COVID-19 Financial Impacts on Municipal Budgets

Current Action Items

S-2475 & A-3971, COVID Bond Bills

A-3971 would authorize the issuance of “coronavirus relief bonds” by municipalities and counties. Specifically, it permits municipalities to issue bonds for the loss of revenue and unanticipated expenses directly attributable to the COVID-19 pandemic

#MunisAreEssential Campaign #MunisAreEssential

The League is launching a campaign to encourage local officials to contact their state and federal legislators to support bills that will address revenue shortfalls for municipalities throughout New Jersey by providing funding and/or tools, and educate our citizens as to the basic principles of how local government budgets work. NJLM wants to ensure that local government voices are loudly heard because after all, they are the closest to the citizens and closest to the solutions.

Financial Impacts

The COVID-19 pandemic has created a financial strain on local government budgets. Since mid-March, more than 1 million New Jersey residents have filed unemployment claims. The current emergency has led to the shuttering of businesses, construction, courts, and schools. As a result, local governments have experienced a record decline in revenue from permitting fees, licensing fees, parking revenue, and hotel occupancy revenue. And at the same time, face income losses due to declining returns on investments. There is also the uncertainty of property tax collection, state aid revenues, and property tax appeals, in particular commercial property tax appeals.

Unlike previous emergencies, COVID-19 is a major revenue loss event. In many cases this loss will not be recaptured for several years, if ever.

Municipalities Need Flexibility & Budgeting Options

A one-size-fits-all solution is not the best approach. Local budgets are already lean due to significant service reductions made after the 2008 recession, Superstorm Sandy and in compliance with the 2% levy cap. Municipalities need flexibility and options given to them to create solutions to long-term financial problems. Without legislation addressing the revenue shortfall, local governments throughout the State will be required to take extreme measures that will gut local government and eliminate critical public services, such as cutbacks in senior and recreational programs, police and first responder furloughs, and elimination of community events. Depleting surplus and reserves will have disastrous long-term financial consequences resulting in higher property taxes.