SENATE, No. 2232
STATE OF NEW JERSEY
INTRODUCED NOVEMBER 17, 1997
By Senator BRYANT
An Act concerning the review and rehabilitation of municipal finances and supplementing chapter 27BB of Title 52 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. This act shall be known and may be referred to as the "Municipal Fiscal Oversight and Rehabilitation Act."
2. The Legislature finds and declares:
Pursuant to the Constitution of the State of New Jersey, municipalities are the creation of the Legislature, and so it is the obligation of the Legislature to assure the fiscal integrity of municipalities in order to protect the general welfare of property taxpayers and other residents.
Although current statutory law contains provisions for the assumption of the fiscal responsibility for a municipality with severe financial difficulties by the Local Finance Board, no mechanism is available to provide fiscal oversight for municipalities with endemic fiscal problems that cannot be quickly or easily cured or for municipalities with serious fraudulent or mismanagement practices identified by the State Commission of Investigation.
It is appropriate for the Legislature to devise as an intermediate oversight mechanism, financial review boards to aid financially troubled or seriously mismanaged municipalities that have not yet reached the point of requiring complete State supervision.
In attempting to assist a municipality with endemic fiscal problems or with a history of fraudulent or mismanagement practices, it is appropriate to solicit the involvement of a wide range of persons and organizations that comprise the municipality in community consultation committees so that they can participate in the development of solutions to the fiscal difficulties of the municipality.
In attempting to assist a municipality with endemic fiscal problems and low per capita income, it is appropriate to offer various State tax incentives to encourage individuals and businesses to relocate into that municipality in order to revitalize its tax base. It is further appropriate to permit such municipalities to create municipal development financing districts in order to redirect certain sales tax revenues from revitalized areas into further revitalization efforts on the part of those municipalities.
The costs incurred by a municipality to assist and cooperate with a financial review board and community consultation committee are deemed to be an inherent part of the conduct of the financial administration and integrity of a municipality as provided by law.
3. As used in this act:
"Authority" means the New Jersey Urban Enterprise Zone Authority created pursuant to section 4 of P.L.1983, c.303 (C.52:27H-63).
"Board" means a financial review board created pursuant to section 5 of P.L. , c. (C. ) (now pending before the Legislature as this bill);
"Committee" means a community consultation committee created pursuant to section 5 of P.L. , c. (C. ) (now pending before the Legislature as this bill);
"Director" means the Director of the Division of Local Government Services in the Department of Community Affairs.
"District" means the municipal development financing district established by a municipality and certified by the Commissioner of Commerce and Economic Development pursuant to section 26 of P.L. , c. (C. ) (now pending before the Legislature as this bill).
"Municipal fiscal oversight and rehabitation exclusion from the gross income tax" means the exclusion of any amount, after all other exemptions, exclusions and deductions from income provided by law, necessary to reduce a New Jersey Gross Income taxpayer's taxable income to $30,000.
"Program" means a financial review program created pursuant to section 4 of P.L. , c. (C. ) (now pending before the Legislature as this bill).
"Project" means any capital project or any other public improvement, service, facility or equipment which a municipality is legally authorized to undertake, purchase or provide.
4. a. Upon a determination by the director that at least three of the conditions listed in this subsection exist in a municipality, the director may give notice to the governing body of that municipality that the Local Finance Board shall conduct a hearing to consider the creation of a board and committee to assist the municipality in regulating its finances. The notice shall be in writing and shall state the time and place that the Local Finance Board will consider the matter. The Local Finance Board, at the time and place stated in the notice, shall give the local governing body and any other interested parties an opportunity to be heard.
The conditions which shall be considered by the director are:
(1) A declining net valuation on which county taxes are apportionied and an increasing municipal purposes tax levy;
(2) A net debt calculation in excess of 3.5%;
(3) A municipal purposes tax levy representing 40% or less of total revenue;
(4) Cash or revenue deficits in excess of 2% of the total annual general appropriations for the municipality;
(5) Deferred charges or budgetary overexpenditures;
(6) A tax collection rate less than 90%; or
(7) An inability to meet statutory budget deadlines.
b. If the Local Finance Board determines at the conclusion of the hearing that three or more of the conditions set forth in subsection a.of this section have existed together within the municipality during at least three of the previous five years, then it shall proceed to determine if the presence of those conditions is affecting the municipality's ability to:
(1) Balance its municipal budget on an annual basis without extraordinary means;
(2) Access the long and short term debt markets;
(3) Provide for necessary infrastructure improvements; or
(4) Attract new investments that result in additional ratables.
c. If the Local Finance Board determines that three or more of the conditions set forth in subsection a. of this section exist or have existed together within a municipality during at least three of the previous five years, and further finds that any one of the conditions set forth in subsection b. of this section also exists currently, it may, by resolution, establish a financial review program in the municipality.
d. In addition to establishing a financial review program in a municipality pursuant to the procedure set forth in subsection c. of this section, the Local Finance Board may also establish a program in any municipality which is subject to supervision pursuant to sections 54 through 99 of P.L.1947, c.151 (C.52:27BB-54 et seq.), when the Local Finance Board determines, following a notice to the municipality and a hearing, that, upon being released from State supervision, the fiscal integrity of a municipality will be further stabilized by the establishment of a financial review program.
e. In addition to establishing a financial review program in a municipality pursuant to the procedure set forth in subsections c. and d. of this section, the Local Finance Board may also establish a program (1) in any municipality in which a report of the State Commission of Investigation has detailed evidence of improper administrative practices, fraudulent claims, fiscal mismanagement, misuse of municipal resources, or other serious irregularities in that municipality, or, (2) in any municipality in which an elected or appointed officer responsible for handling municipal finances has been found guilty of a crime involving that person's office and the finances of the municipality.
