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June 25, 2010

RE:  2.9% Statutory Property Tax Cap, Mandates Relief and the ‘Toolkit’ Reforms 

Dear Mayor:

As reported in our letter of June 17 (http://www.njslom.org/letters/ml061710-2-5-cap.html), our Executive Board voted to support the Administration’s proposed Constitutional caps, if amended, as the final piece, not the centerpiece, of vital property tax relief initiatives.

In that letter, we listed the conditions for our support. They include binding arbitration reform, health benefits reform, mandates relief, flexibility to deal with pension costs, utility costs, disaster and emergency response costs and other costs imposed by factors beyond the control of local leaders, and conformity of any new local caps to a new State spending cap.

As you know, Senate President Sweeney has introduced an alternate proposal. An Assembly companion bill has been introduced by Assemblyman and Mayor John McKeon. That proposal, S-29/A-3065, would lower the statutory cap from 4% to 2.9%, and would make other changes.

In addition to lowering the levy cap to 2.9%, S-29/A-3065 effects the following changes.

  • It permits cap banking.
  • It attempts to eliminate the debt reduction penalty. (A technical amendment is needed.)
  • It limits the basis upon which the Local Finance Board can grant one-year cap waivers to “any purpose … that the board deems essential to protect the public health, safety, or welfare.”
  • It eliminates the option to ask the voters to approve a levy in excess of the limit, by referendum.
  • It eliminates the 2012 sunset, extending the life of levy cap into the indefinite future.

Current exclusions in the present levy cap, listed below, would remain available, pursuant to S-29/A-3065. These are:

  • Increases in amounts required to be raised for (a) all debt service and (b) lease payments with county improvement authorities pursuant to leases in effect on the effective date of the original levy cap (April 3, 2007)
  • increases in amounts required to be raised to replace State formula aid due to a reduction in State formula aid from the previous local budget year;
  • increases in amounts for certain pension contributions (to bring accounts current due to the previous “pension holiday”;
  • any increase, greater than 2.9 (instead of four) percent, in the reserve for uncollected taxes that is required by law;
  • increases in health care costs equal to that portion of the actual increase in total health care costs for the budget year that is in excess of 2.9 (instead of four) percent of the total health care costs in the prior year, but is not in excess of the product of the total health care costs in the prior year and the average percentage increase of the State Health Benefits Program;
  • increases in amounts for certain normal and accrued liability pension contributions in excess of 2.9 (instead of four) percent of the normal and accrued liability pension contributions in the prior year.

In testimony on S-29/A-3065, we told legislators that our property taxpayers deserve to see action on meaningful reforms. And they need to see it now. There is a danger that the Governor’s constitutional cap question could be advanced to the voters, prior to Legislative action on the other vital reforms. Likewise, the new statutory proposal could be enacted, while all other meaningful reforms remain mired in the Legislature.

Accordingly, in our testimony on the new legislation, we advised the committees that it is imperative for other toolkit and mandates reform bills to be on the Governor’s desk, before the Legislature votes to advance the proposed caps.

We are committed to working with the Legislature and the Administration toward levy cap reform, so long as key considerations are satisfactorily addressed. These would include statutory reforms relating to binding arbitration, civil service, public employee pensions and benefits, disciplinary procedures, school and special district elections and mandates relief. These must be enacted BEFORE the voters are asked to approve the Constitutional Caps or the Legislature advances new statutory caps.

On Thursday, the Senate Budget and Appropriations Committee released S-29. On Friday, the Assembly Budget Committee released A-3065. These bills are scheduled for final consideration in both Houses on Monday, June 28.

The League’s position is that cost control reforms and mandates relief initiatives must be put in place,  BEFORE  any new spending limits are imposed on local budgets. If you agree with that, please contact your State Senator and your Assembly Representatives and urge them to delay action on S-29/A-3065, at this time.

If you have any questions, contact Jon Moran at 609-695-3481, ext. 121.

Very truly yours,

Hon. James Anzaldi                            William G. Dressel, Jr.
President, NJLM and                          Executive Director
Mayor, Clifton

 

 

 

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