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William G. Dressel Jr, Executive Director - Michael J. Darcey, CAE, Asst Executive Director
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Legal Q & A


Acting Officials,
Construction Retainage
and Name Changes

Deborah M. Kole
League Staff Attorney
D. Kole

Q Our municipal tax collector has resigned effective July 1 of the second year of a four year term, and we are, of course, eager to find a good person to replace her. The top candidate is not yet certified, but we are hoping to appoint him as “acting tax collector” until he is certified. I had assumed we could do that, since we had an “acting municipal clerk” for a while some years ago. However, I have been told that we cannot do it. Is this true? If so, can we appoint a member of the municipal council who is certified? Also, when would the appointee be eligible for tenure?

A There is no provision in the law allowing for an “acting tax collector” as there is for an “acting municipal clerk.” The municipality is specifically allowed by statute to appoint an individual who is not yet a registered municipal clerk to a one year term as an “acting municipal clerk” and to reappoint the person to that position for two subsequent one year terms. However, there is no such statute concerning municipal tax collectors. Therefore, any individual appointed as tax collector must be certified at the time he or she is appointed.

The term of a tax collector is four years, beginning on January 1 of a given year. A tax collector attains tenure after serving a full four year term and being reappointed. In a situation like the one you describe, where an appointment is made in the middle of a calendar year to complete a term begun by someone else, the “full four year term” does not begin to run until the next January 1. For example, if you appoint a new tax collector effective July, 2006, the four year term of that person begins January 1, 2007. If that individual is reappointed after serving that four year term, he will attain tenure. Once tenure is acquired, the tax collector can only be removed for good cause (which can include failure to meet continuing education requirements) after the filing of formal charges with the Division of Local Government Services and a formal hearing with legal representation, if desired by the individual.

As for the member of your municipal council serving as tax collector, there is a statute, NJSA 40A:9-145.6, specifically prohibiting a member of a governing body of a municipality from serving as tax collector in that municipality.

Q My municipality has entered into a contract to have a new wing added to the municipal building. The contractor has agreed to our withholding a portion of each partial payment under the contract pending completion of the work. We asked for 10 percent retainage, the amount I recall withholding on a project in the past, but the contractor says we cannot retain more than 2 percent under New Jersey law. Is this true? Also, can we keep any of the money retained for maintenance costs once the contract is complete?

A N.J.S.A. 40A:11-16.3 does indeed limit to 2 percent the amount that the contracting unit may withhold from partial payments on a contract over $100,000 for improvement to real property. The one exception that has been allowed by a court, in the case of Township of Middle v. Public Developers Corp., 240 N.J.Super 445 (Ch.1990), was a Farmers Home Administration (FmHA)-funded project. In that situation, the court said, the FmHA regulations requiring a 10 percent retainage was the controlling law, rather than the New Jersey statutory limit of 2 percent.

The New Jersey statute further provides that, if the contract has been completed as indicated in the agreement, the contracting unit has 45 days from the final acceptance date to return all of the money withheld. If the contract has provided for maintenance security, this must be in the form of a bond that lasts no longer than two years and is for an amount not exceeding 100 percent of the project costs.

Q We are considering changing the name of our municipality. If we do so, how soon after it is approved will the new name take effect?

A A municipal name change takes effect immediately once it has been approved by the voters.

This column is for informational purposes only, and is not intended as legal advice.


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