March 8, 2011
Re: Calculation of the Reserve for Uncollected Taxes
As we noted in our March 3 Dear Mayor Letter, when the new 2% cap was signed into law, the exemption for the Reserved for Uncollected Taxes was eliminated. We have been working with the Legislature to exclude any increase in the Reserved for Uncollected Taxes in excess of 2% from the cap calculation.
While we are waiting for legislative relief, you do have several options to adjust your reserve for uncollected taxes.
First, N.J.S.A. 40A:4-40.2 permits a municipality to do an accelerated tax sale in the last month of their fiscal year. This allows the municipality to reduce the reserve for uncollected taxes by the amount of the proceeds to be collected. The governing body must adopt a resolution to use this option.
Secondly, in cases where a municipality had a drop in tax collection rate for one year, N.J.S.A. 40A:4-41c(1) permits a municipality to use a three year average to calculate the reserve for uncollected taxes. The governing body must adopt a resolution by a majority vote of the full membership prior to the introduction of the budget to use this option.
Finally, N.J.S.A. 40A:4-41c(2) permits a municipality can calculate the reserve for uncollected taxes by reducing the tax levy by the prior year amount of adjudicated tax appeals. The governing body must adopt a resolution by a majority vote of the full membership prior to the introduction of the budget to use this option
We continue to work on legislative relief for both the Reserve for Uncollected Taxes and tax appeal issue. Today League President Chuck Chiarello, Mayor of Buena Vista, raised both issues in his testimony before the Assembly Budget Committee.
If you have any questions or need additional information please contact Lori Buckelew at email@example.com or 609-695-3481 x 112.
Very truly yours,
William G. Dressel, Jr.