5. a. A financial review program shall include the creation of a financial review board and a community consultation committee for the municipality. A board shall have the power and responsibility to:
(1) approve the financial plan of the municipality;
(2) investigate any aspect of municipal finances;
(3) issue directives to municipal officials concerning the finances of the municipality;
(4) take legal action to compel municipal officials to comply with its valid orders and directives;
(5) require the appearance of any municipal official or employee before the board to answer questions concerning the finances of the municipality;
(6) require municipal officials and employees to provide documents concerning the finances of the municipality;
(7) approve any actions taken by the governing body affecting the finances of the municipality that the board deems necessary ;
(8) request the community consultation committee to review and provide advice on matters that come before the board;
(9) approve the appointment of or contract with a registered municipal accountant appointed pursuant to N.J.S.40A:5-4;
(10) ratify any collective bargaining agreement, or award of an arbitrator made under binding arbitration, to be entered into by the municipality, notwithstanding the provisions of P.L.1977, c.85 (C.34:13A-14 et seq.) and P.L.1995, c.425 (C.34:13A-14a et al.); and
(11) adopt policies and procedures for the conduct of its activities; and
(12) study matters related to best practices and benchmark costs of municipal services in comparison to comparable municipalities.
b. A community consultation committee shall be comprised of community leaders and representatives of organizations in the community and the municipal government that influence municipal financial matters, economic development policies and social service requirements. A committee shall have the responsibility to:
(1) review and provide advice and recommendations to the board on the financial plan;
(2) provide the board with advice regarding any matter requested by the board;
(3) provide advice and recommendations to the board with regard to any other matters the committee may consider appropriate;
(4) consult with municipal officials on any matter;
(5) study any aspect of municipal governance or issues affecting the community; and
(6) review and advise the board on the annual budget of the municipality.
6. a. A financial review board shall consist of nine members which shall include:
(1) The Commissioner of Community Affairs, who shall serve ex officio and shall serve as chair of the board, and the State Treasurer, ex officio. The commissioner and State Treasurer each may designate a representative to attend meetings of the board in their place and to vote or otherwise act on their behalf. Written notice of the designation of a representative shall be furnished to the board by the commissioner or State Treasurer. A representative shall serve at the pleasure of the commissioner or State Treasurer;
(2) The mayor of the municipality who shall serve ex officio;
(3) A member of the municipal governing body, selected by a majority vote of the full voting membership of the governing body, who shall serve ex officio;
(4) Three public members, appointed by the Governor, with the advice and consent of the Senate, one of whom shall have a business interest in the county in which is situated the municipality in which a program is established. One of the other two public members shall be recommended by the President of the Senate, and the other shall be recommended by the Speaker of the General Assembly and both of these public members shall be residents of the municipality in which a program is established and shall be a community leader or social service provider in that municipality. The public members appointed pursuant to this paragraph shall not hold elected, political, or appointed office or employment in the municipal government or any agency of the municipality in which a program has been established. These members shall be appointed not later than 60 days after the determination of the Local Finance Board to establish a program in a municipality pursuant to section 4 of P.L. , c. (C. ) (now pending before the Legislature as this bill); and
(5) The executive directors of the New Jersey Housing and Mortgage Finance Agency and the Economic Development Authority, who shall serve ex officio.
b. The members appointed by the Governor shall serve for terms of two years and until their respective successors are appointed and qualified, and may be eligible for reappointment for consecutive terms. Vacancies in the membership of a board shall be filled for the unexpired terms only in the same manner as the original appointments were made.
7. a. Each board operating under a program that has been established pursuant to section 4 of P.L. , c. (C. ) (now pending before the Legislature as this bill) shall meet as soon as possible after the appointment of a majority of the members for the purpose of organizing and undertaking its responsibilities. All meetings shall be held in the municipality for which the board is established. The chair person, or his or her designee, shall preside at all meetings of the board. A majority of the members of the entire board shall constitute a quorum for the conduct of business. The board shall act by majority vote of the entire membership of the board. All meetings of the board shall be subject to the "Open Public Meetings Act," P.L.1975, c.231 (C.10:4-6 et seq.).
b. The board shall be in, but not of, the Department of Community Affairs. The board may incur expenses as it may deem necessary in order to perform its duties and as may be within the limits of funds made available to it for those purposes. Expenditures of the board shall not be subject to the provisions of section 9 of article 6 of P.L.1944, c.112 (C.52:27B-61).
c. The board may appoint an administrator who shall have demonstrated experience and qualifications in the field of government finance and whose annual salary shall be set by the Local Finance Board. Subject to the limits of funds made available to it, the board may also retain such consultants experienced in the field of municipal finance or accounting as the board shall deem necessary or desirable to accomplish its purposes, and employ clerical personnel as may be necessary to support its activities. Employees of the board shall be considered to be confidential employees and in the unclassified service pursuant to N.J.S.11A:3-1 et seq., except that the administrator may be a contract employee whose compensation shall be set by the Local Finance Board.
d. The board administrator, if appointed, shall exercise oversight of the financial activities of the municipality to ensure compliance with State law and regulations; provide staff support to the board and the committee; monitor the implementation of an approved financial plan and of the reporting system thereof by the municipality; and perform other related duties as may be delegated by the board.
e. The municipality shall provide the board with office space, clerical personnel and support facilities as the board may determine to be necessary to conduct its activities.
f. The board shall compile and file an annual report of its activities with, and shall provide its assessment of the fiscal condition and progress of the municipality to, the Local Finance Board.
g. The board shall provide staff to assist the municipal governing body with the development and administration of the plan.
h. The board shall submit a budget for its activities to the Local Finance Board for approval.
