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November 4, 2011

Re:      Local Finance Notice Issued
Pre-Halloween Snow Storm Declared Emergency
CY 2012 Municipal and County Budget and Cap Information

Dear Mayor:

The Division of Local Government Services has issued Local Finance Notice 2011-33 which address issues related to the Pre-Halloween Snow Storm Emergency and CY 2012 Municipal and County Budget and Cap Information.

Pre-Halloween Snow Storm Declared Emergency

On October 29, 2011 Governor Christie declared a state of emergency for the entire state to respond to the Nor’easter snowstorm (Executive Order 80).  Emergency expenses associated with this storm are exempt from both the 1977 cap and the 2% property tax levy cap.  Emergency appropriations that are passed will be exempt from both caps when included in next year’s budget.

Emergency expenses are those related to the response, recovery, and restoration of services due to the storm that were not anticipated in the current year’s budget.  Only the portion of the costs that exceed the cost of providing services under non-emergency conditions may be granted as exclusions.  N.J.S.A. 40A:4-49 requires that Emergency resolutions that exceed the 3% expenditure limit be approved by the Director of the Division of Local Government Services.  For this emergency, the Director is granting blanket approval – formal approval of the resolution is not required in order to authorize spending. 

CY 2012 Municipal and County Budget and Cap Information

The 1977 budget cap law requires the Director of Division of Local Government Services to promulgate the Cost of Living Adjustment (COLA).  The COLA for CY 2012 budgets is calculated at 3.5%.  Because the COLA is more than the statutory maximum of 2.5%, the appropriations cap (1977 cap law) rate for CY 2012 is 2.5%.  The governing body may pass a COLA ordinance, increasing the appropriation cap base to 3.5%. 

If a governing body wants to increase its allowable percentage increase in its budget to 3.5%, the following steps must be taken:

  1. After January 1st, and prior to introduction and approval of the budget, an ordinance  must be introduced that details the following:
    1. The new rate (increase percent) to be adopted; and,
    2. The additional amount of appropriations to be added by the increase.
  2. The ordinance must be approved by a majority of the full membership of the governing body, published, and a public hearing held at least 10 days after the publication date.  A certified copy of the introduced action must be filed with the Director of the Division of Local Government Services within 5 days of its introduction.
  3. The governing body may take a final vote on the action any time after the public hearing and prior to adoption of the budget.  Depending on the form of government, the chief executive may veto the action in accordance with local procedures.
  4. The ordinance takes effect immediately upon passage, and a certified copy of the adopted action must be filed with the Director within 5 days.
  5. Cap increase referendums are not permitted if this option is chosen.

In addition the 1977 cap law includes a cap exception for Group Health Insurance.  The 1977 cap exception for Group Health Insurance for CY 2012 will be the increase over 4% up to 10.3%.  The 2010 levy cap exception will be the increase over 2% up to 10.3%.

As was the case in 2011, pension appropriation increases are no longer a 1977 cap law exception.  The 2010 levy cap exception for pension will be for any increases over 2%.

Finally, all emergency efforts related to Hurricane Irene are excluded from the 1977 cap and the 2010 levy cap upon submission and review of certifications by the local unit.

The Division will issue the Levy Cap Workbook at a later date.

If you have any questions or need additional information please contact Lori Buckelew at lbuckelew@njslom.com or 609-695-3481 x112.

Very truly yours,

 

William G. Dressel, Jr.
Executive Director

 

 

 

 

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