Bill Text: NJ S1673 | 2010-2011 | Regular Session | Introduced
Bill Title: Revises requirements for distribution of State aid under "Special Municipal Aid Act."
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2010-03-11 - Introduced in the Senate, Referred to Senate Community and Urban Affairs Committee [S1673 Detail]
Download: New_Jersey-2010-S1673-Introduced.html
Sponsored by:
Senator PHILIP E. HAINES
District 8 (Burlington)
SYNOPSIS
Revises requirements for distribution of State aid under "Special Municipal Aid Act."
CURRENT VERSION OF TEXT
As introduced.
An Act concerning State aid to municipalities under the "Special Municipal Aid Act" and amending and supplementing P.L.1987, c.75 and amending P.L.1999, c.156.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 2 of P.L.1987, c.75 (C.52:27D-118.25) is amended to read as follows:
2. The Legislature finds that certain large and small municipalities in this State experience fiscal distress as a result of insufficient collection of tax revenues, insufficient collection of other revenues, over-anticipation of revenues of prior years, or from other causes; that these municipalities function within stringent budgetary constraints, straining their revenue sources to provide basic public services for their residents; that these municipalities may benefit from the expertise of the State in recommending fiscal recovery measures designed to alleviate the fiscal distress they are currently experiencing; and that limited, short-term State assistance, in the form of State grants and loans, the use of which must be subjected to regular and intensive review and oversight by the State, may provide the temporary revenue bridge these few municipalities need in order to overcome their current difficulties and regain their financial stability.
The Legislature, therefore, declares that it is fitting and proper, and within the public interest, to provide loans and grants to certain municipalities experiencing budgetary difficulties in generating adequate local revenues in order to assist those municipalities not only in meeting their immediate budgetary needs, but also to enable them to regain their financial stability.
(cf: P.L.1999, c.156, s.1)
2. Section 3 of P.L.1987, c.75 (C.52:27D-118.26) is amended to read as follows:
3. As used in this act:
"Board" means the Local Finance Board of the Division of Local Government Services in the Department of Community Affairs.
"Director" means the Director of the Division of Local Government Services in the Department of Community Affairs.
"Eligible municipality" means [a] any municipality [that is qualified to receive assistance under P.L.1978, c.14 (C.52:27D-178 et seq.), a municipality under the supervision of the Local Finance Board pursuant to the provisions of the "Local Government Supervision Act (1947)," P.L.1947, c.151 (C.52:27BB-1 et seq.), a municipality that has issued qualified bonds pursuant to the provisions of the "Municipal Qualified Bond Act," P.L.1976, c.38 (C.40A:3-1 et seq.), or a municipality] identified by the director, after application and review, to be facing serious fiscal distress, provided however that no municipality shall qualify as an eligible municipality for more than five continuous years.
(cf: P.L.1999, c.156, s.2)
3. Section 4 of P.L.1987, c.75 (C.52:27D-118.27) is amended to read as follows:
4. a. The moneys appropriated in section 9 of this act may be used to provide short-term financial assistance to eligible municipalities to enable them to meet their immediate budgetary needs and regain their financial stability, affording them an opportunity to develop, revive and expand their economic bases. The financial assistance provided shall include, but not be limited to, loans, loan guarantees, and grants, but shall not, in the local budget year for which aid is first granted following the effective date of P.L. , c. (pending before the Legislature as this bill), exceed 20% of the eligible municipality's final appropriations for the previous year as calculated pursuant to section 2 of P.L.1976, c.68 (C.40A:4-45.2). Grant aid distributed to an eligible municipality shall not exceed 80% of the grant aid first distributed in the subsequent year, 60% of the grant aid first distributed in the third year, 40% of the grant aid first distributed in the fourth year, and 20% of the grant aid first distributed in the fifth year. The form, amount and terms of the financial assistance, including whether or not any loan shall be repaid with interest and if so, the rate of interest, shall be determined by the Local Finance Board. All loans, along with the interest thereon, if any, shall be repaid by the recipient municipality to the State on the date or dates specified by the Local Finance Board. Any funds received by an eligible municipality pursuant to the provisions of P.L.1987, c.75 (C.52:27D-118.24 et seq.) which are not used by that eligible municipality to meet immediate budgetary needs and regain financial stability shall be repaid by the municipality to the State not later than June 30 of the next succeeding State fiscal year.
