Governor Signs Charitable Trust Legislation

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correct size blogEarlier today, in East Rutherford, Governor Murphy signed S-1893, which permits municipalities, counties and school districts to establish one or more charitable funds, each for a specific public purpose, and permits property tax credits in association with certain donations. This legislation is a response to new Federal Income Tax cap on the SALT property tax deduction.

The charitable fund must have a specific public purpose that is more limited than the general purpose of the municipality. The purpose must be described in publicly available documents and records. For a municipality to establish a charitable fund it first must adopt an ordinance creating the fund for a specific public purpose of that municipality. The ordinance:

  • Must designate the official serving as the municipality’s custodian of public funds to serve as the fund administrator;
  • Must establish an annual credit eligible donation cap;
  • Must limit the total amount of money a person or entity may donate that qualifies for local property tax credit, that is, a cap on the total credits that a taxpayer can earn;
  • Must establish an initial annual credit eligible donation cap, that is, a cap on the total that each charitable fund can collect; and
  • May establish a spillover fund.

The annual credit eligible donation cap is a cap on the total value of local charitable donations that are eligible for a local property tax credit. This is the maximum amount of credit eligible money the fund may collect. The annual credit eligible donation cap must be established prior to the beginning of each fiscal year based on the tax levy from the prior calendar year. The annual cap cannot exceed 85% of the prior year’s budget unless otherwise authorized by the Director of Division of Local Government Services (DLGS).  For 2018 the cap must be established on the date on which each charitable fund begins accepting donations. It is important to note that the donation cap is not construed to limit all donations just donations that are property tax credit-eligible.

The spillover fund, which may be established, temporarily holds donations that have reached their annual credit eligible donation cap to a given fund. The spillover must be administered by the fund administrator of the charitable trust. The ordinance establishing the spillover fund must designate approved uses for the spillover funds that must be remitted by the spillover fund upon appropriation of the governing body. Approved uses include, but are not limited to, payment of debt services, funding of capital reserves, reserve for uncollected taxes, emergency expenses, and operating expenses. Funds in the spillover fund must be used solely for the budget year corresponding to the year in which the taxpayer will receive the credit.

The charitable fund must be held in the name of the municipality in one or more bank accounts and are governed by the Governmental Unit Deposit Protection Act.  It cannot be administered jointly by more than one local unit.

The funds in the charitable fund are equivalent to tax revenues for the purposes of State aid formula, revenue calculations, bonding capacity, and similar State or municipal computations. The funds must be available immediately to the establishing local unit upon request of the fund administrator for the payment of budget and emergency mandatory expenses, including debt service.

The fund administrator, who is the local unit’s custodian of public funds, is responsible for the collection, administration, and distribution of donations dedicated to the fund. They must continually track the total of all qualified donations with respect to the fiscal year.  The DLGS Director may adopt rules requiring additional or supplemental bonding for the fund administrator.

Any person or entity, regardless of property ownership or location of residence, may donate to the charitable fund by directing payment to the fund administrator.  The person must indicate at the time of the donation the specific property to which the donation applies for credit. Please note that a donation may be credited to more than one property, however, the property owner must indicate the amount of the donation intended to be applied to each property.

Following the receipt of a local charitable donation, the fund administrator must:

  • Issue a receipt to the donor – confirming donation amount and the property associated with the donation;
  • Notify the donor that, in the event that the annual credit eligible donation cap has been reached, the donation will be held by the local unit in escrow. The donor has 60 days, unless a lesser timeframe is specified by the DLGS Director, to direct the fund administrator to allocate the donation to another charitable fund established by the local unit or rescind the donation. If the donor fails to notify the local unit within the established timeframe, then the funds are transferred to the spillover fund. If no spillover fund is established the funds are returned to the donor; and
  • Notify the municipal tax collector and chief financial officer or business administrator within 5 business days of the amount of the donation and credit made as a result of the donation. Thereafter, the tax collector must notify the donor of the amount of the available local property tax credit. Please note that only local charitable donations made to the charitable fund established by the local unit are eligible for credit on a property tax bill.

Charitable donations must be used for the following purposes:

  • For the purpose designated by the local unit;
  • Payment of any administrative fees of the municipality that may be required by the municipality to meet the requirements of this law; and
  • The remaining funds used in a manner consistent with the specific charitable purpose.