8. a. Within 60 days following the establishment of a program pursuant to section 4 of P.L. , c. (C. ) (now pending before the Legislature as this bill) the mayor of the municipality, with advice and consent of remainder of the municipal governing body, shall appoint a community consultation committee of no more than 15 voting members together with as many non-voting members as the mayor may deem appropriate. The chief administrative officer or the chief financial officer of the municipality, as determined by the mayor, shall be appointed to serve on the committee as a non-voting member. Each committee member who represents a particular community interest or community organization of the type described in subsection b. of this section shall serve as liaison to and shall communicate with related community interests or organizations regarding the activities of the committee. Actions of the committee shall require a two-thirds vote of the entire voting membership. Members of the committee shall serve at the pleasure of the municipal governing body and may be removed by majority vote of the governing body, including the mayor, at any time. The committee shall organize itself and establish its own leadership and system of organization. The committee shall work collaboratively to develop consensus when making recommendations to the board.
b. When appointing voting members to the committee the mayor shall endeavor to achieve diverse representation with preference to representatives of the following interests and communities as appropriate to the municipality:
(1) the county government;
(2) municipal housing or redevelopment agencies;
(3) uniformed and non-uniformed collective bargaining units;
(4) small businesses and corporations;
(5) religious organizations;
(6) social services providers;
(7) neighborhood groups;
(8) non-profit housing providers;
(9) the school district serving the municipality; and
(10) economic development organizations.
9. a. Following appointment of members to a board pursuant to section 6 of P.L. , c. (C. ) (now pending before the Legislature as this bill), the board, in consultation with the governing body of the municipality, shall prepare and adopt a financial plan.
b. The financial plan shall be comprised of the following sections: a budgetary plan, an operations plan, an economic development plan and a capital improvement plan.
(1) The budgetary plan shall be general in nature and shall include revenue and spending targets that must be met by the municipality through its annual budget. Spending targets may be set by budgetary line item. If, in the opinion of the board, the municipality does not have an adequate cash management plan or cash flow analysis, the board may require that the plan include such matters. The board shall ensure that the provisions of the plan comply with all applicable provisions of State law.
(2) The operations plan shall identify and describe opportunities to reduce the costs of providing municipal services through general reductions of municipal expenditures; sales of surplus municipal assets; changes in staffing patterns; development of new sources of revenue; implementation of shared services with other government agencies; contracting of services to other providers; reductions in municipal service levels; improved or lower cost operating methods and practices; and any other measures which would serve to reduce the costs of providing municipal services as may be developed by the municipality, the committee, or the board. Elements of the operations plan may be overriden by a two-thirds vote of the entire membership of the municipal governing body, including the mayor.
(3) The capital improvement plan shall follow and reflect the capital improvement plan adopted pursuant to the "Local Budget Law," N.J.S.40A:4-1 et seq., and any applicable regulations adopted by the Local Finance Board.
(4) The economic development plan shall identify and describe appropriate actions for the economic development of the municipality planned by all government agencies, non-profit and private sector organizations engaged in the economic development of the municipality.
10. a. The financial plan prepared in accordance with section 9 of P.L. , c. (C. ) (now pending before the Legislature as this bill) shall be developed and approved, and may from time to time be modified in accordance with the procedures established in this section.
b. Not later than 120 days after the date that a financial review board of a municipality has its first meeting, the governing body of the municipality shall submit a proposed financial plan to the board covering the three-year period beginning with the municipality's next ensuing fiscal year. The governing body shall consult with the committee in the development of the plan.
c. Not later than 120 days prior to the commencement of each subsequent fiscal year, the governing body shall submit to the board a report regarding the implementation of the financial plan approved by the board together with recommendations for such modifications to the approved financial plan as the governing body may wish to propose.
d. Upon receipt of a proposed financial plan or of any proposed modifications to an approved financial plan, the board shall provide a copy of the proposed plan or the proposed modification to the voting members of the committee, who shall have 30 days to review and provide comments to the board. The committee may recommend to the board that changes be made to the plan or the proposed modification for board's consideration.
e. (1) Not more than sixty days after submission of the proposed financial plan or recommendations for modification of an approved financial plan to the board, the board shall determine whether the proposed plan or the proposed plan modification is complete and complies with the requirements of P.L. , c. (C. ) (now pending before the Legislature as this bill). If the board determines that the proposed plan, or the proposed plan modification, is complete and complies with the requirements of P.L. , c. (C. ) (now pending before the Legislature as this bill), the board shall, by resolution, approve the financial plan or the financial plan modification.