b. Each eligible municipality receiving financial assistance pursuant to P.L.1987, c.75 (C.52:27D-118.24 et seq.) shall develop a plan for the financial recovery of the eligible municipality as required in this subsection. The director shall require that each municipality develop and file with the Local Finance Board a financial plan to rectify the municipality's financial distress. The contents of the financial plan shall be determined by the director; however, the financial plan shall contain at least the following information: a statement by the chief financial officer of the municipality detailing the reasons for the municipality's need for State aid under P.L.1987, c.75 (C.52:27D-118.24 et seq.); the reasons for the municipality's financial instability and inability to meet its budgetary needs; a description of the uses to which the municipality will put the State aid it will receive under P.L.1987, c.75 (C.52:27D-118.24 et seq.); a description of actual actions taken and anticipated to be taken by the municipality to economize under the municipality's current and future budgets through cuts in appropriations, the elimination of programs and expenditures, and the sharing of services with other local units; and a description of how the municipality will address its financial instability such that State aid under P.L.1987, c.75 (C.52:27D-118.24 et seq.) will no longer be required. This financial plan shall be discussed at the time of the meeting to review the implementation of the provisions of P.L.1987, c.75 (C.52:27D-118.24 et seq.) as required pursuant to section 5 of P.L.1987, c.75 (C.52:27D-118.28).
(cf: P.L.1987, c.75, s.4)
4. Section 5 of P.L.1987, c.75 (C.52:27D-118.28) is amended to read as follows:
5. The director shall establish a standard application form for municipalities to utilize to apply for "Special Municipal Aid." The director shall annually supply to each municipality a copy of the application form together with a copy of any rules and regulations adopted pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) that establish the criteria for receipt of "Special Municipal Aid."
The application form shall require the following information from each municipality applying for financial assistance:
(1) the amount of financial assistance being sought by the applicant;
(2) the amount of the budget shortfall caused by the municipality's revenue needs for the current local budget year and the limitations on its revenue-raising capacity during the current local budget year;
(3) a detailed explanation of its revenue needs for the current year;
(4) a detailed explanation of the limitations on its revenue raising capacity in the current local budget year;
(5) information about its property tax collection rate;
(6) information on the staffing levels on all municipal departments, agencies, and authorities;
(7) information about its economic development or redevelopment plans, and the time frame in which those plans will lead to fiscal recovery of the municipality;
(8) information concerning every service contract of which the municipality is a party and any lawsuit or legal action, settled or otherwise concluded, for which the municipality is obligated to pay money;
(9) information about why assistance under the "Special Municipal Aid Act" will be integral to the municipality's economic recovery plans;
(10) information about the time frame within which the municipality expects to be financially solvent, or to complete its financial recovery; and
(11) any other information deemed necessary by the director and the board.
Whenever the director, during the exercise of the director's duty under the provisions of the "Local Budget Law," N.J.S.40A:4-1 et seq., to examine each local budget, or upon the basis of any other information and data available to the director, shall find that [an eligible] a municipality is experiencing fiscal distress and may require assistance under P.L.1987, c.75 (C.52:27D-118.24 et seq.), the director shall notify the municipality to submit an application for "Special Municipal Aid" pursuant to this section, and shall notify the Local Finance Board of the director's finding. The director's finding of fiscal distress in an eligible municipality may be based on the municipality's tax rate, cash deficit, insufficient percentage of tax collections, insufficient collection of other revenues, over-anticipation of the revenues of prior years, non-liquidation of interfund transfers, reliance on emergency authorizations, continual rollover of tax anticipation notes, or other factors indicating a constrained ability to raise sufficient revenues to meet its budgetary requirements.
At a time and place determined by the director, the governing body of the eligible municipality, and any other interested parties the director may deem appropriate, shall meet to review the implementation of the provisions of P.L.1987, c.75 (C.52:27D-118.24 et seq.). The review shall include, but not be limited to:
a. The director's assessment of the difference between the eligible municipality's revenue needs for the current local budget year and its revenue raising capacity for the current local budget year;
b. The actions the governing body of the eligible municipality intends to take in the current local budget year to meet the municipality's revenue needs; and
c. The actions the governing body intends to take to expand the eligible municipality's local revenue generating capacity for subsequent local budget years.
After the review has taken place, the director shall notify the board of the findings of the review and shall recommend to the board actions necessary to be taken by the municipality, which may include the provision of short-term financial aid.
