Concerns with Governor’s Energy Tax Proposal Aired


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,, 609-695-3481, x121.


Assembly to Consider Bills of Interest on Thursday


, , , ,

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.


  • Michael F. Cerra, Assistant Executive Director,, 609-695-3481 x120.
  • Jon Moran, Senior Legislative Analyst,, 609-695-3481 x121.
  • Lori Buckelew, Senior Legislative Analyst,, 609-695-3481 x112.


Division Adopts New Regulations on Electronic Funds Transfers & Claimant Certification


, ,

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,, 609-695-3481 x112.

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



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, or 609-695-3481 x137.

Bill Introduced, Usurping Local Discretion of Coastal Communities


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, , 609-695-3481 x137.

Municipalities Win With Federal FY 2018 Appropriations Act


, ,

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,, 609-695-3481, x121.

Budget Proposal Could Terminate Energy Tax Receipts Property Tax Relief Program


, ,

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,, 609-695-3481 x121.

A-3414/S-1964 – The Alternative to S-5


, , ,

correct size blogOn February 16, Assemblyman Thomson, who is a pension actuary by trade, introduced legislation proposing alternatives to the legislation (S-5) that transfers management of Police and Fire Retirement System (PFRS) to labor dominated Board of Trustees.    Likewise, Senator Declan O’Scanlon has introduced an identical Senate companion.   A-3414 and S-1964 would transfer the management of the PFRS to a 15 member Board of Trustees.

While A-3414/S-1964 include many of the same elements of S-5 (see blog post) there are the following differences, which the League believes improves elements of S-5.

  • A-3414 creates balanced representation on the Board of Trustees. It increases PFRS Board of Trustees representation to 15 members as follows:
    • 7 Labor representatives
      • 2 police officers
        • 1 appointed by PBA President
        • 1 appointed by FOP President
      • 2 firefighters
        • 1 appointed by FMBA President
        • 1 appointed by PPFA President
      • 1 active police officer elected from active members of the system
      • 1 active firefighter elected from the active members of the system
      • 1 retiree elected from the retiree members of the system
    • 7 Management representatives
      • 4 appointed by the Governor from recommendations of the League and the Association of Counties who are either elected or employed as administrator or chief financial officer in municipal or county government
      • 1 appointed by the Governor who holds a management or supervisory position of the Executive Branch
      • 1 direct appointment from the League
      • 1 direct appointment from the Association of Counties
    • 1 Taxpayer
      • Appointed by Governor
      • Cannot be a
        • member retiree,
        • beneficiary,
        • state or local elected official,
        • officer of a county,
        • state labor organization, union or affiliate that represents public employees
  • Increases the required number of Trustees that must be present for the Board to take action. Requires 8 trustees to be present for a quorum.
  • Requires a supermajority to assure accountability for benefit enhancements before reaching secure financial footing. Until the fund has reached the target fund ratio of 80%,  9 affirmative votes will be required to:
    • Enhance or reduce member benefits, including COLA
    • Approve any increase or decrease in employer or employee contribution rates, other than those recommended by the actuary.
  • Increases assurances of financial stability. Prohibits the implementation of a Board decision if, according to a written actuary report, the direct or indirect result of the decision will be that the fund ratio of that part falls below the target fund ratio (80%) in any valuation period during the 5 years following the implementation.
  • Assures property taxpayers will not be left making up for decisions on contribution rates. Changes to members’ contribution rate cannot be implemented if the direct or indirect result of the adjustment will be that the fund ratio of the part falls below 80% during the 5 years following implementation.
  • Assures reasonable benchmarks are used to evaluate the fund. Every 3 years, the Director of the Division of Investments shall compare the investment rate of return of PFRS with the investment rate of return attained by the Division on behalf of the other pensions.
  • If the Director determines that PFRS has yielded a lower rate of return than the State during the preceding 3 years, then the Board must increase the employer and employee contribution rates.
  • The increase is by an amount necessary to contribute to the retirement fund, within 2 years, the difference between the 2 rates of returns.
  • The increase shall be by the amount necessary for each to generate 50% of the amount required.
  • Requires the PFRS Board of Trustees to set the same regular interest rates as the State Treasurer for PERS, TPAF, JRS, & SPRS.

A-3414 and S-1964 include many of the safeguards that the League has advocated for S-5.    Both bills await committee hearings.



Shared Service Bill, S1



correct size blogSenate President Sweeney’s shared services bill, S-1, was approved by the Senate Budget Committee on February 15, 2018, and awaits consideration by the full Senate.  While the League appreciates the civil service and shared service reforms, the League opposes S-1 due to its taxpayer voting penalty provision.

