ASSEMBLY, No. 3527

STATE OF NEW JERSEY

214th LEGISLATURE

 

INTRODUCED DECEMBER 6, 2010

 


 

Sponsored by:

Assemblyman  MATTHEW W. MILAM

District 1 (Cape May, Atlantic and Cumberland)

Assemblyman  NELSON T. ALBANO

District 1 (Cape May, Atlantic and Cumberland)

Assemblyman  CRAIG J. COUGHLIN

District 19 (Middlesex)

 

Co-Sponsored by:

Assemblyman O'Donnell

 

 

 

 

SYNOPSIS

     Permits chief financial officer to recommend reduced appropriation for reserve for uncollected taxes in certain circumstances.

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act concerning the calculation of the reserve for uncollected taxes and amending N.J.S.40A:4-41.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.    N.J.S.40A:4-41 is amended to read as follows:

     40A:4-41.  a.  For the purpose of determining the amount of the appropriation for "reserve for uncollected taxes" required to be included in each annual budget where less than 100% of current tax collections may be and are anticipated, anticipated cash receipts shall be as set forth in the budget of the current year, and in accordance with the limitations of statute for anticipated revenue from, surplus appropriated, miscellaneous revenues and receipts from delinquent taxes.

     b.    Receipts from the collection of taxes levied or to be levied in the municipality, or in the case of a county for general county purposes and payable in the fiscal year shall be anticipated in an amount which is not in excess of the percentage of taxes levied and payable during the next preceding fiscal year which was received in cash by the last day of the preceding fiscal year.

     c.     (1) For any municipality in which tax appeal judgments have been awarded to property owners from action of the county tax board pursuant to R.S.54:3-21 et seq., or the State tax court pursuant to R.S.54:48-1 et seq. in the preceding fiscal year, the governing body of the municipality may elect to determine the reserve for uncollected taxes by using the average of the percentages of taxes levied which were received in cash by the last day of each of the three preceding fiscal years.  Election of this choice shall be made by resolution, approved by a majority vote of the full membership of the governing body prior to the introduction of the annual budget pursuant to N.J.S.40A:4-5.

     (2)   If tax appeal judgments of the county tax board pursuant to R.S.54:3-21 et seq., or the State tax court pursuant to R.S.54:48-1 et seq., result in tax reductions for the previous fiscal year, the governing body of the municipality may elect to calculate the current year reserve for uncollected taxes by reducing the certified tax levy of the prior year by the amount of the tax levy adjustments resulting from those judgments.  Election of this choice shall be made by resolution, approved by a majority vote of the full membership of the governing body prior to the introduction of the annual budget pursuant to N.J.S.40A:4-5.

     d.    The director may promulgate rules and regulations to permit a three-year average to be used to determine the amount required for the reserve for uncollected taxes for municipalities to which subsection c. of this section is not applicable.

     e.     (1)  (a)  Notwithstanding any other provision of this section to the contrary, upon approval of the director, the chief financial officer of a municipality, in consultation with the tax collector, may recommend a lesser amount to be required for the reserve for uncollected taxes than the amount calculated by the formulas set forth in subsections c. or d. of this section, if the chief financial officer determines that a lesser amount will satisfy the obligations of the municipality.

     (b)   A chief financial officer who proposes to make a recommendation pursuant to subparagraph (a) of this subsection shall obtain the approval of the director prior to the introduction of the budget.  The chief financial officer shall file a 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.

     (2)   The governing body may use the amount deemed to be required for the reserve for uncollected taxes in paragraph (1) of this subsection in its annual budget provided that the director has approved the request.

(cf: P.L.2010, c.56, s.1)

 

     2.    This act shall take effect immediately.

 

 

STATEMENT

 

     This bill authorizes the chief financial officer of a municipality, in consultation with the tax collector, and with the approval of the Director of the Division of Local Government Services in the Department of Community Affairs, obtained prior to the introduction of the municipal budget, to recommend a lesser amount for the reserve for uncollected taxes than the amount calculated by the standard formulas, if the chief financial officer determines that a lesser amount will satisfy the obligations of the municipality.  The governing body may use the amount deemed by the chief financial officer to be required for the reserve for uncollected taxes in its annual budget, provided that the director has approved the chief financial officer's prior request of the recommended lesser amount.

     By requiring pre-approval of the alternate amount, the municipal governing body will be able to make informed budget decisions without the possibility of a director's veto over the amount appropriated for the reserve for uncollected taxes.  Essentially, the reserve for uncollected taxes represents an amount by which the property taxpayers are "over taxed" to compensate for the fact that the municipality will not collect 100% of its property tax levy.  The reserve for uncollected taxes is intended to ensure that the municipality has sufficient funds to pay its own operating expenses as well as the amounts billed on behalf of the county and other taxing districts such as the school district and fire district.  Since the municipality can only approximate what its tax collection rate will be during the budget year, it is important that the reserve for uncollected taxes be set at an amount that is sufficient to offset unpaid tax bills.