(cf: P.L.1999, c.156, s.3)
5. Section 6 of P.L.1987, c.75 (C.52:27D-118.29) is amended to read as follows:
6. a. The board shall determine the total amounts of grants and loans, or any combination thereof, to be provided to each eligible municipality, within the limits contained in section 4 of P.L.1987, c.75 (C.52:27D-118.27), and the director shall certify that amount to the State Treasurer and the governing body of the eligible municipality. In the case of loans to an eligible municipality, the board shall set forth the terms of the loan agreement, including whether or not any interest shall be paid and, if so, the rate of that interest. The term of a loan authorized under the provisions of P.L.1987, c.75 (C.52:27D-118.24 et seq.) shall not exceed 10 years.
As a condition of receiving assistance under the provisions of P.L.1987, c.75 (C.52:27D-118.24 et seq.), an eligible municipality, or any agency, authority, or instrumentality thereof, shall implement any government, administrative and operational efficiency, and oversight measures necessary for the fiscal recovery of the municipality as recommended by the director and approved by the board, and be subject to management and an annual fiscal audit by the State Auditor or an audit firm approved by the director.
The director shall deny any request for "Special Municipal Aid" if the revenue loss or extraordinary expense, for which the aid is intended to compensate, is a direct result of the actions of the applicant.
The determination of the board pursuant to P.L.1987, c.75 as to the amount of financial assistance to be paid to an eligible municipality shall be final and conclusive, and there shall be no appeal therefrom nor any review thereof.
b. The director may withhold from an eligible municipality any State aid payments that are disbursed by the Division of Local Government Services if the director finds the municipality has failed to implement fiscal recovery measures approved by the board. Upon withholding an aid payment, the director shall report to the board and to the Senate Community and Urban Affairs Committee and the Assembly Housing and Local Government Committee, or their successors, the circumstances surrounding the reasons for withholding aid. The board shall then hold a hearing to give the eligible municipality an opportunity to explain why such aid payments should not continue to be withheld, and what action the eligible municipality plans to take to implement the fiscal recovery measures. Upon completion of the hearing, the board shall determine if State aid payments should continue to be made to the municipality, establish a schedule for such payments when appropriate, and determine what other actions should be taken.
c. If an eligible municipality receives [increased amounts of] aid under P.L.1987, c.75 (C.52:27D-118.24 et seq.) [after January 1, 1999] and continues to receive such aid for two continuous fiscal years, at the end of each second year, or at such other time the board deems appropriate, the board shall hold a hearing for the eligible municipality to demonstrate why the board should not create a financial review board to oversee the fiscal condition of the eligible municipality. If the board finds that the eligible municipality has successfully implemented fiscal recovery measures or has otherwise acted to improve sufficiently its fiscal condition, the board shall permit the eligible municipality to continue to receive aid without the creation of a financial review board and be subject to such other fiscal recovery conditions the board may place on it; otherwise, the board shall order, by resolution, the creation of a financial review board to operate in accordance with the provisions of subsections b. through d. of section 5 of P.L.1999, c.156 (C.52:27D-118.30a). The board shall forward a copy of its resolution creating a financial review board, within seven calendar days, to the Senate Community and Urban Affairs Committee and the Assembly Housing and Local Government Committee, or their successors.
(cf: P.L.1999, c.156, s.4)
6. Section 7 of P.L.1987, c.75 (C.52:27D-118.30) is amended to read as follows:
7. Whenever the board shall determine to provide financial assistance to an eligible municipality pursuant to the provisions of this act, the board shall [forthwith] notify the Governor, the President of the Senate, the Speaker of the General Assembly and the State Treasurer not later than the seventh calendar day next following that determination. The notice shall set forth:
a. The municipality's eligibility for a payment of financial assistance under the provisions of this act;
b. The board's determination of the amounts of financial assistance to be paid to that eligible municipality;
c. The form, amount and terms of the financial assistance, including whether or not any loan shall be repaid with interest and, if so, the rate of that interest, and the factors considered by the board in making those determinations;
d. The actions the governing body of the eligible municipality intends to take in the current local budget year to meet the municipality's revenue needs;
e. The actions the governing body intends to take to expand the eligible municipality's local revenue generating capacity for subsequent local budget years; and
f. Any other information or data the board deems appropriate and necessary.