(2) If the board determines that the proposed plan or proposed plan modification is incomplete; that the budget plan therein fails to contain projections of revenues and expenditures that are based on reasonable and appropriate assumptions and methods of estimation; that the proposed plan or proposed plan modification fails to demonstrate that the operations of the municipality will be conducted within the cash resources available to the municipality according to the board's revenue estimates; or that the proposed plan or proposed plan modification fails to comply with the provisions of this act, the board shall, by resolution, disapprove the plan.
f. In the event that the governing body of the municipality either fails to submit a financial plan as required by this section or fails to submit a financial plan which receives the approval of the board, the board shall, by resolution, formulate and adopt a financial plan to be effective until the governing body of the municipality submits a financial plan which is approved by the board. Any such plan shall be submitted to the committee for its review at least 30 days prior to adoption by the board.
g. Once adopted by the board, the provisions of the financial plan shall be binding on the municipality.
h. The financial plan shall be updated on an annual basis.
11. a. Following its initial approval, the financial plan shall be examined by the board and the committee on a regular basis, in consultation with the governing body of the municipality. The municipality shall establish a system for reporting on its progress in complying with the various components of the plan. These reports shall be prepared in a form and with such contents as shall be prescribed by the board. Reports regarding the municipality's compliance with the budget plan shall be made monthly. Reports regarding the municipality's compliance with the other components of the financial plan shall be made quarterly. The board shall provide copies of all of the reports to the committee.
b. In the event that the reports provided to the board indicate that expenditures being undertaken by the municipality are not consistent with the approved financial plan, the board shall be authorized to issue orders and directives as it believes necessary or desirable to ensure compliance with the plan.
c. If, in the board's judgment, it appears at any time that (1) the amount of revenues which the municipality is reasonably likely to realize in cash during any fiscal year will be less than the amount of anticipated revenues in the municipality's annual budget; or (2) the expenditures for the municipality during any fiscal year will exceed the amount of revenues which the municipality is reasonably likely to realize in cash during that fiscal year, the board may direct the municipality to submit a financial plan modification to the board describing the manner in which the municipality will effect such adjustments in revenue estimates and such reductions in expenditures as may be necessary to conform the expenditures of the municipality to such revised revenue estimates. Following approval by the board, the municipality shall implement that financial plan modification.
d. The board shall approve a financial plan modification so long as the modification complies with the requirements of P.L. , c. (C. ) (now pending before the Legislature as this bill). If, within the time period specified by the board for the submission of a financial plan modification, the municipality fails to submit a plan modification as may be necessary to achieve the purposes of P.L. , c. (C. ) (now pending before the Legislature as this bill), the board, upon adoption of a resolution, may formulate and approve such financial plan modification as may be necessary to achieve the purposes of P.L. , c. (C. ) (now pending before the Legislature as this bill) and thereafter direct its implementation by the municipality.
e. Any plan modifications shall be reviewed by the committee prior to action by the board approving the modifications.
12. a. In any municipality in which a financial review program has been established, the mayor of the municipality, at least 60 days prior to the start of each fiscal year, shall require the directors or supervisors of each department, function or operation of the municipal government to submit budget requests for appropriations for the forthcoming fiscal year and to appear before the committee at public hearings on the various requests, which shall be held no later than 30 days prior to the start of each fiscal year. The mayor shall provide appropriate instructions to those preparing the budget requests so that the requests are prepared in compliance with the financial plan adopted pursuant to section 9 or 10 of P.L. , c. (C. ) (now pending before the Legislature as this bill). The budget requests shall include detailed information as to the items of appropriation set forth therein.
b. Following the hearings pursuant to subsection a. of this section and in accordance with all other applicable provisions of law, the governing body shall introduce an annual budget for the next fiscal year. Following introduction of the budget, copies of the budget shall be provided to the board and the committee. The budget introduced by the governing body shall conform to the approved financial plan for the municipality and shall be in the form required by, and shall otherwise comply with, the requirements of the "Local Budget Law," N.J.S.40A:4-1 et seq. The introduced budget shall also be submitted to the director who shall conduct an examination of the budget pursuant to the provisions of the "Local Budget Law," N.J.S.40A:4-1 et seq.
c. The budget shall be advertised and a public hearing on the budget shall be held by the governing body in accordance with the provisions of the "Local Budget Law," N.J.S.40A:4-1 et seq. Prior to the commencement of the public hearing, the committee shall review the budget and provide such comments to the governing body and the board as it deems necessary or appropriate. Any budget amendments shall be made pursuant to the "Local Budget Law," N.J.S.40A:4-1 et seq.
d. Following receipt of the introduced budget, receipt of comments regarding the introduced budget from the committee, and the introduction of any amendments by the governing body, the board shall review the budget and approve the budget either as submitted or with such modifications as to anticipated revenues or budget appropriations as the board may deem appropriate. The governing body of the municipality shall incorporate any modifications required by the board into the budget and shall then proceed to adopt the budget. Notwithstanding the provisions of the "Local Budget Law," N.J.S.40A:4-1 et seq., actions of the board that result in budget changes shall, if necessary, extend otherwise binding statutory time periods to an appropriate date set by the board.
