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February 14, 2008

A-1880, Mandates Referendum on all Local Bonds



Dear Mayor:

The League opposes A-1880, which would require a public referendum prior to issuance of general obligation bonds by local units. While we welcome the public’s participation prior to, during and after the public hearing portion of the bond ordinance passage process, the additional requirement of a referendum is not in the public’s interest.

The Local Bond Law differs considerably from laws governing State debt issuance, in ways that protect the public and the public’s right to participate in the process.

First, the Law requires that a 5% down-payment appropriated from municipal funds must be part of any bond ordinance. In most instances, the annual budget will include, as part of the capital budget, an appropriation earmarked for the down-payment. So as early as the introduction of the budget, citizens are put on notice as to the governing body’s intent to issue a bond. That budget resolution is subject to publication and public hearing requirements, which allow for any citizen to raise objections.

Second, municipal debt is strictly limited to 3.5% of equalized valuation. The adoption of any bond ordinance that would place the net debt above that maximum must first be approved by the State’s Local Finance Board.

Third, the bond ordinance itself must be published and posted; copies of the ordinance must be available to the public during the week prior to the public hearing; there must be a public hearing; any amendments that substantially alter the ordinance impose new publication, posting and public hearing requirements; a super-majority (two-thirds of the full membership) of the governing body is required for passage of the ordinance; and in certain forms of government, the ordinance can be vetoed by an elected mayor.

Finally, after passage and republication of the bond ordinance, citizens can initiate a referendum on the act or challenge the ordinance in court, on substantive or procedural grounds.

By delaying bond issuance until after a general election, this requirement could prevent a local unit from taking advantage of favorable markets to maximize the public benefit of future bonding. It would, in other words, add costs that would have to be borne by the property taxpayers of the local unit. Further, the addition of this new mandate could negatively affect bond ratings, which would again increase the burden on property taxpayers.  

Accordingly, while we sympathize with the sponsors’ interest in promoting public participation in the process, we believe that current law provides ample opportunity to the electorate. And we believe that the inevitable delay in the process, mandated by this bill, would increase public costs.

Municipalities are often counseled to conduct their affairs in a more business-like manner. It is hard to imagine how effective and efficient any business could be, if forced to operate under the mandates that already constrain municipal operations in New Jersey. Bills like this will only make matters worse.

The bill has been referred to the Assembly Housing and Local Government Committee. Please contact your own State legislators and urge them to oppose A-1880.

For more information, contact Jon Moran at 609-695-3481, ext. 121.


                                                                        Very truly yours,


                                                                        William G. Dressel, Jr.
                                                                        Executive Director





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