Sponsored by:

Assemblyman  JOHN DIMAIO

District 23 (Hunterdon, Somerset and Warren)






     Removes municipal and county ability to divert up to five percent of funds from certain water and sewer authorities for other purposes.



     Introduced Pending Technical Review by Legislative Counsel.


An Act concerning undesignated fund balances and unreserved retained earnings of certain local authorities, and amending P.L.2004, c.87.


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


     1.    Section 1 of P.L.2004, c.87 (C.40A:5A-12.1) is amended to read as follows:

     1.    To the extent there is available an undesignated fund balance or unreserved retained earnings held by an authority that is subject to the provisions of the “Local Authorities Fiscal Control Law,” P.L.1983, c.313 (C.40A:5A-1 et seq.), excluding a fire district, a regional authority, an authority established pursuant to the “sewerage authorities law,” P.L.1946, c.138 (C.40:14A-1 et seq.) or the “municipal and county utilities authorities law,” P.L.1957, c. 183 (C.40:14B-1 et seq.), or a housing authority, an amount in that undesignated fund balance or unreserved retained earnings, not to exceed 5% of the annual costs of operation of the authority, may be appropriated for use in the local budget of the municipality or county that created the authority unless otherwise restricted by bond covenants. 

(cf: P.L.2004, c.87, s.1)


     2.    This act shall take effect on January 1 next following the date of enactment.





     This bill would amend the “Local Authorities Fiscal Control Law” to remove the ability of municipalities and counties to divert up to five percent of funds from certain sewerage authorities and municipal and county utilities authorities for other purposes. 

     The vast majority of New Jersey’s drinking water and wastewater systems are municipal utilities and utilities authorities governed by elected and appointed officials.  These publicly-owned systems determine their own rates and service, are closer to their individual communities, and are free of the requirement to ensure a profit margin for their shareholders.  Despite these benefits, many of these systems are small and lack the revenues to make necessary investments, while additionally facing public pressure to keep rates low.

     A major obstacle to more robust funding of water and sewer infrastructure is a provision in the Local Authorities Fiscal Control

Law that allows municipalities and counties to divert up to five percent of water and sewer funds for other purposes.  According to the Association of Environmental Authorities, in one set of 100 New Jersey municipal and authority budgets, approximately $80 million had been transferred in a three-year period.  That translates into $80 million that was not invested in improving infrastructure, and acts as a type of tax on ratepayers to subsidize local budgets.