Civil service and shared service reforms

S-1 would permit the parties of a shared service agreement to request the relaxation of Civil Service law and regulations, including, but not limited to:

  • Selection and appointment
  • Require non-Civil Service employees prior to the execution agreement/contract to become Civil Service for the purpose of creating a uniform pool
    • From which the new agreement/contract shall hire employees
    • Until employee pool is exhausted
    • Provides employees so designated with Civil Service rights

Determination of those employees, if any, which shall be transferred to the providing town, retained by the recipient town, or terminated for reasons of economy or efficiency is a management decision, but the providing municipality has the final decision. However, these employment decisions are subject to existing collective bargaining agreements with the affected local units, as it pertains to such employment decisions.  The parties must use mediation to settle any disputes and, if that is unsuccessful, then binding arbitration.

Any employee with a permanent Civil Service title who is terminated for reasons of economy or efficiency at any time by either local unit is placed on a Special reemployment list for any civil service employer within the county. The employee will be removed from the list if that employee has declined a reemployment opportunity in a position that involves the same, or substantially similar, job duties as the employee’s previous job; the same title and series as the previous job; and the location of the new job is within a 25 mile radius of the previous employment.

If the providing town is Civil Service but the receiving town is non-Civil Service and the towns desire that some or all employees of the recipient town are transferred to the providing local unit, the Civil Service Commission shall vest those employees in appropriate titles, seniority, and civil service tenure with the providing local unit, based on the duties of the position, information provided by the recipient unit, and the recommendations of the providing town. When the non-Civil Service employee is transferred and given a Civil Service job title due to a shared service agreement/contract, upon termination of said agreement/contract, that employee remains subject to Civil Service.

If the providing town is non-Civil Service but the receiving town is Civil Service and some or all employees of the receiving town are transferred to the providing town, any Civil Service rules incorporated by reference into a collective bargaining agreement applicable to the receiving town employees shall continue to apply to the transferred employees, until the expiration of the collective negotiation agreement.

Employees who are being laid off for reasons of the economy due to the implementation of a shared service agreement/contract must be provided a layoff notice at least 45 days prior to the layoff date, unless a collective bargaining agreement, employee contract, or personnel policy set forth a different notice requirement. A Civil Service employee has the right to appeal the good faith of such layoff notice, within 20 days of the final layoff notice.

S-1 also creates a new layoff process, if one of the towns in the agreement is Civil Service, for implementation of shared service agreement.  The “stratified layoff process” is designed to allow employees within a given employee band (executive, managerial or non-managerial) to invoke seniority in the event of layoffs, but to prohibit employees assigned from one band from invoking seniority rights over an employee assigned to another band.  Within an employee band, employees shall retain and be entitled to exercise all seniority and layoff rights that they have under Civil Service law and regulations, as well as collective bargaining agreements.  The municipality must assign current employees to one of three employee bands (1) executive, which is a job title with managerial responsibilities equivalent to a Division Director or higher in State service; (2) managerial, which is a job title with managerial responsibilities equivalent to Assistant Director or Bureau Chief in State service and that supervises second level supervisors; or non-managerial, which are job titles that are not in the managerial or executive bands.  When the application is submitted to Civil Service, a copy must also be sent to the collective bargaining representatives, who have 15 days to submit additional information to the Civil Service Commission for consideration.

S-1 also repeals:

    • N.J.S.A. 40A:65-8, which preserves the seniority, tenure, and pension rights of every full-time law enforcement officer in a shared service agreement for law enforcement services.


    • N.J.S.A. 40A:65-17, which preserves the seniority, tenure, and pension rights of every full-time law enforcement officers in a joint contract for the joint operation of law enforcement services.


    • N.J.S.A. 40A:65-19, which requires joint meeting plans to include an employment reconciliation plan.


    • N.J.S.A. 26:3A2-16, which requires in a Civil Service municipality that for Department of Health shared service agreements the full-time local health employees must to be transferred to another local health agency with the same job responsibilities and salary.


    • N.J.S.A. 26:3A2-17, which requires in a non-Civil Service municipality that for Department of Health shared service agreements the full-time local health employees with two or more years of service, must to be transferred to another local health agency with the same job responsibilities and salary. 
    • N.J.S.A. 26:3A2-18, which requires part-time local board of health employees with two or more years of service, to be placed on a preferential reemployment list for two years after employment is terminated for a shared service agreement.


S-1 also removes the requirement that municipal consolidations should be within the same county and legislative district.