For fiscal years beginning on or after January 1, 2018, the tax collector must allow local property owners credit to be applied to property taxes. The credit shall be equal to 90%, or a different percentage as determined by the DLGS Director, of the amount of local charitable donations contributed, on behalf of the owner’s specified local real property, to a local unit’s charitable fund. However, no credit can be issued to any owner of a local real property if the owner owes local property taxes or other delinquent municipal charges at the time of donation.

On or after the fifth (5) business day following receipt of fund administrator’s donation notification, the tax collector shall apply the credit against the first local property tax bill that is charged. However, each municipality must impose a deadline by which the fund administrator must supply the tax collector and chief financial officer with all donation amounts received and the amount of credits made available as a result of those donations, in order for the credits to be applied to the next annual property tax bill. Subject to the pending rules, the municipality has the sole discretion as to whether to establish a deadline by which donations made to a charitable fund may be credited against an annual property tax bill that has already been issued. In that case, the property taxpayer must be given access to a statement showing how the credit has been applied.

If the total amount of all local property tax credits available for a specific local property exceeds the property taxes due during the year in which the donation was made, and the tax collector is unable to apply all or portion against the bill, the tax collector must carry the remaining portion of the credit forward to one or more future bills. Tax credits can only be carried over for five (5) years from the date of the first local property tax bill after the donation was made. No cash refund of property taxes can be issued until the amount of the property tax refund due exceeds the amount of tax credit issued for the property.

The tax collector must indicate on the property tax bill the value of tax credits applied to the current bill and value of tax credits available for future bills. The tax credit is applied to the parcel of property and not an individual person or entity. The law also requires the property tax bill to include the value of the tax credits that apply to the bill and the value of tax credits that apply to future bills.

Please note that no mortgagee or servicing organization is entitled to hold a local property owner liable for electing to meet their obligation to a local unit by means of a charitable donation and resulting property tax credit.

The law gives rulemaking authority to the State Treasurer, the Director of the Division of Taxation, the Commissioner of Banking and Insurance, the Commissioner of Education and the DLGS Director. The rules adopted by the DLGS may include provisions to:

  • protect local units against the loss of property tax revenues that may apply to a local unit due operation of the property tax levy cap attributable to receipt of charitable donations;
  • establish procedures for management of the charitable funds;
  • establish appropriate timelines to coordinate various responsibilities of fund administrators and tax collectors;
  • provide guidance to tax collectors as to when a tax bill is deemed assessed;
  • provide guidance as to how servicing organizations shall implement the election of a local property owner to meet their obligations and obtain resulting local property tax credits, including, but not limited to, provisions for notice to the servicing organization of credits;
  • adjust the percentage of the annual credit eligible donation caps;
  • establish standards for implementing local property tax credits for qualified charitable contributions toward a school district-established charitable fund, where the municipality defers a portion of the school levy tax; and
  • harmonize, to the extent necessary, the provisions of this law with the Local Budget Law and Local Fiscal Affairs Law.

The rules adopted by the State Treasurer may include guidance on how qualified donations impact the “Homestead Property Tax Credit Act”, the “Property Tax Deduction Act”, and the homestead property tax reimbursement program.

Please note that nothing in this law will prohibit a municipality or county from accepting bequests, legacies, or gifts pursuant to N.J.S.A. 40A:5-29 or any other legal authority.

The new law will take effect on July 3, 2018. The state is in the process of drafting rules to implement the law. We will continue to keep you posted.

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

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Governor Signs Earned Sick Leave Legislation

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correct size blogOn Wednesday Governor Murphy signed A-1827, which requires employers to provide earned sick leave to employees they employ in New Jersey. The bill does provide an exemption for Civil Service municipalities.

All employers, including local governments, will be required to provide employees with one hour of earned sick leave for every 30 hours worked at the same rate of pay, and with the same benefits as the employee normally earns. An employer is in compliance with this mandate if the offer paid time off, which is fully paid, that includes personal days, vacation days and sick days. Nothing in the law prohibits the employee and employer from mutually agreeing to permit the employee to choose to work additional hours during the same pay period in lieu of sick leave.

The employer has the discretion to choose the increments in which its employees may use the earned sick leave, provided that the largest increment of sick leave is the same that the employee would be required to work for that shift. An employer has the discretion to provide the full complement of earned sick leave for a benefit year on the first day of each benefit year. The employer also has the discretion to permit the accrual of sick leave.