13. a. Any board established pursuant to section 5 of P.L. , c. (C. ) (now pending before the Legislature as this bill) shall, from time to time and to the extent it deems necessary or desirable in order to accomplish the purposes of P.L. , c. (C. ) (now pending before the Legislature as this bill), be authorized to:
(1) Review the efficiency and productivity of the operations and management of the municipality and make reports thereon to the mayor and the governing body of the municipality;
(2) Audit compliance with the approved financial plan for the municipality as the board shall determine;
(3) Recommend to the municipality or require the implementation of such measures relating to the efficiency and productivity of the municipality including, but not limited to, public employee contracts, personnel policies and purchasing practices, as the board may deem appropriate to reduce costs and improve services;
(4) Obtain such information regarding the financial condition and needs of the municipality including such financial statements and projections, budgetary data, and information and management reports and materials, as the board may deem necessary or desirable; and
(5) Inspect, copy and audit such financial books and financial records of the municipality as the board shall determine necessary or desirable.
b. Any reports of the board pursuant to subsection a. of this section shall be forwarded to the committee.
14. During the period of time during which a board is authorized to function in a municipality, the municipality shall not authorize the issuance of bonds or notes without the prior approval of the board. Any bond ordinance proposed to be adopted, together with such other information as the board may require, shall be submitted to the board for review and approval prior to introduction of the ordinance. The board shall request the committee to comment regarding the proposed ordinance. If the board is satisfied that the purpose or purposes to be funded by the proposed ordinance are consistent with the approved financial plan for the municipality, it shall approve the proposed ordinance. Upon receipt of such approval, the governing body of the municipality may proceed with the introduction and adoption of the ordinance. The procedures set forth in this section shall be in addition to, and not in lieu of any procedures which a municipality would be required to follow in seeking the issue of debt in accordance with the provisions of the "Municipal Qualified Bond Act," P.L.1976, c.38 (C.40A:3-1 et seq.). The board may not compel the municipality to adopt any bond ordinance.
15. During the period of time during which a board is authorized to function in a municipality, the board shall review the annual financial statements and the annual audits of the municipality. To the extent that corrective action plans are developed by the municipality as a result of those audits, any such plans shall first be submitted to the board for approval. In addition, if, as a result of an annual audit, the board concludes that the preparation and implementation of a corrective action is necessary and the municipality has not taken that action, the board shall be authorized to direct the preparation and implementation of such a corrective plan as the board may deem necessary or desirable.
16. During the period of time during which a board is authorized to function in a municipality, no emergency appropriation or other budget amendment in excess of $100,000 shall be adopted by the governing body of a municipality until the emergency appropriation or other budget amendment has first been reviewed and approved by the board, or its administrator when that power has been delegated. In reviewing any proposed emergency appropriation or other budget amendment, the board shall consider such factors as may be appropriate, including but not limited to, the need for the appropriation and the existence of alternative sources to meet the need for the appropriation. Any request for approval of a proposed emergency or other budget amendment shall be accompanied by a document prepared by the municipality explaining the need for the action.
In addition, no transfer in excess of $100,000 of appropriation or change in text or title of an appropriation shall be authorized or approved by the governing body of a municipality until the transfer of appropriation or change in text or title of an appropriation has first been reviewed and approved by the board or its administrator when that authority has been delegated. Any request for approval of a proposed transfer of appropriations or change in text or title of an appropriation shall be accompanied by a document prepared by the municipality explaining the need for the transfer.
17. a. During the period of time during which a board is authorized to function within a municipality, the municipality shall not enter into any contract with a value in excess of $100,000 without prior review and approval by the board, or its administrator when that authority has been delegated. A copy of each such contract shall be submitted to the board, or the board's administrator, together with an analysis of the projected costs of the contract and a certification by the municipality's chief financial officer that the performance of the contract will be in accordance with the financial plan, all in such form and with such additional information as the board may prescribe. The board or its administrator shall promptly review the terms of the contract and the supporting information in order to determine whether the contract is in compliance with the financial plan.
b. The board or its administrator shall approve the contract if it determines that the execution and the performance of the contract will be consistent with the financial plan. In approving a contract, the board or its administrator may establish appropriate terms and conditions to achieve the purposes of the financial plan, provided that the terms and conditions are not otherwise inconsistent with other requirements of law, including, but not limited to the "Local Public Contracts Law," P.L.1971, c.198 (C.40A:11-1 et seq.).
c. Upon receipt of notice of approval of a contract, the municipality may proceed to enter into the contract subject to the terms and conditions as may have been established by the board or its administrator.
18. During the period of time during which a board is authorized to function within a municipality, the municipality shall not incur any expenditures, or obligations to incur expenditures, in excess of the amount established under the financial plan then in effect without prior review and approval by either the board or its administrator when that authority has been delegated to the administrator. This provision shall not be applicable to obligations incurred as a result of a court judgment. Upon receipt of a final court judgment requiring the municipality to appropriate funds, the board, in consultation with the governing body shall modify the plan.
19. Any board created pursuant to section 5 of P.L. , c. (C. ) (now pending before the Legislature as this bill) shall be authorized to issue such orders and directives as that board may deem necessary to any officer or employee of the municipality in which it is authorized to function to accomplish the purposes of P.L. , c. (C. ) (now pending before the Legislature as this bill), including but not limited to, timely and satisfactory implementation of the provisions of the approved financial plan of the municipality. Any order or directive so issued shall be binding upon the officer or employee to whom it was issued. Such order or directive shall be subject to disapproval by the mayor or business administrator of the municipality; however, the disapproval may be overridden by a two-thirds vote of a majority of the total membership of the board. Any officer or employee who, after the date fixed for compliance, fails or refuses to obey a valid order or directive shall be subject to a personal penalty of not less than $25 or more than $1,000 to be fixed by the board. Such failure or refusal to obey a valid order or directive from the board shall constitute inefficiency, neglect of duty, misconduct or malfeasance in office or employment, and in the case of an elected official, shall be grounds for an action to compel forfeiture of office. The amount of a monetary penalty may be collected by the board in the name of the State as a personal debt of the officer or employee and shall be paid upon receipt to the municipality.
