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December 11, 2008

S-7 (Pension Payment Deferral Option) Advances




Dear Mayor:

Today in Trenton, the Senate Budget and Appropriations Committee released S-7. Sponsored by Senate President Codey, the bill would implement Governor Corzine’s pension payment deferral option, which had been unveiled last month at our Conference. The Senate is expected to vote on the bill next Monday, December 15. No action on this is anticipated in the Assembly, until after the Holiday recess.

We have been involved in discussions with the Administration and with Senate Majority Staff on this. Throughout those discussions, we have insisted that municipalities reserve the right to opt out of any deferral, should they judge that to be in the best interests of their property taxpayers. Each municipality will need to be able to balance the need for immediate relief, in the current economic climate, with any potential long term costs. We maintain that such a decision can only be made by municipal officials, in light of local conditions.

In ordinary times, we might not comment favorably on this proposal. We would instead, as we have in the past, ask the Administration and the Legislature to provide inflation adjusted municipal property tax relief funding, in accordance with permanent statutes. In the normal course of affairs, that would be the best way to ensure property tax relief at the local level.

But these are not ordinary times. We have to start from where we are, not from where we were a year, or five or ten years, ago. And certainly not from where we would all like to be. And, when speaking of the state’s budget and of the state, national and global economy, we are not in a good place.

So, instead, we need to welcome any effort to provide potential relief to municipal budgets and to our property taxpayers, provided that the proposal represents a realistic option, and provided that it allows for local flexibility to most effectively protect the interests of local property taxpayers.

We have not yet had the opportunity to review the actual language of the bill. But we have seen some proposed provisions and have been kept informed of the general shape and intent of the legislation. Based on those discussions, we support S-7, in concept.

It appears that the bill will provide both expenditure and levy cap relief for pension liabilities (in the case of the levy cap, for those in excess of a 4 percent increase) through 2012. We thank the Administration and Senate President Codey for working with us on these provisions. Without this relief from the arbitrary and artificial limits that the caps impose on prudent and informed local decisions, the pension payment deferral option would not work for the benefit of our citizens. And without that relief, there would be no real option available to locally elected and locally responsive municipal leaders.

Given the current state of the economy and the current state of State finances, we need to recognize that this could be the surest form of property tax relief available to the citizens of many municipalities in 2009. We expect many will use the reduced billing to relieve pressures elsewhere in the budget that would otherwise drive bigger property tax increases and levy cap waiver requests.

We have reserved the right to amend our position, subsequent to a thorough review of the language in the bill. And we will keep you posted on this. If you have any questions, please contact Jon Moran at 609-695-3481, ext. 121.


                                                                        Very truly yours,


                                                                        William G. Dressel, Jr.
                                 Executive Director



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