April 20, Governor Murphy signed into law A-3382/S-1971, which permits taxpayers to make dedicated prepayments toward anticipated property taxes.  The law requires that regardless of the governing body adopting a resolution, the tax collector must receive property tax payments at any time during the year. Payments may be made in full or in installments, not less than one dollar.

In addition, the law permits a dedicated payment, which is defined as a prepayment toward anticipated quarterly property tax installment prior to the issuance of a tax bill, be made to the tax collector. Any dedicated payment must be credited toward the amount to become due and payable. If the taxpayer is delinquent on property taxes or other municipal charges, the taxpayer must first satisfy all outstanding delinquencies before being permitted to make a dedicated prepayment.

If the dedicated prepayment exceeds the total property tax bill the municipality must refund the taxpayer within 60 days of issuance of the property tax bill. If the governing body does not meet within those 60 days, at the next regularly scheduled governing body meeting the refund must be issued. In a situation in which the mortgagee pays the property tax bill and the property owner makes a dedicated prepayment towards the property taxes the refund is issued to the second-in-time payor.

If the dedicated prepayment is less than the property tax bill, the taxpayer must pay the difference due in the same manner as other taxes are collected.

The law took effect on April 20 and is retroactive to July 1, 2017.

Contact: Lori Buckelew, Senior Legislative Analyst, lbuckelew@njslom.org, 609-695-3481 x112.

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Governor Signs Pay Equity Law

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correct size blogEarlier today, Governor Murphy signed into law S-104, the “Diane B. Allen Equal Pay Act.” The new law, which takes effect July 1, 2018, modifies the Law Against Discrimination (LAD) to provide protections against employment discrimination and promote equal pay for all groups protected by the LAD.

The law expands unlawful employment practice under LAD to include discrimination based on compensation or financial terms or conditions of employment. It will now be unlawful for an employer to pay any of its employees, who are members of a protected class, at a rate of compensation, including benefits, which is less than the rate paid by the employer to employees, who are not members of the protected class, for substantially similar work, when viewed as a composite of skill, effort and responsibility. An employer cannot reduce the rate of compensation of any employee in order to comply with this new requirement.

An employer may pay a different rate of compensation only if the employer demonstrates that the differential is based on a seniority system, a merit system, or the employer demonstrates:

  1. That the differential is based on one or more legitimate, bona fide factors other than the characteristics of members of the protected class, such as training, education or experience of the quantity or quality of production;
  2. That the factor(s) are not based on and do not perpetuate a differential in compensation based on sex or any other characteristic of members of a protected class;
  3. That each of the factors is applied reasonably;
  4. That one or more of the factors account for the entire wage differential; and
  5. That the factors are job related with respect to the position in question and based on a legitimate business necessity. Please note that a business necessity factor does not apply if it is demonstrated that there are alternative business practices that would serve the same business purpose without producing a wage differential.

The comparison of wage rates must be based on wage rates in all of the employer’s operations or facilities.

It will also be considered an unlawful employment practice to require employees or prospective employees to consent to a shortened statute of limitations or waive any of the protections provided by LAD or agree not to make request or disclosure of job title, occupational category, and rate of compensation, including benefits, of any current or former employees.

The law also provides that a discriminatory compensation decision or other employment practice that is unlawful under the LAD occurs each occasion that compensation is paid in furtherance of that discriminatory decision or practice. This provision thus restarts the applicable statute of limitations governing discriminatory compensation claims under the LAD, effectively making each paycheck another instance of the discriminatory compensation decision or other practice and therefore a new or continuing violation. Liability will accrue and an aggrieved person may obtain relief for back pay for the entire period of time not more than six years. If the Director of the Division of Civil Rights or a jury determines that an employer is guilty of an unlawful employment practices based on compensation or financial term or conditions of employment the judge must award three times any monetary damages to the person(s) aggrieved by the violation.

We suggest you review this new law with your labor counsel and administrator. We are in the process of planning a webinar on this new law for late May/early June. We will keep you posted.

