VAN DREW BILL TO HELP TOWNS WILL CAP PASSES SENATE

Legislation sponsored by Senator Jeff Van Drew to help municipalities live within the new 2 percent property-tax cap by allowing for more practical budgeting practices today was approved by the full Senate.

The bill (S-2232) would allow municipalities to create a reserve for uncollected property taxes at an amount less than required by standard formulas, which base the required amount on the previous year’s uncollected taxes. With the recommendation of the chief municipal finance officer – and approval from the state – municipalities would be permitted to set aside a reserve based on real-time estimates of the amount that will go uncollected, taking into account unique circumstances occurring within their towns or cities.

“Local officials know best the special circumstances existing in their municipalities that may affect property tax collections,” said Senator Van Drew. “By giving these municipal officials, in consultation with their professionals, the power to revise expected collections, we will prevent municipalities from having to pour precious public resources into their reserves merely to meet a state-imposed quota.”

The uncollected tax reserve was exempt from the 4 percent property tax cap approved in 2007, but is included in the new 2 percent levy cap. This means that money raised for the reserve – even if it is not needed – will place further pressure on municipal budgets, likely resulting in service reductions and layoffs in already cash-strapped towns and cities.

“This bill would give local officials flexibility to budget based on the real-life circumstances in their municipalities, instead of forcing them to make service and work force reductions to fill a reserve with funds that ultimately won’t be needed for that purpose,” said Van Drew.

Under the bill, the chief financial officer of a municipality, in consultation with the tax collector, would have to recommend the lesser amount to be budgeted for the reserve, and also make a determination that it would satisfy the obligations of the municipality.

A chief financial officer who proposes to recommend a lower reserve for uncollected taxes would be required to obtain the approval of the Director of Local Government Services in the Department of Community Affairs prior to the introduction of the municipal budget.  Specifically, the bill would require the chief financial officer to file the request for approval at least two weeks prior to the introduction of the budget unless, for good cause shown, the Director grants leave for a later filing of the request.  If the Director approves the lower reserve amount, the governing body could use that amount in its annual budget.

The Senate approved the measure by a vote of 34-2.

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