Within 30 days of the receipt of each notice by the President of the Senate and the Speaker of the General Assembly, a hearing shall be held by the Senate Community and Urban Affairs Committee and the Assembly Housing and Local Government Committee, or their successors, to provide an opportunity for the Commissioner of Community Affairs and the Director of the Division of Local Government Services to inform the committee of the circumstances of each award of aid under the "Special Municipal Aid Act," P.L.1987, c.75 (C.52:27D-118.24 et seq.), and the progress toward the relief of fiscal distress made by each municipality receiving aid for more than one year.
The notices provided pursuant to this section shall form the basis for an annual written report by the board to the Governor, the Legislature, and the State's taxpayers, which report shall be available to the public through the board's official webpage.
(cf: P.L.1987, c.75, s.7)
7. Section 5 of P.L.1999, c.156 (C.52:27D-118.30a) is amended to read as follows:
5. a. Upon a finding by the director that an eligible municipality possesses conditions that create extreme difficulty in adopting a budget in compliance with the "Local Budget Law," N.J.S.40A:4-1 et seq., in issuing indebtedness as permitted by law, or in funding capital improvements essential to the protection of the public health, safety, and welfare, the board may create, by resolution, a financial review board for that municipality.
b. A financial review board shall be authorized to approve, implement and enforce a financial plan for any municipality, or any agency, authority, or instrumentality thereof, in which it has been created. A financial review board so created shall consist of five members, one of whom shall be the mayor of the municipality or the mayor's designee; one of whom shall be appointed by the Governor and shall be a resident of the municipality who is not an elected official or employee of the municipality; one of whom shall be the Commissioner of the Department of Community Affairs or the commissioner's designee; one of whom shall be the State Treasurer or the Treasurer's designee; and one of whom shall be appointed by the Governor and shall be an officer of the Executive Branch of State government. The financial review board shall exercise its powers and duties under rules and regulations adopted by the board. A municipality, or any agency, authority, or instrumentality thereof, subject to a financial review board shall establish a financial plan, subject to the financial review board's approval, to address the budgetary, operational, capital and economic development needs of the municipality, or any agency, authority, or instrumentality thereof. The financial review board shall also have the power to approve: the annual budget of the municipality, the issuance of debt, all contracts entered into during the time of supervision of the financial review board, and municipal expenditures, if so directed by the board, to the extent that the financial review board shall specify. The financial review board may delegate to the municipality such of its powers, under such circumstances and subject to such conditions, as it may determine. A financial review board shall operate until such time that the board finds that the conditions that led to the creation of the financial review board have been substantially abated.
c. At the end of each year of its operation the financial review board shall report to the board on its activities. The report shall include: a review of the financial review board's activities generally; the status of the municipality's finances; recommendations concerning the municipality's fiscal condition; the criteria for municipal performance which will lead the financial review board to recommend to the board that the financial review board be dissolved; a review of the municipality's economic development needs, and policy recommendations that would achieve those goals; comment on the municipality's compliance with the financial review board's directives; and any other information the financial review board deems necessary. After review, a copy of the financial review board's report and any comments of the board shall be forwarded to Governor, the Senate President, the Senate Minority Leader, the Speaker of the General Assembly, and the Assembly Minority Leader.
d. The board shall review the status of each municipality in which a financial review board has been created at least each two years, at which time the municipality shall be given the opportunity to demonstrate why the financial review board should be ended or its role modified. The board shall determine whether the municipality shall continue to be subject to the oversight of the financial review board and if the conditions that led to the creation of the financial review board have been substantially abated, and shall take such other actions as the board deems appropriate in light of the municipality's financial condition.
(cf: P.L.1999, c.156, s.5)
8. (New section) Notwithstanding any other provision of P.L. , c. (C. ) (pending before the Legislature as this bill), or any other law to the contrary, a municipality subject to the provisions of the "Municipal Rehabilitation and Economic Recovery Act," P.L.2002, c.43 (C.52:27BBB-1, et al.), shall be eligible for financial assistance under the "Special Municipal Aid Act," P.L.1987, c.75 (C.52:27D-118.24 et seq.) and shall not be subject to any requirements or limitations set forth in P.L. , c. (C. ) (pending before the Legislature as this bill).
9. This act shall take effect immediately.
STATEMENT
This bill makes substantial and significant revisions to the "Special Municipal Aid Act," P.L.1987, c.75 (C52:27D-118.24 et seq.) to strengthen the State's oversight of the program and to provide greater fiscal control over the program and the recipient municipalities.