Contact:  Frank Marshall, Esq., Staff Attorney,  609-695-3481 x137,  Fmarshall@njslom.org

 

Concerns with Governor’s Energy Tax Proposal Aired

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correct size blogOn Monday, League President Mayor Jim Cassella of East Rutherford testified before the Assembly Budget Committee. Mayor Cassella’s testimony explained the municipal impact of the Governor’s FY 2019 budget proposals to State budget makers.  Much of Mayor Cassella’s testimony focused on Energy Tax Receipts Property Tax Relief funding. On Tuesday and Wednesday, State Treasurer Elizabeth Maher Muoio testified on the proposal before the Senate and Assembly budget writing committees.

When discussing the Stabudget-writing your legislators, please make certain that they understand our concerns with the Governor’s Energy Tax Receipts (ETR) proposal. As the Treasurer emphasized, this change will not reduce municipal property tax relief funding in 2018. But, the change raises serious concerns about future ETR funding.

The Energy Tax, in one form or another, has been a reliable and significant source of non-property tax revenue for local governments for over a century. Though often underfunded, the 1997 reforms set a floor, below which the fund wouldn’t sink. Pursuant to those reforms, sales taxes on energy utility bills and corporate taxes on energy utilities are collected by the State and placed in a dedicated, off-budget Energy Tax ‘lock box.’ At least $788.5 million of the funds are dedicated, and must be distributed to New Jersey municipalities for property tax relief.

At the League’s insistence, Chapter 167 of the Public Laws of 1997, which established the ETR ‘lock box,’ also includes the so-called ‘poison pill’ provisions that assure annual distributions of sufficient funds. Those provisions would prevent the State from collecting most corporate taxes, should the State ever fail to distribute the statutory minimum in any year.

At that time, we fought for those safeguards, because Governors and Legislators of both parties, over many years, had used their discretion to retain revenues meant for municipal purposes, in order to fund State level priorities. The Governor’s budget proposes the elimination of the ‘lock box’ and the redirection of sales taxes on energy bills and corporate taxes on energy utilities into the State’s General Fund. This would give State budget makers broad discretion concerning the use of the funds.  Instead, the proposal would shift ETR funding to an annual budget line-item appropriation, with the funding provided through the State Income Tax.

Income Tax proceeds are constitutionally dedicated to property tax relief, in general. But the specific property tax relief uses of the funds can vary from year to year.

From the State Treasurer’s perspective, this change amounts to an ‘accounting shift.’   While aid remains flat this year, the elimination of the “lock box” poses a serious concern for taxpayers going forward, as it would allow the state to effectively reduce property tax relief funding in future years.     From our perspective, that is an unacceptable outcome.

As Mayor Cassella stated, “While, for this year, the Governor intends to replace the dedicated funds with other revenues; we need assurances that we will be able to count on funding, in the future. On behalf of our property taxpayers, we will strongly oppose any proposal that changes the Energy Tax Receipts Property Tax Relief Fund from a dedicated source of local revenues, which the state can only reduce at some risk to its own revenues, to another discretionary aid program, which the state can cut, in future years, to meet some other priority.”

We want to thank State Senator Patrick Diegnan, Assemblyman John DiMaio and Assemblywoman Nancy Munoz, who each raised concerns with the proposal. In response to a question from Assemblywoman Munoz, Treasurer Muoio indicated that the poison pill will remain in place, pursuant to language to be included in the State budget.

Again, when discussing the State budget with your legislators, please make certain that they understand our concerns with the Governor’s Energy Tax Receipts (ETR) proposal.

For more on the history of the energy tax relief funding, please click here for the recently revised League white paper.

Contact: Jon Moran, Senior Legislative Analyst, jmoran@njslom.org, 609-695-3481, x121.

Assembly to Consider Bills of Interest on Thursday

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correct size blogOn Thursday, the Assembly will consider the following bills of interest to municipalities. We strongly urge you to contact your Assembly representative on these bills of interest.