20. No officer or employee of a municipality in which a board has been authorized to function shall take any action in violation of any valid order or directive of the board, or shall fail or refuse to take any action required by any such order or directive, or shall prepare, present or certify any information or report, including any projections or estimates, for the board or any of its agents that are wilfully false or misleading. In addition to any penalty or liability under any other law, any officer or employee of the municipality who shall violate the provisions of this section shall be subject to appropriate administrative discipline including, when circumstances warrant, suspension from duty without pay or removal from office by order of the mayor or the board. Any action taken against an officer or employee pursuant to this section shall be reviewed by the Merit System Board in accordance with its rules and regulations, in those municipalities that have adopted Title 11A, Civil Service, of the New Jersey Statutes. In the case of a violation of the provisions of this section by an officer or employee of the municipality, the mayor shall immediately report to the board all pertinent facts together with a statement of the action taken thereon.
21. Orders and directives issued by a board may be enforced by a proceeding in lieu of prerogative writ, by an action for injunctive relief in appropriate cases, or by a mandamus action to compel performance by the governing body or by any officer or employee of the municipality in which the board is authorized to function.
22. The members of the board and any person authorized to act on behalf of or assist the board shall be considered public employees under the "New Jersey Tort Claims Act," N.J.S.59:1-1 et seq. and shall be entitled to all of the rights and immunities provided to public employees under that act.
23. The activities of the board shall cease and the board and the committee shall be dissolved at the conclusion of the third municipal budget year next following the budget year in which the program was established.
24. The Commissioner of Community Affairs may issue orders, or adopt rules and regulations pursuant to the "Administrative Procedure Act,"P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to carry out the provisions of sections 4 through 23 of P.L. , c. (C. ) (now pending before the Legislature as this bill).
25. Notwithstanding any law, rule or regulation to the contrary, in any municipality in which a program has been created pursuant to section 4 of P.L. , c. (C. ) (now pending before the Legislature as this bill) and which has an average per capita income of $10,000 or less according to the latest federal decennial census, whether or not promulgated by the State:
a. for a period of 10 years commencing on January 1 next following the year in which the program was created, bona fide residents of the municipality shall be entitled to a municipal fiscal oversight and rehabitation exclusion from the gross income tax;
b. for a period of 15 years commencing on January 1 next following the year in which the program was created, corporations maintaining an office or facility within the municipality and employing at least eight residents of the municipality at that office or facility shall be exempt from paying any amounts otherwised due under the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.).
26. a. Any municipality in which a board has been established pursuant to section 4 of P.L. , c. (C. ) (now pending before the Legislature as this bill) and which has an average per capita income of $10,000 or less according to the latest federal decennial census, whether or not promulgated by the State, may establish a Municipal Development Financing District by ordinance. The district shall be a contiguous area of compact shape within the municipality. If a boundary of the district is a body of water, any establishment situated on the body of water and accessible from the district by a dock or ramp shall be considered within the district.
The district may include any portion of the municipality which has experienced significant revitalization, except that if any portion of the district overlaps with an enterprise zone designated pursuant to section 7 of P.L.1983, c.303 (C.52:27H-66) or pursuant to section 3 of P.L.1995, c.382 (C.52:27H-66.1), the provisions of section 27 of P.L. , c. (C. ) (now pending before the Legislature as this bill) which otherwise apply to the enterprise zone shall not apply to that area of the district included within the enterprise zone.
b. Any municipality which has adopted an ordinance pursuant to subsection a. of this section shall submit the ordinance to the Commissioner of Commerce and Economic Development who shall certify the area as a Municipal Development Financing District upon a determination that it meets the requirements of this section.
27. a. Fifty percent of all sales tax revenues derived within the district from (1) receipts of retail sales, except retail sales of motor vehicles, of alcoholic beverages as defined in the "Alcoholic beverage tax law," R.S.54:41-1 et seq., cigarettes as defined in the "Cigarette Tax Act," P.L.1948, c.65 (C.54:40A-1 et seq.) and of manufacturing machinery, equipment or apparatus, made by a certified vendor from a place of business owned or leased and regularly operated by the vendor for the purpose of making retail sales; (2) receipts from the sale of food and drink subject to taxation pursuant to subsection (c) of section 3 of the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-3), but excluding sales of food and drink sold through coin operated vending machines; (3) the rent for the occupancy of a room or rooms in a hotel subject to taxation pursuant to subsection (d) of section 3 of the "Sales and Use Tax Act"; and (4) admission charges subject to taxation pursuant to subsection (e) of section 3 of the "Sales and Use Tax Act," as certified by the Director of the Division of Taxation, shall be remitted to the chief finance officer of the municipality to be used for municipal purposes, subject to any financial oversight or supervision applicable to the municipality under any law, or rule or regulation promulgated pursuant thereto.