LUARCC Process

S-1 expands the “Local Unit Alignment, Reorganization and Consolidation Commission(LUARCC) to undertake studies to examine the sharing of services between specific municipalities or between municipalities and other public entities as well as consolidation.  In addition, LUARCC is required to develop criteria to serve as the basis for:

  • Recommending the consolidation of specific municipalities; and
  • Merger of specific existing autonomous agencies into the parent municipal or county government; and
  • For recommending the sharing of services between municipalities or between municipalities and other public entities, including but not limited to counties, fire districts, school districts and regional school districts.

Please note that a local unit may request LUARCC to undertake a study to examine the local unit’s potential for consolidation or sharing of service.  A county may also request LUARCC to undertake a study to examine the local unit’s potential for providing specific shared service to constituent municipalities. However, no county shall be included in study that could potentially serve as a basis of recommendation subject to CMPTRA aid penalty, unless the study is agreed to by the municipal governing body by resolution.

LUARCC will first focus its studies on local units that neither participate in a shared service agreement nor have undertaken independent shared service studies or negotiations before it studies any local units that participate in shared services. Only after “affirmatively” demonstrating that it has already studied all municipalities in the State that are not engaged in shared services can LUARCC impose a CMPTRA aid penalty in a municipality with an existing shared service agreement.

LUARCC will be required to conduct at least five (5) on-site consultation sessions in each local unit with the governing bodies and affected officials of each local unit for sharing of services. In addition, they must hold at least one public hearing on consolidation recommendations and two public hearings in each municipality for a shared service recommendation.

Each consolidation or shared service proposal must:

  • detail the current delivery service being considered for the shared service proposal, including personnel, equipment, and cost;
  • detail the cost, including personnel and equipment, for the proposed shared service;
  • include an estimate of the total net savings that will result from implementation of the proposed consolidation or sharing of service;
  • provide options for delivery of the shared services and an explanation of why those options are not optimum;
  • include a transcript of the public hearings; and
  • include any other pertinent information

LUARCC must provide written notice of recommendations, including any economic analysis and documentation supporting the recommendation, to the governing body of each local unit.  Any LUARCC economic analysis must be submitted to the State Treasurer for review of the accuracy of the analysis, prior to releasing a recommendation.  At the same time, the economic analysis shall be submitted to the affected municipalities and other public entities. Within 30 days from LUARCC’s submission, a local unit must either certify the recommendations or provide written objections along with supporting documentation to the State Treasurer.  The State Treasurer has 90 days to either certify the recommendations or object to LUARCC’s findings.  LUARCC must work with the State Treasurer in satisfying the objections, prior to resubmitting a recommendation for review and certification.

A local unit may appeal the total net savings estimate contained in LUARCC’s proposal to the DCA Commissioner within 30 days of receipt of the LUARCC report.  The DCA Commissioner has 15 business days to review the analysis and the challenge in order to determine whether the analysis should be adjusted.  The DCA Commissioner may extend the review time for the appeal, if a hearing is deemed necessary.

If the LUARCC’s study finds that there could be savings in a shared service, thereby resulting in a taxpayer CMPTRA Aid penalty, then the recommended model:

  • must be projected to be capable of maintaining the same level of service or improving the services provided by the participating municipalities; and
  • must project either a meaningful savings or a slowed rate of growth of costs to result over a reasonable period of time.

If a local unit receives a recommendation for sharing of services from LUARCC along with the State Treasurer’s certification, the local unit must approve the recommendation within 14 months of the date of the notice or be subject to the CMPTRA penalty. An approved shared service proposal must be implemented within 28 months following LUARCC’s recommendation.

The local unit may adopt a resolution or ordinance to approve a recommendation or submit it to the voters at the next general election. S-1 provides the language for a local unit to use if they wish to submit a public question.

Taxpayer Penalty

Regardless of the outcome of the vote on the public question, if a municipality does not approve LUARCC’s recommendation within 14 months or does not make a good faith attempt within 28 months to enter into and implement the recommendations, the State shall annually reduce the total amount of CMPTRA  allocated to that local unit by the total net savings estimated in LUARCC’s proposal.  The CMPTRA penalty only applies to shared service recommendations and not consolidation recommendations.

No municipality will be subject to a CMPTRA reduction if it approved a recommendation for sharing of services and the failure to implement the recommendation was due to action or inaction of the governing body or voters of another local unit.

The League continues to oppose any proposal which would, on the one hand, allow the voters to express their will; but on the other hand, inform those voters that they will be penalized if their will does not comport with that of a majority of the appointed members of LUARCC.  To us, this is a fundamental position, respecting our voters and the concept of self-determination.

Though we oppose the bill, we thank the Senate President for involving local officials in the development of this legislation, for listening to our concerns and accepting some of our recommendations.  We remain committed to working with the sponsors and other interested stakeholders to address our remaining concerns with the legislation.


Lori Buckelew, Senior Legislative Analyst,, 609-695-3481 x112.