A. A-3686, the “Workplace Democracy Enhancement Act”

Please ask your State Legislators to oppose A-3686.

This legislation, which we oppose, would impose mandatory requirements on public employers to ensure that public unions are able to carry out their statutory duties by having access to and the ability to communicate with, their public employee members. The League, joined by its partners with the Association of Counties, School Boards Association, and the Association of State Colleges and Universities, are concerned that many provisions of the bill, such as access to employees provided to unions, and meeting with union officials and their members, intrude into the collective bargaining process. By mandating minimum requirements the bill does not consider the potential disruption to the day-to-day operations of our respective members, particularly if the relationship between management and the union is contentious.   These are issues that have been successfully negotiated during the collective bargaining process.

We are also concerned with the new procedures established in A-3686, such as providing detailed contact information to the unions on all employees, whether they are members of the union, or not. We are further concerned that management will be used to assist unions in the recruiting/retaining of their members, which is inconsistent with the labor-management dynamic.

Additionally, we believe that this bill will unintentionally create taxpayer-funded data mining and access that could violate public employees’ privacy and First Amendment rights.  Typically the detailed information employers will be required to provide unions on their employees in A-3686 is information a person provides an organization once they join, not beforehand, and certainly not by a third party, in this case, their employer.

Furthermore, we believe this legislation is unnecessary as the “New Jersey Employer-Employee Relations Act”, which governs relations between public employers, employees, and unions, already provides appropriate protections regarding union activities. For example, the law explicitly prohibits public employers from interfering with the formation, existence or administration of any employee organization, and bars them from refusing to negotiate in good faith over the terms and conditions of employment (N.J.S.A. 34:13A-5.4). We are concerned that A-3686 infringes on the well-established collective bargaining process for New Jersey’s public sector and possibly the rights of the public employees themselves.

B. A-1627, Permits Volunteer Firefighters and First Aid Members to Continue After Retirement

Please ask your State Legislators to support A-1627.

This legislation, which we support, permits a person with a pre-existing volunteer relationship as a firefighter, rescue squad worker, or emergency medical technicians with their employer to retire from service covered by PERS or PFRS and continue to serve that employer as a volunteer.

In 2014, the Division of Pension and Benefits issued guidance on post-retirement employment restrictions for public employees. The guidance noted that there must be a “bona fide severance of employment”, a complete termination of the employee’s employment relationship with the employer for a period of at least 180 days, in order not to jeopardize the employee’s retirement benefits. The Division considers re-employment by a different unit of the same public entity, whether the position is covered by the same retirement system or a different retirement system, to be employment by the same employer. If an employee holds more than one position with the employer they must separate from all employment in order to retire, even if the positions are covered by different retirement systems, or the second position is not subject to pension contributions.

If an individual returns to public employment with the former employer, even as a volunteer, prior to satisfying the requirements of a bona fide severance from employment, the employee will be required to repay all retirement benefits received from the date of retirement and may be required to re-enroll in the same or different retirement system. As a result, volunteer firefighters, rescue squad members or EMTs, who are public employees, have been required to resign as a volunteer in order to receive their retirement benefits.

Volunteers are the backbone of communities providing services to the residents at no cost to taxpayers while freely giving of their time and expertise. Employees affected by the Division of Pensions ruling generally are at least 55 years of age. In their volunteer positions, they often serve as mentors to the new and younger members, typically providing guidance and direction.

While well intended the Division of Pensions has created an unintended consequence which, if not changed, will impact every public employee who volunteers in the state and will not only drive up property taxes but would also reduce the quality and level of essential public services.

CA-3122, Permits JIFs to Invest in Governmental Bonds

Please ask your State Legislators to support A-3122.

This legislation, which we support, permits both local unit and board of education joint insurance funds (JIFs) to invest in bonds of any governmental entity established under State law, or of any federal agencies or government corporations. It will also permit the local unit and board of education JIFs to amend their respective risk management plans to form joint cash management and investment programs.

