March 20, 2012
Re: Affordable Housing/Municipal Trust Fund Dollars
This letter is intended to address the many questions and inquiries we have received regarding the status of the municipal affordable housing trust fund dollars. We are unable to answer all questions, as current circumstances are confusing and contradictory. This letter will provide background on the current state of affairs.
According to the Department of Community Affairs, approximately $174 million rests in local trust funds that must be committed by July 17,2012 or risk forfeiture to the State. This is a result of PL 2008. c46, signed by Governor Corzine in July 2008, which reads, in part:
“A municipality may not spend or commit to spend any affordable housing development fees, including Statewide non-residential fees collected and deposited into the municipal affordable housing trust fund, without first obtaining the council’s approval of the expenditure. The council shall promulgate regulations regarding the establishment, administration and enforcement of the expenditure of affordable housing development fees by municipalities. The council shall have exclusive jurisdiction regarding the enforcement of these regulations, provided that any municipality which is not in compliance with the regulations adopted by the council may be subject to forfeiture of any or all funds remaining within its municipal trust fund. Any funds so forfeited shall be deposited into the “New Jersey Affordable Housing Trust Fund….” (Emphasis added, please see NJSA 52:27D-329.2a)
Further, the Act also reads, in part:
“d. The council shall establish a time by which all development fees collected within a calendar year shall be expended; provided, however, that all fees shall be committed for expenditure within four years from the date of collection. A municipality that fails to commit to expend the balance required in the development fee trust fund by the time set forth in this section shall be required by the council to transfer the remaining unspent balance at the end of the four-year period to the "New Jersey Affordable Housing Trust Fund," established pursuant to section 20 of P.L.1985, c.222 (C.52:27D-320), as amended by P.L.2008, c.46 (C.52:27D-329.1 et al.), to be used in the housing region of the transferring municipality for the authorized purposes of that fund.” (Emphasis added, please see NJSA 52:27D-329.2d.)
Thus, the 2008 law established a four-year window for fees to be “committed for expenditure.” Given the importance of the “committed for expenditure” standard, the Council on Affordable Housing (COAH or “the council”) should have promulgated regulations to define this standard shortly after the legislation was enacted. Instead of defining the standard early on, we are approaching the four year mark identified in the Legislation and COAH still has not defined the standard. Indeed, COAH has not even proposed regulations to define the standard.
We would note that COAH promulgated its “third round” regulations in 2008, the essential parts of which were subsequently set aside by the Court. The assumption was that with a methodology in place, a four year window to commit the dollars was reasonable. However, at this time there is no methodology in place as the challenges to the 3rd round regulations await argument before the State Supreme Court. In addition, as noted above, COAH has not adopted or proposed any regulations on the matter. Thus, the current situation is that hundreds of municipalities are at risk of losing a significant portion of their trust fund dollars for failing to comply with regulations that have never been proposed, let alone adopted.
Further complicating this matter is the recent Appellate Division decision invalidating Governor Christie’s reorganization plan abolishing COAH. Just before the Appellate decision came down, the League met with DCA Acting Commissioner Constable and staff and was advised that regulations defining “commitment” were forthcoming from DCA. However, since the 2008 law specifically directs COAH to adopt regulations, and since COAH has been (at least temporarily) reinstated, it appears that COAH itself may need to meet and formally propose any such regulations. It is unclear from the decision whether the initial abolition of COAH also eliminated the then current members, requiring the Governor to now reappoint them. Moreover, even if reappointment is unnecessary, at the time the Governor issued the reorganization plan abolishing COAH and transferring its responsibilities to DCA, there were a number of vacancies on the COAH board, so we do not know if COAH can even establish a quorum to meet at this point. (For more on the Appellate Division decision, please see the March 8 Dear Mayor.)
While questions abound on the regulatory side, there is some hope for some legislative relief. Under S-1566 and A-2168, the “New Jersey Residential Transformation Act,” a municipality will be given the right of first refusal to purchase a foreclosed home using its trust fund dollars. Such a house is then deed-restricted as part of the municipality’s affordable housing inventory would result in a 2-for-1 credit towards the municipality’s affordable housing obligation. If the municipality declines to purchase the home, it can still qualify for the credits if it authorizes, by resolution, the state corporation to use the municipality’s trust fund dollars to purchase an eligible property, which is then converted to affordable housing. Under both circumstances, the use of the municipal trust fund dollars is done with the consent of the municipality. This was achieved by an amendment requested by the League and we thank the sponsors.
Under this legislation a "foreclosure-impacted municipality," defined as having 10 or more foreclosed homes listed on a multiple listing service for at least 60 days, can protect its affordable housing trust funds from being seized by the State for up to two years. Such a municipality can adopt a resolution committing the expenditure of its municipal affordable housing trust fund monies for the production of affordable housing, authorizing the transfer of at least $150,000 of its municipal affordable housing trust fund monies to the corporation established by the proposed bill to produce affordable housing. S-1566 awaits a vote by the full Senate, and A-2168 awaits a hearing before the Assembly Appropriations Committee. For more on S-1566 and A-2168, please see item II of March 6 Dear Mayor.
Also, A-2717, would extend for four years the requirement that a municipality commit to expend its trust fund dollars. This is a simple extension for municipalities and will safeguard these dollars to be used for their intended purposes of providing for affordable housing. This bill is assigned to the Assembly Housing and Local Government Committee.
The League supports these bills, and in the upcoming days, we will make available samples resolutions expressing support for these bills for your consideration. The League will advise of any new developments. In the meanwhile, questions can be directed to Mike Cerra at firstname.lastname@example.org or (609) 695-3481 x120.
Very truly yours,
William G. Dressel, Jr.
*If you would like to be removed from receiving faxed advisories please contact Shirley Cade at email@example.com or 609-695-3481 ext. 114 with the name of your municipality and fax number. Thank you.