Under the law, an employee may use earned sick leave:

  1. For diagnosis, care, treatment, or recovery related to the employee’s mental or physical illness or preventive medical care;
  2. To care for a family member during diagnosis, care, treatment, or recovery related to a family member’s mental or physical illness or preventive care;
  3. For certain absences resulting from the employee or a family member being a victim of domestic or sexual violence;
  4. For time during which the employee is not able to work because of a closure of the employee’s workplace, or the school or place of care of a child of the employee, in connection with a public health emergency or a determination that the presence of the employee or child in the community would jeopardize the health of others; or
  5. To attend school-related conferences, meetings, or events, or to attend other meetings regarding care for the employee’s child.

Please note that the law defines a child and parent as the biological, adopted (ive), foster, step or legal ward/guardian of the employee, domestic partner or civil union partner of the employee.  Family member is defined as child, grandchild, sibling, spouse, domestic partner, civil union partner, parent or grandparent of an employee or a spouse, domestic partner, or civil union partner of a parent or grandparent of the employee, or a sibling of a spouse, domestic partner or civil union partner of the employee or any other individual related by blood to the employee or whose close association with the employee is the equivalent of a family relationship.

An employer is permitted to require reasonable documentation if the leave is for three or more consecutive days. If the sick leave is foreseeable, an employer may require advance notice, not to exceed seven (7) calendar days prior to the beginning of the leave, of the intention to use and the expected duration. If the leave is unforeseeable, the employer may require an employee to provide notice as soon as practicable. Employers may prohibit employees from using foreseeable earned sick leave on certain dates and require reasonable documentation if employees use sick leave that is not foreseeable during those dates.

An employer may offer payment to an employee for unused earned sick leave in the final month of the benefit year. The employee has ten (10) calendar days from the date of offer to either accept or decline the payment. If the employee accepts the full payment, the employer must make the entire accrual for the following year available to that employee at the beginning of that year. If the employee declines a payment for unused earned sick leave or agrees to a partial payment, the employee may have the unused leave carried forward to the following year.

The law prohibits retaliatory actions against an employee for the use or requested use of earned sick leave or for filing a complaint for an employer violation of the provisions of this bill. There is a rebuttable presumption of an unlawful retaliatory personnel action under this law whenever an employer takes adverse action against an employee within 90 days of the employee files a complaint or court action, cooperates with a Labor Department investigation, informs any person of their rights under the law, or opposes any policy, practice, or act that is unlawful under this law.

Employees or their representatives may waive rights or benefits provided by this law during the negotiation of a collective bargaining agreement. Employees who

Employers are required to retain records documenting hours worked by employees and earned sick leave taken by employees for a five-year period.

The Department of Labor and Workforce Development has been given rulemaking authority under this law. They are tasked to implement a multilingual outreach program to inform employees, parents, and persons under the care of health care providers about the availability of earned paid sick leave. Employers are required to provide notification, using the forms provided by the Labor Department, to advise employees of their rights. The employer must provide each employee with a written copy of the notification within 30 days of issuance, at the time of hiring, or anytime requested by the employee.

In addition, after October 29 counties and municipalities are prohibited from adopting new requirements regarding earned sick leave, and the provisions of the bill preempt existing local requirements.

This new law takes effect on October 29, 2018, except for employees covered under a collective bargaining agreement. The effective date for those employees will be at expiration of the collective bargaining agreement. We suggest you review your existing policies and the new law with your labor attorney and administrator.

Contact: Michael F. Cerra, Assistant Executive Director, mcerra@njslom.org, 609-695-3481 x120.

Governor’s ETR Budget Proposal and History’s Hard Lessons

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correct size blogIn his testimony before the respective Legislative Budget Committees and in a recent meeting with the State Treasurer, League President, Mayor Jim Cassella of East Rutherford, voiced our concerns with a key piece of Governor Murphy’s State budget proposal. Our concerns are well-founded.

The Governor’s proposal would shake the foundations of the Energy Tax Receipts Property Tax Relief Fund (ETR), which, for more than twenty years, has delivered reliable and significant property tax relief to municipal home- and business-owners, all around our Garden State.

Specifically, the Governor’s proposal would zero-out the ETR, which has always been funded through taxes (Sales and Corporate) levied on energy suppling utilities. In lieu of the ETR, funding would be derived through the Income Tax. This change, we have been told, will be effected not by the passage of a new statute, but instead by the insertion of new budgetary language.

