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December 18, 2008

Re:      S-7 Pension Deferral

Dear Mayor:

Based on our research and on recent Press reports, the proposed optional 50% deferral of pension payments is the only form of incremental municipal ‘property tax relief’ that the Administration intends to make available in 2009. Formula aid (Energy Tax and CMPTRA) will be at or below last year’s funding levels. Discretionary aid will almost certainly be cut.

Further, though the Local Finance Board has yet to rule on my November request for pension payment cap relief, we have been told that the request will be rejected. We have also been advised that, while individual municipalities can apply for individual waivers, the only generally available form of cap relief will be through passage of S-7. At our request, the bill includes both expenditure and levy cap relief.

Even with those cap relief provisions, this bill, as currently drafted, is far from perfect. The Division of Pensions estimates that the interest rate on deferred payments will need to be 8.25%. But, that rate cannot be guaranteed. If the market improves, the rate could be lower. But if the market worsens, the rate could be higher. And, because of the deferral, even those municipalities that opt to appropriate full payments will face higher future payments, because of the systems’ overall liabilities.

But beyond these shortcomings, it now appears that concessions will need to be made to public employee unions, in order to win legislative support sufficient for passage of the initiative. Such concessions could mean amendments injurious to your ability to manage your municipality in an efficient and economical manner.

With all that in mind, we urge you to contact your legislators. Please impress on them:

  1. the need for some form of incremental municipal property tax relief, to allow you to adopt a budget that meets the needs of your citizens during a year of economic distress;
  2. the need for cap relief related to pension payments, to allow you to address your citizens’ needs for effective municipal programs and services, beyond public employee pensions;
  3. the need to reject any proposals that would be injurious to your ability to manage your municipality in the most efficient and economical manner possible.


Also, please contact DCA Commissioner Joseph Doria at:

The Hon. Joseph V. Doria, Jr., Commissioner
Department of Community Affairs
101 S. Broad Street, PO Box 800
Trenton, NJ   08628

Urge the Commissioner to expedite definitive Local Finance Board action on our request for cap relief.

Confronting such a devastating economic crisis, in 2009 the State will seriously need to consider local problems and to work with local policy makers. The last thing New Jersey needs is any more lay-offs. A rising unemployment rate will have negative consequences for all of us. The next to last thing we need is excessive property tax increases. But if lay-offs and/or tax increases are necessary, we need to work together to minimize their impact on the people we are sworn to serve.

This crisis, too, shall pass. And I am certain it will pass faster if we all work together and speak with one voice.

Very truly yours,


                                                                        William G. Dressel, Jr.

                                                                        Executive Director




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