The bill ensures that no municipality, other than a municipality operating under the "Municipal Rehabilitation and Economic Recovery Act," P.L.2002, c.43 (C.52:27BBB-1), shall be disqualified from consideration for Special Municipal Aid, and limits a municipality's participation in the program to five continuous years. The bill also limits the maximum amount of allowable aid per qualified municipality to 20% of the municipality's final appropriations for the previous budget year. The bill also phases out an eligible municipality's grant aid by requiring that grant aid distributed to an eligible municipality in the subsequent year shall not exceed 80% of the grant aid first distributed, 60% of the grant aid first distributed in the third year, 40% of the grant aid first distributed in the fourth year, and 20% of the grant aid first distributed in the fifth year. The bill requires that any funds received by a municipality which are not used by that municipality to meet immediate budgetary needs and regain financial stability shall be repaid by the municipality to the State not later than June 30 of the next succeeding State fiscal year.
The bill also requires that each eligible municipality receiving financial assistance under the Special Municipal Aid Act must develop, and file with the Local Finance Board, a plan for its financial recovery. The contents of the financial plan shall be determined by the Director of the Division of Local Government Services in the Department of Community Affairs, but it must contain at least the following information: a statement by the chief financial officer of the municipality detailing the reasons for the municipality's need for Special Municipal Aid; the reasons for the municipality's financial instability and inability to meet its budgetary needs; a description of the uses to which the municipality will put the State aid it will receive; a description of actual actions taken and to be taken by the municipality to economize under the municipality's current and future budgets through cuts in appropriations, the elimination of programs and expenditures, and the sharing of services with other local units; and a description of how the municipality will address its financial instability such that State aid will no longer be required. The bill prohibits the director from awarding aid to a municipality if the loss of revenue or extraordinary expense that is the cause of the municipality's request for aid is the result of actions taken by the municipality.
The bill also requires the Director of the Division of Local Government Services to establish a standard application form for municipalities to utilize to apply for "Special Municipal Aid" and to annually distribute to every New Jersey municipality a copy of the form together with a copy of the rules and regulations that establish the criteria for receipt of "Special Municipal Aid."
The application form would require the following information from each municipality applying for financial assistance:
· the amount of financial assistance being sought by the applicant;
· the amount of the budget shortfall caused by the municipality's revenue needs for the current local budget year and the limitations on its revenue-raising capacity during the current local budget year;
· a detailed explanation of its revenue needs for the current year;
· a detailed explanation of the limitations on its revenue raising capacity in the current local budget year;
· information about its property tax collection rate;
· information on the staffing levels of all municipal departments, agencies, and authorities;
· information concerning every service contract and legal actions or lawsuits concluded for which the municipality is obligated to expend funds;
· information about its economic development or redevelopment plans, and the time frame in which those plans will lead to fiscal recovery of the municipality;
· information about why assistance under the "Special Municipal Aid Act" will be integral to the municipality's economic recovery plans;
· information about the time frame within which the municipality expects to be financially solvent, or to complete its financial recovery; and
· any other information deemed necessary by the director and the board.
The bill also requires the performance of an annual fiscal audit by the State Auditor or an audit firm approved by the Director of the Division of Local Government Services of each municipality receiving Special Municipal Aid.
The bill requires the Local Finance Board to notify the Senate Community and Urban Affairs Committee and the Assembly Housing and Local Government Committee, or their successors, when a resolution creating a financial review board in a municipality is adopted.
The bill also requires that within 30 days of the receipt of a notice that the Local Finance Board has determined to provide financial assistance to an eligible municipality by the President of the Senate and the Speaker of the General Assembly, a hearing must be held by the Senate Community and Urban Affairs Committee and the Assembly Housing and Local Government Committee, or their successors, to provide an opportunity for the Commissioner of Community Affairs and the Director of the Division of Local Government Services to inform the committee of the circumstances of each award of Special Municipal Aid, and the progress toward the relief of fiscal distress made by each municipality receiving aid for more than one year. The bill also requires the Local Finance Board to make an annual written report to the Governor, the Legislature, and the State's taxpayers, of the information contained in those notices, to be available to the public through the board's official webpage.
Finally, the bill requires that any agency, authority, or any other instrumentality of the municipality be subject to fiscal limitation. Current law imposes fiscal limits on the municipality receiving aid, but not an independent instrumentality of the municipality.
The bill exempts municipalities subject to the Municipal Rehabilitation and Economic Recovery Act from the procedural requirements of the bill, as those municipalities are currently subject to robust financial supervision by the State.