JIFs have different cash flow needs than local governments and boards of education, and currently are very limited on how they can invest their funds. A-3122 would permit JIFs to take a conservative approach to investing while adding competitiveness to the municipal bond market.

League Conference Resolution 2016-09 called for legislation to permit JIFs to invest in debt obligations of any governmental entity and create a joint investment and cash management program, further increasing investment income.

D. A-3549/S-846, Reinstates and Extends Duration of certain UEZs

 Please ask your State Legislators to support A-3549/S-846.

This amended legislation would reactivate the Urban Enterprise Zone (UEZ) program in those municipalities where it expired at the end of 2016. The program, which provides certain benefits to participating businesses, would be scheduled to sunset in those five municipalities – Bridgeton, Camden, Newark, Plainfield, and Trenton – at the end of 2023. That would also be the termination date for the program in any other municipalities where the UEZ is scheduled to sunset over the next five years.

The amended bill also directs the Department of Community Affairs to conduct or contract for a study of the Urban Enterprise Zone program. The results of the study would need to be delivered to the Legislature, with a year of the bill’s enactment. It would include recommendations regarding the continuation, modification or replacement of the program.

Though not as beneficial as prior versions of the bill, the League supports A-3549/S-846.

Contacts:

  • Michael F. Cerra, Assistant Executive Director, mcerra@njslom.org, 609-695-3481 x120.
  • Jon Moran, Senior Legislative Analyst, jmoran@njslom.org, 609-695-3481 x121.
  • Lori Buckelew, Senior Legislative Analyst, lbuckelew@njslom.org, 609-695-3481 x112.

 

Division Adopts New Regulations on Electronic Funds Transfers & Claimant Certification

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correct size blogThe Division of Local Government Services has issued Local Finance Notice 2018-13 providing guidance on the recently adopted amendments to N.J.A.C. 5:30-9A, Electronic Disbursements & Claimant Certification.  The amendments implement the provisions of P.L. 2016, c. 29, effective on April 1, 2017, which authorized local government entities to adopt policies for the payment of certain claims through the use of standard electronic funds transfer technologies.  While the Local Finance Notice provides guidance for all local government entities, this blog post will only focus on the guidance for municipalities.

Instead of paper checks, governing bodies can adopt policies and procedures permitting specific officers and employees to pay claims electronically using electronic fund technology (EFT), such as Automated Clearing House (ACH), wire transfers and e-checks.  The written policies and procedures must be adopted by resolution or ordinance as appropriate. If the municipality has a payment of claims ordinance it is recommended that EFT policy is incorporated into that policy.  The Chief Financial Officer (CFO) is responsible for ensuring that the controls set forth in state regulations and local policies are in place and adhered to.

All EFT policies and procedures must allow for the designation of separate roles for the initiation and authorization of the payment of claims using EFTs.  The initiation and authorization roles must be segregated and they must password-restricted and/or subject to other security controls, appropriate for the technology.   The role of initiation must be filled by the mayor or another chief executive officer unless the municipality has a payment of claims ordinance which designates another individual. The CFO and Municipal Clerk are responsible for authorization role.  The governing body must designate an officer, who is not supervised by the CFO, to authorize transfers initiated by the CFO.  Additionally, it is recommended that a backup officer be designated in the event the Mayor, Municipal Clerk, or CFO is unavailable.  Any adopted EFT policy must specify permitted EFT methods and incorporate the regulatory safeguards.

EFT technologies must facilitate measures that would mitigate the risk of a single payment being made more than once.  Each individual disbursement to a vendor must be preceded by instructions transmitted to the bank. No automatic debits are permitted.

No less than a weekly basis, activity reports on all EFT based transactions must be reviewed by the CFO or another individual under the CFO’s supervision. The governing body must designate someone, not under the CFO’s supervision, to review any CFO generated activity report. The municipal auditor may be designated instead of another official.  At least on a monthly basis reconciliation of the actual EFT transactions to the accounting records must be performed and maintained for audit.