A little background on New Jersey State finance will help to explain the State’s reason for the proposed shift.

The vast majority of the money that the State collects (and spends) every year goes into one of four main funds. (A fifth fund, the Gubernatorial Election Fund, exists only to provide State funding for those elections.) Three of the four funds can only be used for specific purposes.

The Casino Control Fund (with revenues derived from casino-related licensing fees, which must be used to fund the Casino Control Commission and the Division of Gaming Enforcement) and the Casino Revenue Fund (with resources derived from a gross revenue tax on the casinos, and which must be used for the benefit of senior and disabled citizens) are not involved in the matter at hand.

Monies collected through the State Income Tax are deposited into the Property Tax Relief Fund (PTRF) and are constitutionally dedicated and must be spent on a purpose that can reduce or offset property taxes. The General Fund receives most other State taxes, fees, fines and Federal funding. The largest source of General Funds is the State Sales Tax. (Portions of Sales and Corporate Taxes are, like the ETR, dedicated for specified purposes. But the lion’s share of all sales and corporate taxes goes into the General Fund.) General Fund revenues can be used for any number of purposes, and the General Fund supports State government operations.

State Treasurers and other State budget-makers like to be able to spend money as they see fit. (And don’t we all.)  The General Fund allows for that. So, while a bookkeeping shift of $788.5 million, from the ETR funding source to PTRF funding, reduces the amount that must be spent on other property tax relief initiatives, it increases the amount that the State can use to address other priorities.

As we have reported, Governor Murphy has called for level funding of combined Energy Tax and CMPTRA funding. That’s better than a cut. And while we had hoped to see some indication that these dedicated municipal property tax relief funding sources will begin to be restored to their previous levels, we appreciate that the proposal doesn’t further add to the $320 million cut, endured by local budget-makers in each of the last eight years.

Our concern is the impact that the reshuffling of ETR funding could well have in future years. And we have two main reasons for that concern

First, at the League’s insistence, Chapter 167 of the Public Laws of 1997, which established the ETR ‘lockbox,’ 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.

Second, history has taught us hard lessons about shifts from General Fund sourced revenues to the PTRF. This isn’t the first time it happened.

In 1995, not by the passage of a new statute, but instead by inserting new language in the budget, the State created the Consolidated Municipal Property Tax Relief Aid (CMPTRA) program. It was a new program, but it didn’t provide any new money. CMPTRA was an amalgamation of twelve pre-existing municipal property tax relief funding programs. Like the ETR, some, but not all of those, were revenue replacement programs. They replaced revenues that had been (or, in the case of Payments in Lieu of Property Taxes on State Property, that could otherwise have been) collected locally. And like the ETR, some, but not all, had been funded through the General Fund.

In the League’s testimony on the proposed budget that year, with regards to the ‘Block Grant’ proposal, then-League Executive Board Member and Union City Mayor Bruce Walter stated the following.

First, nine of the twelve funding programs which would be folded into the block grant are currently financed through the state’s general fund. That means that those dollars, which total approximately $300 million, come from sources other than the income tax. That tax is constitutionally dedicated to the property tax relief fund.

It is extremely important that those $300 million, or roughly 46 percent of the block grant, continue to come from the general fund. If, instead, you take less than $300 million, or 46 percent, of the funding from the general fund, you decrease the amount that would otherwise be available for funding other important property tax relief programs.

The Mayor, on the League’s behalf, then warned State budget-makers that, because of the change, future continued municipal property tax relief funding could be placed in jeopardy.

Sadly, his warning proved prophetic. In that first year, CMPTRA was funded at $755 million. In 2001, CMPTRA’s best year, the fund provided $818.5 million. By 2010, due to cuts and the steady shift of property tax relief dollars from CMPTRA to the ETR, funding was down to $264.7 million. And this year’s budget proposal calls for the distribution of $263.3 million through CMPTRA.

No one doubts Governor Murphy’s commitment to property tax relief. And no one questions our current State Legislators’ share that sense of purpose. But no one knows what the future will bring. And, when next faced with unanticipated problems forcing tough choices, no one can predict what a future Governor and a forthcoming Legislature might decide to do.

In his testimony to State budget-makers weeks ago, our President, Mayor Cassella, made our position clear.

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 believe the Treasurer appreciates our concern and our need for guarantees. We expect our conversations to continue. Please explain these worries to your State Legislators as they consider the SFY 19 budget.

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

 

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.

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.