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Trenton Forgets the Promises of
Energy Tax 'Reform,'
But Mayors Don't

Janice Mironov   Dave Fried
By Janice S. Mironov, Mayor
East Windsor Township
& Dave Fried, Mayor
Robbinsville Township

In our municipalities and others along the New Jersey Turnpike, towering metal skeletons hold up massive power lines, which carry electricity along the spine of the Garden State.

The towers occupy acres vital to our state’s economy, land that will never become ratables for our local taxpayers. That was not a problem when our communities received fair compensation for their presence, from the Energy Tax Receipts Property Tax Relief Fund. But over the past two years, lean times in Trenton appear to have caused memory loss among those who administer the energy tax receipts.

Starting with the FY 2010 budget, and with increased aggressiveness this spring, the Department of Community Affairs has forgotten that New Jersey’s energy tax receipts are not like other forms of municipal aid. In fact, one could argue whether they should be called “aid” at all.

As noted by the nonpartisan Office of Legislative Services (OLS) in 2003, “there was one ‘traditional’ state-collected tax that was wholly unavailable for general state purposes.” Then called the gross receipts and franchise tax, this money, “from its inception” was designed to replace the property tax in those communities that housed gas and electric utility property. The state was the administrator of a fund that was set by a formula, which was not based on a town’s wealth or population, but rather by the amount of utility property in its borders.

It is important to note that the OLS summary came after the old gross receipts and franchise tax underwent a transformation in July 1997. That the original purpose of energy tax receipts was still clear to the legislative staff in 2003 should not be lost on anyone. We mayors who host an abundance of gas and electric lines and property haven’t forgotten.

In the mid-1990s, as energy deregulation took hold in New Jersey, the future of the gross receipts and franchise tax was very much in doubt. The rise of major energy users switching to non-utility power sources to save money, in part by avoiding the tax, meant this important municipal revenue was at risk.
So, 1997 legislation replaced the old gross receipts and franchise tax (GR&TF) with the “Energy Tax Receipts Property Tax Relief Fund.” Up to five revenue streams, including the sales and use tax to energy and utility services, replaced the GR&FT.

While the tax streams are different, the intent was crystal clear: Rather than see municipalities lose this critical revenue, the reform was designed to provide reliable property tax relief. An October 1997 Local Finance Notice states, “The Energy Tax Receipts Program is allocated to ensure that municipalities will receive at least the same amount of money they received from the Gross Receipts and Franchise Tax.”

In other words, energy tax receipts were not to be treated like discretionary forms of state aid, which were subject to political winds and economic misfortune. But in this budget and the last one, that has happened. The effect is devastating for towns with large amounts of utility property, and especially for those, like Robbinsville, that get no other state revenue.

In 2008, Robbinsville received $1,604,879 from its initial allotment of energy tax receipts, plus $77,891 in the supplemental amount traditionally paid each spring. In 2009, Governor Corzine merged CMPTRA and ETR into one aid pool, and the supplemental payment disappeared.

Still, the effect was relatively small; Robbinsville, which had already lost all CMPTRA aid, lost $42,069 in energy receipts. East Windsor, meanwhile, saw its CMPTRA aid go from $430,101 in 2008 to $148,382 in 2009; ETR, meanwhile, increased slightly from $4,104,875 to $4,273,220.

This year, the policy change is repeated on a larger scale. Robbinsville lost $226,371 in energy tax receipts, while East Windsor lost $826,160 in energy tax receipts, on top of a $78,057 cut in CMPTRA aid.

The linkage between energy receipts and local utility property appears gone for good. In its place is a grouping system based on each town’s tax rate and wealth. Residents in both our communities are now compensated for utility lines we can’t move, based on Trenton’s perception of our ability to take another hit.

Rest assured, we know our residents can’t afford to lose a dime. For both towns, the loss of energy receipts comes as the economy has driven down rents and caused vacancies in the warehouses that line the Turnpike. East Windsor has seen $500,000 in tax appeals; for Robbinsville, the number for 2009 was $1.7 million.

Nor do our towns deserve to lose funds: We have held the line on spending year in and year out, only to see our efficiency go unrecognized. East Windsor’s spending is down 5.3 percent from 2009; Robbinsville, meanwhile, has won health benefit contributions from every employee, including its police and firefighters. Both communities have extensive shared services and have devoted hundreds of acres to open space to slow growth.

Each of us have laid off staff, eliminated vacant positions and presented a 2010 budget with less spending than the prior year. And, we are burdened with setting aside higher amounts than ever for the reserve for uncollected taxes. Most residents have no idea we act as the “bank” for the school district and the county; we must pay them first, account for any shortfall in our own tax rates, and when someone successfully appeals, we don’t get repaid for the money we have already sent elsewhere.

For our efforts, someone at DCA has decided that East Windsor and Robbinsville can afford to lose energy tax receipts. While the revenue loss is our immediate concern, we also fear the policy implications: Where does this end? Will someone in Trenton decide our towns don’t need the tax revenue from the local supermarket, and give it away?

We hope that Governor Chris Christie simply hasn’t been told about the history of energy tax receipts. As the OLS stated, these funds are not “aid.” They are payments our towns receive because we aren’t allowed to charge the utilities property taxes. The state’s position as collector and distributor of this money was designed for efficiency and fairness. It wasn’t designed for one town’s money to be given to someone else’s taxpayers.

A look at the FY 2011 Budget in Brief shows that two revenue streams making up the energy tax receipts fund—water and sewerage gross receipts and franchise taxes, and TEFA, the transitional fund on gas and electric companies—are stable relative to last year’s projections.

It would be one thing to lose energy receipts due to declining revenues, as long as the amount was set by formula, based on utility property. Right now, that does not appear to be the case.

Rather, it appears that we are being asked to weather cuts without regard to need, efficiency, or 70 years of legislative intent.

We know Governor Chris Christie arrived in the worst of times. But bad times do not give the bureaucracy the right to rewrite the rules. We welcome items like the Mayor’s toolbox and the focus on the shadowy practices of independent authorities. What we need now is for the Governor to return our most important tool: the money that is ours in the first place.


This article appeared in New Jersey Municipalities, Volume 87, Number 5, May 2010


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