Each bill list approved by the governing body must indicate the type of technology used in each EFT transaction. An audit trail must be created and maintained such that transaction history, including documentation of demands for payment and payment initiation, authorization and confirmation, can be independently tracked and detailed.  For wire transfers and ACH debit description, the bank posting the name of the vendor based upon the transaction routing number provides an adequate audit trail.

Procurement card issuers, along with providers of ACH and wire transfers services, must be financial institutions chartered by a State or federal agency, with the further requirement that financial institutions providing ACH and wire transfer services be covered under GUDPA (N.J.S.A. 17:9-41 et seq.). The use of PayPal and Venmo are not permitted under these rules.

ACH payments must follow the National Automated Clearing House Association (NACHA), or equivalent banking industry standard, rules. EFT through ACH must utilize Electronic Data Interchange (EDI) technology, which provides transaction-related details including invoice numbers, pay dates, and other identifying information.  An ACH Origination Agreement must be in place with the financial institution.

The regulations also include a cybersecurity framework that must be incorporated into standard EFT technologies.  Elements include:

  • System hosting; data encryption;
  • Password policy and staff security;
  • System risk assessment and security updates;
  • Limitations on the maintenance of personal identifying information; and
  • Cybersecurity incident response plan and response team.

Financial institutions providing EFT technologies must annually provide evidence of satisfactory internal controls to the CFO.

In regards to Claimant Certification, the adopted rules:

  • Clarify that the certification may be executed by a vendor or claimant by signature stamp, facsimile signature, or electronic signature in addition to a “wet” signature;
  • Permits a municipality not to require claimant certification for transactions where a local unit makes payment through standard EFT;
  • Permits a municipality to enact a standard policy through resolution or ordinance, as appropriate, to not require claimant certification where the vendor or claimant does not provide such certification as part of its normal course of business; and
  • Permits payment to vendors in advance of delivery of materials or services for State or federal payment obligations, membership in a non-profit organization, educational courses, registration for a conference or convention sponsored by a non-profit organization, and web hosting.

The regulations on Procurement Cards (P-Cards) remain largely unchanged except the qualified purchasing agent must be designated as a “program manager” when P-Cards are used regardless of dollar amount and the CFO is ultimately responsible for ensuring proper internal controls for P-Card usage.

We suggest you review this Local Finance Notice with your Chief Financial Officer, Purchasing Agent, and Municipal Clerk.

Contact: Lori Buckelew, Senior Legislative Analyst, lbuckelew@njslom.org, 609-695-3481 x112.

Performance Guarantees Under the MLUL and the Soil Erosion and Sedimentary Control Act

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correct size blogSigned into law on January 16, 2018, P.L. 2017 C. 312 amended the Municipal Land Use Law (“MLUL”) to set limitations on the circumstances in which a municipality can require performance and maintenance guarantees from a developer.  Municipalities often require a developer to post performance guarantees to ensure that certain types of improvements are completed.  Prior to P.L. 2017 C. 312, the MLUL authorized performance guarantees for various improvements, regardless of whether they would be privately owned or dedicated to the municipality upon completion. However, under the recent law change, municipalities are now permitted to require performance guarantees only for improvements being dedicated back to the municipality, with an exception for privately-owned perimeter buffer landscaping.

Furthermore, municipally required performance guarantees are only permitted for certain types of improvements as outlined within the MLUL.  These include, among other things; curbs, sidewalks, street lighting, water mains, etc.  One particular item of note, no longer subject to performance guarantees is, “erosion control and sedimentation control devices.” While widespread authority under the MLUL to require performance guarantees for these items has been eliminated, certain municipalities may find that under the Soil Erosion and Sedimentary Control Act, they still have authority to require performance guarantees for erosion control and sedimentation control devices.

