Yesterday, the State Assembly approved A-4175, the “New Jersey COVID-19 Emergency Bond Act,’’ by a vote of 51-28. This bill authorizes the issuance of $5 billion in State general obligation bonds to be used in response to the fiscal impact of the COVID-19 pandemic. The bill also authorizes the Governor to apply for and receive federal stimulus loans (of up to $9 billion) from the Federal Reserve’s Municipal Liquidity Facility (MLF). The MLF funding would, according to the bill, be available to address State revenue shortfalls, and to create a “COVID-19 Local Government Unit Emergency Fund,” to be administered by the Department of Community Affairs (DCA). The bill also authorizes the issuance of refunding bonds, whenever better rates and terms are available, and emergency, short-term liquidity notes, to address temporary cash flow problems. The bill now heads to the Senate, where there is no companion and its fate is uncertain.
With the COVID-19 Local Government Unit Emergency Fund, the DCA would be authorized to make loans to municipalities and counties unable to directly access the MLF or the purchase of securities issued by those local governments. Apart from the requirement that the DCA secure local government repayment obligations, the bill does not set forth the terms and conditions of providing financial assistance.
We all know that New Jersey local governments will need support from either the Federal or State governments or the bond markets to continue to deliver vital services throughout the recovery period. And we know that the State will also need a revenue infusion from either or both of those sources to meet the needs of our citizens, and our municipalities, statewide. That includes the State’s responsibility to transmit Energy Tax Receipts Property Tax Relief and Consolidated Municipal Property Tax Relief Assistance (ETR/CMPTRA) funding, without any cuts or any further delays.
We appreciate this effort to address the problems that the State and New Jersey municipalities are experiencing, and will continue to experience, due to the pandemic. However, respectfully, we are concerned whether this legislation provides enough flexibility to municipalities looking to try steering their own courses through the current crisis.
League President Jim Perry has appointed a Special Committee of Mayors and a small group of experts from across the state to analyze the legislation and provide guidance to the League and its membership. We will advise you of its findings.
With or without this legislation, we will continue to urge Senate action on A-3971/S-2475. These companion bills would amend current law to allow counties and municipalities to borrow monies (through the issuance of bonds and notes) to cover the revenue shortfalls and additional costs that are directly attributable to the COVID-19 pandemic. Local units of government have significant fixed statutory expenses and provide essential services. The cost of providing many essential services is likely to increase as a result of the COVID-19 pandemic at the same time revenues collections will most likely be decreasing due to the pandemic and aftermath.
Current law does not permit local bonding to cover revenue losses. Pursuant to A-3971/S-2475, a local unit that requires moneys because of a loss of revenue, unanticipated expenses, or both, which are directly attributable to the COVID-19 pandemic, may incur indebtedness, borrow money, and authorize and issue "coronavirus relief bonds." Coronavirus relief bonds would be payable from and secured by a pledge of ad valorem taxes levied upon all the taxable property within the local unit without limitation as to rate or amount.
These provisions would allow municipalities with a better bond rating than the State to possibly secure funding at a lower rate and better terms than would be available through the State pass-through of Federal Reserve’s MLF lending process in A-4175. That would not only help taxpayers in those municipalities. A-3971, sponsored by Assemblyman Benson, Speaker Coughlin, and others, has already passed the Assembly. It awaits action in the Senate Community and Urban Affairs Committee, where it has joined its companion bill, S-2475, which is sponsored by Senators Singleton and Gopal.
You can download a sample letter and resolution in support of A3971 and S2475 on the League’s webpage. Please urge your State Senator to support A-3971/S-2475.
Jon Moran, Senior Legislative Analyst, email@example.com, 609-695-3481 x121.
Lori Buckelew, Senior Legislative Analyst, firstname.lastname@example.org, 609-695-3481 x112.