NJ looks to let towns borrow big to patch coronavirus deficits
In a party-line vote, an Assembly committee voted Thursday to allow counties and municipalities to borrow money through "coronavirus relief bonds" to navigate the financial fallout of the pandemic.
Governments are facing severe revenue shortfalls and additional costs associated with the COVID-19 response. While the Federal Emergency Management Agency may reimburse three-fourths of the cost of emergency expenses, there would still be higher costs and plunging revenue from taxes and fees.
“While we don’t view this particular bill as a panacea, we do see it as a viable tool in the toolbox for local governments to proceed in the years ahead,” said Mike Cerra, assistant executive director of the New Jersey State League of Municipalities.
Under the bill, borrowing wouldn’t require voter approval – and it wouldn’t need approval from the state’s Local Finance Board, either, unless the bonds exceed 30% of a government’s prior year budget or would be repaid in longer than 10 years.
“The proceeds of the sales would then be used to address those revenue shortfalls or cover those unanticipated expenses, thereby allowing towns and counties to spread the pain of this pandemic over a series of years,” said Assemblyman Dan Benson, D-Mercer, the bill’s sponsor.
The borrowing would be repaid through future property taxes.
The Assembly Commerce and Economic Development Committee advanced the bill 6-4. The six Democrats voted for it, and the four Republicans were opposed.
“Borrowing to cover your debt never works,” said Assemblyman John Catalano, R-Ocean.
“The reality is this is really – the numbers don’t work,” said Assemblyman John DiMaio, R-Warren. “And to not say we’re going to tie it to cuts is almost setting up these towns are long-term disaster. And I really would like to this bill tied to voter approval.”
“The mayors and councils need to have a very limited scope where they can use this money and appropriate it in places where it’s going to help the taxpayers in their communities. And this is not doing it,” said Assemblyman Robert Auth, R-Bergen. “This is an expansion of government and this is an expansion of budgets of municipalities that can’t afford to do it right now.”
Democrats said the bill is necessary, given the fiscal emergency.
“Putting it out to the public for their vote right now is just – there’s no time. This is a matter of urgency right now,” said Assemblyman Rob Karibinchak, D-Middlesex. “This is something that our mayors need as another tool in their arsenal to combat this financial disaster that’s in front of us right this second.”
“They are looking desperately trying to keep their towns afloat, and this is definitely a tool to do that,” said Assemblywoman Verlina Reynolds-Jackson, D-Mercer.
“At this time, when revenues have fallen off a cliff, we need to trust that our local officials will act responsibly and give them tools to get us to tomorrow,” said Assemblyman Nicholas Chiaravalloti, D-Hudson.
Bridgewater Mayor Matthew Moench said his township is facing a nearly $2 million loss in revenue, mostly through a reduction in hotel taxes and revenue sharing with Bridgewater Commons mall. He said if passed along to residents, that would amount to a nearly 12% increase in property taxes.
“It’s not something we can burden our residents with,” Moench said. “While I don’t advocate borrowing generally, I think it typically should be a last resort, this is the kind of thing that if we don’t do, is going to incur an enormous amount of tax increases on residents and not provide towns the flexibility that they need.”