The intent of the Soil Erosion and Sedimentary Control Act (the “Act”), was to prevent development within the state from causing soil erosion which pollutes the state’s waterways and causes other harms to the environment.  To facilitate this purpose, the Act created Soil Conservation Districts and tasked them with creating soil erosion standards along with the authority to review construction projects to ensure the adopted soil erosion standards are met.  The Soil Conservation Districts oversee the soil erosion standards for all development within their defined areas.  Currently, there are 15 Soil Conservation Districts and for the most part, they run along county lines.  The Act also authorized municipalities to adopt an ordinance within 12 months of the Act’s passing, which would allow the municipality to take on the functions of the Soil Conservation District for developments within its boundaries.  These are known as, “exempt municipalities.”

Today, there remain only a few exempt municipalities.  But, for these exempt municipalities, it is important for them to understand the implications that the new changes to the MLUL could have on their ordinances related to erosion and sedimentation control devices.  This is especially true as many municipalities begin the process of amending their land use ordinances to reflect the recent changes to the MLUL by removing references to certain performance guarantees.

Exempt municipalities should take particular care to ensure that when they are reviewing and amending their ordinances in connection with the MLUL changes that they are not inadvertently removing from their ordinances performance guarantee requirements for soil erosion and sedimentation.  It is important that exempt municipalities understand that they may retain, under the Act, the authority to require performance guarantees for soil erosion and sedimentation control purposes.

Exempt municipalities should consult with their municipal attorneys for further information on how the recent changes to the MLUL could impact their authority under the Soil Erosion and Sedimentary Control Act.

Contact: Frank Marshall, Esq., League Staff Attorney, FMarshall@njslom.org or 609-695-3481 x137.

Bill Introduced, Usurping Local Discretion of Coastal Communities

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correct size blogLast week, Assemblyman Reed Gusciora introduced A-3725; legislation which seeks to create a new state entity known as the New Jersey Coastal Commission.  This bill, much like those introduced in prior legislative sessions (2016: A-2642, 2014: A-2117, S-64, and 2012: A-3920) would create a new state government entity and task it with the planning and enforcement of various environmental laws within the coastal areas of Atlantic, Cape May, Middlesex, Monmouth, and Ocean counties.

The League opposes this bill because it would undermine and usurp local discretion of land use and zoning prerogatives.  At the same time, the bill creates an additional and unnecessary level of state bureaucracy which would take on certain enforcement and oversight functions currently being performed by the Department of Environmental Protection.

Specifically, this bill would remove local authority over land use and development and instead vest such authority exclusively with a state-appointed Coastal Commission.  According to the bill, the proposed Coastal Commission would have exclusive authority over:

  • All planning activities and all approvals related to applications for development;
  • All activities related to land use permitting and approvals;
  • All beach erosion and shore protection projects undertaken or proposed to be undertaken; and
  • The oversight of disbursement and use of any federal monies received from the Federal Emergency Management Agency or any other source related to reconstruction from the effects of Hurricane Sandy. (See, Section 6a(1) through (4))

In addition, the Coastal Commission would be tasked with creating a coastal management plan that all local and state governments would be mandated to comply with.  Also, the Coastal Commission would be vested with the authority to review and approve or disapprove each county and municipality’s master plan, development regulations, and capital improvement program. (See, Section 11c(1))  And, should the Commission decide that the county or municipality is not in conformance with the Commission’s coastal management plan and practices, the Commission is directed to withhold all grants, loans or loan guarantees. (See, Section 11e(1))

The Coastal Commission would be made up of 19 voting members serving five-year terms.  The members consist of:

  • Two residents, appointed by the Governor, from each of the effected counties (Atlantic, Cape May, Middlesex, Monmouth, and Ocean), for a total of ten.
    • No more than five of those appointed can be of the same political party, and;
    • Five must be county officials, holding elected office at the time of appointment, and;
    • Five must be municipal officials, holding elected office at the time of appointment.
  • Nine residents of the State, appointed by the Governor,
    • With three being appointed upon the advice and consent of the Senate, and;
    • Three upon the recommendation of the Senate President, and;
    • Three being upon the recommendation of the Speaker of the General Assembly. (See, Section 5)