The State Treasurer may deduct from amounts so retained prior to deposit in the fund an amount equal to that necessary to compensate the Division of Taxation for costs actually incurred by that division in administering the provisions of sections 27 through 30 of P.L. , c. (C. ) (now pending before the Legislature as this bill).
b. The remaining fifty percent of all sales tax revenues derived within the district from the items enumerated in paragraphs (1) through (4) of subsection a. of this section, less those amounts deducted by the State Treasurer for administrative costs, shall be deposited into a Municipal Development Assistance Fund to be used for the purposes prescribed in section 31 of P.L. , c. (C. ) (now pending before the Legislature as this bill), except as provided in subsection c. of this section.
c. Notwithstanding the provisions of subsection b. of this section to the contrary, if any portion of the district is included within a designated urban enterprise zone in which an exemption from receipts of retail sales has been granted pursuant to section 21 of P.L.1983, c.303 (C.52:27H-80), the moneys so collected shall be allocated in accordance with the provisions of the urban enterprise zone program. Any receipts collected from the items enumerated in paragraphs (1) through (4) of subsection a. of this section on which the retail sales tax exemption set forth in section 21 of P.L.1983, c.303 (C.52:27H-80) does not apply shall be deposited into the Municipal Development Assistance Fund as provided in subsection b. herein to the account of that municipality to be used for the purposes prescribed in section 31 of P.L. , c. (C. ) (pending before the Legislature as this bill).
28. Any vendor making sales from a location within the district and required to collect tax pursuant to the "Sales and Use Tax Act", P.L.1966, c.30 (C.54:32B-1 et seq.) shall register with the Director of the Division of Taxation in a manner prescribed by the director and file a return in such form and with such information as the director shall prescribe by rule or regulation as necessary to determine the municipal share of the tax.
29. Any vendor making sales from a location within the district and required to register under section 28 of P.L. , c. (C. ) (now pending before the Legislature as this bill) shall, on or before the dates required pursuant to section 17 of the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-17), forward to the director the sales tax collected in the preceding return period and make and file a return for the preceding return period with the director on a form containing any information that the Division of Taxation in the Department of the Treasury shall prescribe by rule or regulation in order to determine the municipal share of the tax.
30. a. There is created a Municipal Development Assistance Fund to be held by the State Treasurer, which shall be the depository for all moneys required to be deposited therein under subsection b. of section 27 of P.L. , c. (C. ) (now pending before the Legislature as this bill) or moneys appropriated annually to the fund. All moneys deposited in the fund shall be held and disbursed in the amounts necessary to fulfill the purposes of this section and subject to the requirements hereinafter prescribed. The State Treasurer may invest and reinvest any moneys in the fund, or any portion thereof, in legal obligations of the United States or of the State or of any political subdivision thereof. Any income from, interest on, or increment to moneys so invested or reinvested shall be included in the fund.
b. The State Treasurer shall maintain separate accounts for each municipality which has a certified Municipal Development Financing District designated under section 26 of P.L. , c. (C. ) (now pending before the Legislature as this bill). The State Treasurer shall credit to each account an amount of the moneys deposited in the fund equal to the amount of revenues collected from the taxation of retail sales made in the district as provided in subsection b. of section 27 of P.L. , c. (C. ) (now pending before the Legislature as this bill) and appropriated to the Municipal Development Assistance Fund.
31. a. The Municipal Development Assistance Fund shall be used for the purpose of assisting municipalities which have established municipal development financing districts in undertaking public improvements and economic development projects in those municipalities.
b. A governing body which has designated an approved municipal development financing district may, by resolution adopted after public hearing, propose to undertake a project for the public improvement of the municipality and to fund that project from moneys deposited in the Municipal Development Assistance Fund and credited to the account maintained by the State Treasurer for the municipality.
The proposal so adopted shall set forth a plan for the project and shall include:
(1) A description of the proposed project;
(2) An estimate of the total project costs and an estimate of the amounts of funding necessary annually from the municipal account;
(3) A statement of any other revenue sources to be used to finance the project;
(4) A statement of the time necessary to complete the project;
(5) A statement of the manner in which the proposed project furthers the municipality's policy and intentions for addressing municipal economic and social conditions; and
(6) A description of the financial and programmatic controls and reporting mechanisms to be used to guarantee that the funds will be spent in accordance with the plan and that the project will accomplish its purpose.
c. Upon adoption by the governing body of the municipality, the proposal shall be sent to the authority for evaluation and approval. The authority shall approve the proposal upon a finding that the proposed project furthers the municipality's policy and intentions for addressing municipal economic and social conditions, thereby contributing to an increase in the municipality's economic self-sufficiency;
d. The authority may at any time revoke the approval of a project upon a finding that the payments made from the Municipal Development Assistance Fund are not being used as required by this section. The municipality shall annually certify to the State Treasurer the amount to be paid in that year from the Municipal Development Assistance Fund with respect to each project approved by the authority.
e. Upon certification to the State Treasurer of the annual amount to be paid to a municipality with respect to any project, the State Treasurer shall pay in each year to the municipality from the amounts deposited in the Municipal Development Assistance Fund the amount so certified, within the limits of the amounts credited to the municipal account.
32. Notwithstanding any law, rule or regulation to the contrary, 20% of the proceeds of bonds authorized to be issued by the New Jersey Housing and Mortgage Finance Agency or the Economic Development Authority following enactment of P.L. , c. (C. ) (now pending before the Legislature as this bill), shall be set aside for projects located in municipalities in which a program has been created pursuant to section 4 of P.L. , c. (C. ) (now pending before the Legislature as this bill) and which have an average per capita income of $10,000 or less according to the latest federal decennial census. Whether or not promulgated by the State.
