Home | NJLM Foundation 

N.J. bill would restore $440M in energy-tax revenue to municipalities

Thursday May 3, 2012, 8:59 PM
The Record

Nearly $440 million would go to towns struggling to lower property taxes under a bill introduced Thursday that seeks to reroute money from a state aid program funded by energy taxes.

Mayors and other local officials contend that the aid program – supported by taxes charged on the pipes, wires and other conduits used by utility companies – has been starved by the state for decades.

The bill, crafted after weeks of hearings on the $32.1 billion state budget, appears to have support among lawmakers and municipal leaders, but it is unclear whether Governor Christie would veto the bill if it came to his desk. Christie’s administration has said previously it would not return those revenues.

In 2012, the state will collect roughly $1.2 billion in energy taxes, $788.5 million of which is distributed to towns in the form of direct state aid. The rest stays in Trenton to support the state budget. The state’s share of that energy tax has grown dramatically in recent years as utility revenues increased and overall state aid — a critical source of municipal revenue — has remained flat.

“This is really an injustice,” said Sen. Paul Sarlo, D-Wood-Ridge, who sponsored the bill with Assemblyman Troy Singleton, D-Burlington. “This is state government literally diverting money that belongs to municipalities. Utility revenues are going up, they are taking more in. They are playing a great game of shuffling the deck here.”

Sarlo, who heads the Senate Budget and Appropriations Committee, said Wednesday he felt “quite certain” the bill would reach the governor’s desk. Democrats control both the Senate and Assembly; lawmakers must pass a balanced budget by July 1.

Sarlo is also the mayor of Wood-Ridge, which over the past decade has seen 32 percent decline in state aid, from $1.15 million in 2002 to an estimated $784,723 in 2012. That decline ranks among the highest in Bergen County.

Christie spokesman Michael Drewniak declined to comment specifically on the bill Thursday. “The amount of aid distributed to municipalities is consistent with that in years past,” Drewniak said. “Our budget for the coming fiscal year protects municipal aid at the same level as last year.”

At a budget hearing in early April, acting Community Affairs Commissioner Richard E. Constable III said the municipalities were unlikely to see a full funding of energy tax receipts.

“The municipalities believe, incorrectly, that they have a birthright to these monies. They don’t,” told an Assembly committee last week. “If we fully fund them to the tune that they’d like to see, then we can’t fund our Medicaid recipients, we can’t fund state police.”

Assembly Speaker Sheila Oliver, D-Essex, said the bill would be considered as legislators took up the budget in the coming weeks.

“While this legislation will certainly help cash-strapped towns that have been hurt by the governor's cuts in municipal aid, we will be reviewing it in the context of the budget,” Oliver said in a statement.

Republicans, however, have said that higher state aid does not lead to lower property taxes, marshalling data from earlier administrations.

“The years when towns were receiving more municipal aid were the years property taxes went up the most,” said Adam Bauer, a spokesman for the Senate Republicans. Bauer said the bill did not explain how the energy tax increases would fit into the budget.

“That money is already used in the budget to balance it, at least in the proposed budget,” Bauer said. “It’s a little premature to be talking about that big of a shift in where funds go without knowing first of all how the budget is going to shake out. Secondly, how are we going to pay for it?”

If the bill passes, it would represent a major legislative victory for New Jersey towns and their advocates, who have pushed for the full restoration of energy tax receipts funding for years.

“We see this as substantial progress in our ongoing effort to have these dollars returned to municipalities to provide for property tax relief,” said Bill Dressel, executive director of the state League of Municipalities, adding that the League was still reviewing the details of the bill. “We feel it is worthy of serious consideration by the legislature and the governor.”

The bill would restore $385 million cut from the energy tax receipts program between 2009 and 2011, plus an additional $54 million to support aid increases required under existing law. The first $87.8 million payment would go to municipalities in the 2013 fiscal year.

“We are being responsible phasing this in over five years,” Sarlo said. Municipalities would still be held to the tax and budget caps, and use the energy receipts to keep property taxes low and offset municipal services.

“The governor is talking about an income tax cut for the wealthy,” Sarlo said. “This is a fraction of what his income tax cut would cost.”

Email: obrien@northjersey.com


New Jersey State League of Municipalities • 222 West State Street • Trenton, NJ 08608 • (609) 695-3481
FAX: (609) 695-0151        Click here to follow NJLM on Twitter