This bill is a reaction to Superstorm Sandy, and while it attempts to provide a means of achieving short-term and long-term goals of mitigating life and property loss along the Garden State’s coastline, it fails to recognize the strides already made.  In the time since Sandy devastated our shore communities in 2012, municipal and county officials have worked tirelessly with the State and Federal government to ensure the scale of loss brought by Superstorm Sandy would never be seen again, even in face of stronger storms.  These efforts have included, beach replenishment, redevelopment and planning changes with a focus on storm-resiliency, along with more general storm preparedness, just to name a few.

Local government officials in conjunction with the existing government agencies are already well into the planning and implementation of coastal management.  The creation of a Coastal Commission to usurp these responsibilities would only serve to setback and undermine the strides already taken and constrain future planning efforts.

Contact: Frank Marshall, Esq., League Staff Attorney, FMarshall@njslom.org , 609-695-3481 x137.

Municipalities Win With Federal FY 2018 Appropriations Act

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correct size blogLate last week, the President signed the Omnibus Consolidated Appropriations Act of 2018 into law. As we reported last week, the bill includes significant increases in some key municipal priorities.

We want to thank all of you who reached out to your colleagues in Federal office on this long-awaited, bipartisan compromise. We also want to thank our friends at the National League of Cities (NLC) for their advocacy, on our behalf, day in and day out, in our Nation’s Capital. And especially, we want to thank all the Members of our State’s Congressional delegation for their efforts to protect and strengthen the Federal-State-Municipal partnership of service to our citizens and businesses.

We’ve come a long way from last March, when the new Administration proposed a FY 2018 budget that would have eliminated $54 Billion from programs that municipalities use to better serve their citizens and businesses. In response to that proposal, NLC launched its #FightTheCuts campaign. After six months of stalemate and a series of Continuing Resolutions, Congress rejected the austerity budget and approved The Bipartisan Budget Act of 2018, which increased the overall amount of federal funding available for fiscal years 2018 and 2019 by nearly $300 billion.

As reported last week, the FY 2018 Omnibus includes:

  • CDBG: First meaningful increase since 2010, from $3 billion to $3.3 billion.
  • Transportation Investment Generating Economic Recovery (TIGER): Increased by $1 billion.
  • Airport Discretionary Grants Targeting Small and Rural Airports: Increased by $1 billion.
  • Clean Water and Drinking Water State Revolving Loan Funds: Increased by $300 million each.
  • Transit Infrastructure Grants: Increased by $834 million (including $400 million to help communities modernize their bus systems and $400 million for capital assistance to transit systems).
  • Rural Broadband Infrastructure: $600 million in new funds.
  • State and Local Law Enforcement Grants: Increased by $1.2 billion for a total of $2.9 billion in 2018. This includes a total of $446.5 million, an increase of $299.5 million more than Fiscal Year 2017, in DOJ grant funding to help state and local communities respond to the opioid crisis.
  • State Opioid Response Grants: $1 billion in new funding for grants to states to address the opioid crisis (this funding is in addition to the $500 million provided in the 21st Century Cures Act).
  • National Pre-Disaster Mitigation Fund: Pre-disaster mitigation funding increased from $149 million to $249 million to build infrastructure that prevents loss of life and mitigates risks, reduces damage from future disasters, and lowers flood insurance premiums.
  • HUD-VA Supportive Housing (HUD-VASH) Vouchers: Increase funding of $40 million for new vouchers, while also protecting VA resources providing case management for homeless veterans.

Specific funding level changes are located on NLC’s FY18 Budget Tracker here.

Please thank Senators Menendez and Booker and your Congressperson for their efforts on this matter.

Contact: Jon Moran, Senior Legislative Analyst, jmoran@njslom.org, 609-695-3481, x121.

Budget Proposal Could Terminate Energy Tax Receipts Property Tax Relief Program

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correct size blogOn Tuesday, Governor Murphy presented his first budget proposal to the Legislature and the people of New Jersey.

