Energy Tax Direct Payment Op-ed
January 9, 2013
By Mayor Janice S. Mironov, East Windsor Township;
President, New Jersey State League of Municipalities
A bill is advancing in the New Jersey legislature that would guarantee taxes collected for municipal property tax relief will be used for that purpose, only.
Assembly Bill A-2753, and its Senate companion S-1923, would require certain energy tax receipts to be paid directly to municipalities, beginning in the State’s next fiscal year. On December 6, the bill received unanimous, bipartisan support by the Assembly Housing and Local Government Committee. We thank the sponsors, Assemblymen Daniel Benson and Wayne DeAngelo and State Senator Linda Greenstein, for their leadership on this matter of fundamental fairness. We urge all Legislators to support this measure and to restore this funding to its intended purpose, to municipalities for property tax relief.
For far too long, municipalities and our property taxpayers have been forced to go without dedicated property tax relief funding. For many years, State officials of both political parties chose to divert large amounts of municipal property tax relief dollars to State budget priorities. When it comes to the State’s budget, reliance on what should be local revenues is a habit that will be difficult to break. But it is important that a start be made immediately.
At issue are the Energy Taxes that were originally paid to compensate local property taxpayers for hosting transmission facilities and lines that allow gas and electric energy corporations to serve customers and conduct business in our Garden State. These taxes are meant to be the ‘rent’ these corporations pay for the use and enjoyment of the public’s rights-of-way.
The taxes were originally paid directly to the host municipalities. In the early 1980’s, however, at the request and for the convenience of the power utilities, the State made itself the collection agent for the taxes. At that time, it promised to return to towns all proceeds for municipal property tax relief.
Just as municipalities collect property taxes for the benefit of school districts, counties and other entities, and are required to pass on the funds, likewise the state is supposed to collect Energy Taxes for the benefit of municipal governments and pass on all funds. For years, however, state budget makers have diverted funding from Energy Taxes to fund state programs. Instead of being spent on local programs and services and used to offset property taxes, the money has been spent as successive Legislatures and Administrations have seen fit.
The cumulative impact of years of underfunding has left many municipalities with serious needs and burdensome property taxes. Local elected officials are in the best position to decide the best use for these resources. Further, these monies were always intended to provide relief to local taxpayers and fund local programs and services.
Assembly Bill A-2753 requires the State Treasurer to calculate amounts due to municipalities pursuant to statutory law, adjusting for inflation. Those payments would be made directly to the municipalities by the utility taxpayers. In 2013, the amount to be apportioned to, and collected by, the municipalities would be $1,108,115,000.
A-2753 would also require the State to distribute to each municipality an amount equal to the difference between their total payment of Consolidated Municipal Property Tax Relief Aid (CMPTRA) and Energy Tax Receipts Property Tax Relief Aid (ETR Aid) in Fiscal Year 2008 and Fiscal Year 2012. This additional State aid would restore to towns approximately $331 million in reductions to CMPTRA and ETR Aid eliminated due to State budget constraints in Fiscal Years 2009, 2010, and 2011.
Last Spring, on a bipartisan basis, both legislative chambers passed a bill (A-2921/S-1900) that would begin to restore dedicated property tax relief dollars to local budgets. To be clear, the bill would not have restored all the property tax relief funding that should have been distributed. As a start, however, it would provide taxpayers in every municipality in the State with the same level of relief they received in 2007. The restoration of the $331 million needed to return to that level would be accomplished in five steady steps, over New Jersey’s next five fiscal years.
Regrettably, that bill was vetoed.
The time has come to restore this property tax relief funding to our citizens. They have waited too long already. In preparing the FY 2014 budget let the State make a 2013 New Year’s resolution to stop relying on aid from municipalities.