33. a. The State Treasurer shall promulgate those rules and regulations necessary to effectuate the provisions of section 25 and sections 27 through 30 of P.L. , c. (C. ) (now pending before the Legislature as this bill) pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
b. The Commissioner of Commerce and Economic Development in consultation with the Commissioner of Community Affairs shall promulgate those rules and regulations necessary to effectuate the provisions of section 31 of P.L. , c. (C. ) (now pending before the Legislature as this bill) pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
34. This act shall take effect immediately.
STATEMENT
This bill would permit the Director of the Division of Local Government Services in the Department of Community Affairs (DCA) to identify to the Local Finance Board those municipalities with severe fiscal problems, but which do not require complete assumption of fiscal responsibility by the State. The Local Finance Board would conduct a hearing with each identified municipality to determine if a financial review program should be established for that municipality. The establishment of a financial review program would entail the creation of a financial review board and a community consultation committee that would work with the municipal governing body to form a financial plan. The fiscal oversight would terminate at the end of the third municipal budget year following the budget year in which the financial review program was established.
A financial review board would consist of nine members. The members would be the Commissioner of DCA, ex officio, who would be the chairman of the board, the State Treasurer, ex officio, the mayor of the municipality, ex officio, a member of the municipal governing body, and three public members appointed by the Governor with the advice and consent of the Senate. One public member would be recommended by the President of the Senate and another public member would be recommended by the Speaker of the General Assembly. Both of these public members would have to reside in the municipality and be a community leader or social service provider in the municipality. The other public member would have to have a business interest in the county in which the municipality is situate and would not have to be a resident of the municipality. The remaining members of the board would be the executive directors of the New Jersey Housing and Mortgage Finance Agency and the Economic Development Authority, ex officio.
The mayor of the municipality, with the advice and consent of the remainder of the municipal governing body, would appoint a community consultation committee to represent broad interests of residents and social service organizations operating within the municipality. The committee would be responsible for making suggestions to the board and reviewing the financial plan before it is approved by the board.
The bill gives financial review boards liberal powers to ensure compliance by local officials with its orders and directives, subject to the requirements of Title 11A, Civil Service, of the New Jersey Statutes. Meetings of these boards would be subject to the "Open Public Meetings Act," P.L.1975, c.231 (C.10:4-6 et seq.). The board would have the authority to appoint an administrator and delegate any oversight functions to the administrator that the board deems appropriate. An administrator would be a person of demonstrated experience and qualifications in the field of government finance and the administrator's compensation would be set by the Local Finance Board.
To encourage rehabilitation of the property tax base of municipalities in which a financial review program has been established and which have an average per capita income of $10,000 or less, the bill provides an exemption from the State income tax of amounts in excess of $30,000 taxable income for residents of the municipality for a period of 10 years. The bill also exempts corporations maintaining an office or facility in the municipality and employing at least eight residents of the municipality from payment of amounts otherwised due under the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.) for a period of 15 years.
Finally, for those municipalities in which a financial review program has been established and which have an average per capita income of $10,000 or less the bill would allow the delineation of a Municipal Development Financing District, by ordinance.
Under the terms of the bill, fifty percent of those sales taxes collected within the district derived from retail sales, with certain exceptions; sales of food and drink; hotel room occupancy; and admission charges must be returned to the municipality in which the district is situated by the State Treasurer to be used for municipal purposes, subject to any financial oversight or supervision which may prevail within the municipality. The district must be a contiguous area of compact shape and comprise an area in which significant revitalization has occurred. The State Treasurer shall certify the area as a Municipal Development Financing District upon a determination that it meets the criteria set forth in the bill. The bill provides for a reporting procedure on the part of vendors whose sales are subject to the bill's provisions and requires the State Treasurer to promulgate such rules and regulations as are necessary in order to effectuate the bill's provisions.
The bill requires that the remaining three percent sales tax collected in any Municipal Development Financing District be placed in an account designated for the municipality by the State Treasurer, to be used for projects which are defined in the bill. Those projects are defined broadly to include any capital project or other public improvement which furthers the municipality's economic revitalization goals and which is legally authorized. The municipality shall propose the project by resolution adopted after public hearing and the proposal shall set forth a plan which includes a project description, estimate of project costs, statement of other revenues to be used to fund the project, estimated time necessary to complete the project, and other significant information of similar nature. The bill permits the State Treasurer to revoke the approval if the payments made from the fund are not being used in accordance with the terms of the approval.
Those amounts which are otherwise to be deposited into the Municipal Development Assistance Fund under the provisions of this bill which are generated in an urban enterprise zone shall be allocated as otherwise provided in the "New Jersey Urban Enterprise Zones Act." Other retail sales tax revenues which are exempted under this bill, generated in a designated urban enterprise zone which receives the benefit of the retail sales tax exemption and which are payable into the Municipal Development Assistance Fund shall be payable to the municipal account as provided for in this bill.
Finally, the bill requires that 20% of the proceeds of bonds authorized to be issued by the New Jersey Housing and Mortgage Finance Agency or the Economic Development Authority following enactment of the bill, shall be set aside for projects located in municipalities in which a financial review program has been established and which have an average per capita income of $10,000 or less, so that State bond money can be targeted to revitalize those municipalities.
"Municipal Fiscal Oversight and Rehabilitation Act"; authorizes establishment of financial review boards and provides for redevelopment in certain municipalities.