From our perspective, municipal property tax relief funding is of paramount importance. Regarding that priority, the Governor has called for level funding of comingled Energy Tax and CMPTRA property tax relief. Though better than a cut, we had hoped to see these funding sources restored to their previous levels.  Currently, funding for Energy Tax and CMPTRA property tax relief are $320 million lower than they were before the Recession of 2008. And while we appreciate the proposed $15 million increase in Transitional Aid; we are concerned with the proposed elimination of Meadowlands Tax Sharing Payments.

We have another concern with the proposal. It appears that the Governor’s proposal may jeopardize the most significant and reliable source of municipal revenues, other than the property tax, in future State budgets. Since the passage of the Voorhees Tax Act in 1900, municipalities have been able to lay claim to certain taxes paid by energy producing utilities. (Please see the League’s White Paper, Energizing Tax Relief, for a complete history of this issue.) Language in the Governor’s proposal would allow the State to access these revenues. For the upcoming State Fiscal Year, the revenues would be replaced by funding derived through the State Income Tax. But we have been unable to find, in the proposal, any assurance that the State will guarantee distribution of Energy Taxes in future years.

A little history of municipal property tax relief, and the State’s role in that matter, might help us to better explain our concern.

There are two main formula-driven general municipal property tax relief programs currently in use in our Garden State. Though often referred to as “State Aid” programs, these are actually Revenue Replacement programs. The revenue they replace was, formerly, generated through taxes assessed and collected locally.

The simplest to describe is the Energy Tax Receipts Property Tax Relief program. It is the direct descendant of the Public Utility Gross Receipts and Franchise Tax (PU-GRAFT). That was a tax on regulated public utilities originally assessed and collected at the municipal level. In the early 1980s, at the request and for the convenience of the taxpaying utilities, the State became the collection agent for this assessment. The law that effected this change promised that the proceeds would be distributed back to the municipalities, which provide services to utility facilities and from whence come utility profits. The State of New Jersey neglected that commitment, immediately repurposing large and growing portions of the proceeds to its own general fund.

Modernization and deregulation led to a major reform of utility taxes in the mid-Nineties. That reform law validated and, supposedly, capped the State’s annual percentage. The League lobbied hard for the inclusion of a ‘poison pill’ provision, which requires the State to annually distribute, to municipal governments, their fair share of Energy Tax proceeds. Failure to do so would result in the forfeiture of the State’s authority to collect the tax.

The second formula-driven general municipal property tax relief program is CMPTRA.  Around the same time as the energy tax reforms, the State decided to ‘consolidate’ a number of previously discrete municipal property tax relief programs. While some may see ‘no rhyme or reason’ to the distribution of Consolidated Municipal Property Tax Receipts Aid (CMPTRA), each of its component parts were distributed according to state-established formulas. And many of those parts were, like Energy Taxes, the lineal descendants of taxes that had once been assessed and collected at the municipal level. Among its many components, CMPTRA includes the Financial Business Tax, the Business Personal Property Tax Replacement, the Railroad Class II Property Tax, the Insurance Franchise Tax, the Corporation Business Tax on Banking Corporations and a big chunk of State Payments In Lieu Of Taxes (PILOT) payments, that had been under-funded for many years, prior to being folded into the Consolidation. These are all meant to be municipal revenue replacement programs. They were not, properly speaking, State aid. They were not meant to make things better for municipal property taxpayers. They were only intended to keep things from getting worse. Unlike the Energy Tax, CMPTRA funding is not assured by a ‘poison pill.’

We will strongly oppose any proposal that would change the Energy Tax Receipts Property Tax Relief program from a dedicated source of municipal funding, which the State can only reduce at some risk to its own revenues, to another discretionary aid program, which the State could reduce at any time, without danger of any repercussions.

Contact: Jon Moran, Senior Legislative Analyst, jmoran@njslom.org, 609-695-3481 x121.