S1711 SBA Statement 3/10/16

SENATE BUDGET AND APPROPRIATIONS COMMITTEE

STATEMENT TO

SENATE, No. 1711

with committee amendments

STATE OF NEW JERSEY

DATED: MARCH 10, 2016

The Senate Budget and Appropriations Committee reports favorably Senate Bill No. 1711, with committee amendments.

As amended, this bill, designated the “Municipal Stabilization and Recovery Act,” authorizes the State to assist municipalities experiencing severe fiscal distress by developing a comprehensive rehabilitation plan for such a municipality and implementing that plan on behalf of the municipality.

The bill defines a “municipality in need of stabilization and recovery” as a municipality that has experienced a decrease of more than 50 percent in its total assessed property values during the immediately preceding five-year period, and has experienced an increase in outstanding debt exceeding 50 percent during the immediately preceding five-year period, as determined by the director. Under the bill, the Director of the Division of Local Government Services may ascertain whether a municipality should be deemed a “municipality in need of stabilization and recovery,” and if so, shall recommend that the Commissioner of Community Affairs make such a determination. Within 14 days of receipt of the director’s recommendation, the commissioner must make the final determination of whether to deem the municipality a “municipality in need of stabilization and recovery” and therefore subject to the provisions of the bill for a period of five consecutive years. The commissioner must notify the Governor, the State Treasurer, and the director when a municipality has been deemed to be subject to the provisions of the bill, and must then notify the municipal clerk, or other appropriate municipal official of the municipality, in writing, of that determination.

Following that determination, the bill authorizes the Local Finance Board, in its exclusive discretion, to assume, reallocate to, and vest in the director, any of the functions, powers, privileges, and immunities of the governing body of that municipality set forth in any statute, regulation, ordinance, resolution, charter, or contract to which the municipality is a party that are, or may be, substantially related to the fiscal condition or financial rehabilitation and recovery of that municipality. The bill provides that the duration of the transfer of the functions, powers, privileges, and immunities of the governing body shall not exceed five consecutive years.

The bill provides that the director may be granted the authority by the Local Finance Board to take any steps to stabilize the finances, restructure the debts, or assist in the financial rehabilitation and recovery of the municipality in need of stabilization and recovery. Under the bill, this authority includes, but is not limited to:

-- implementing efficiency and oversight measures;

-- dissolving local agencies;

-- vetoing the minutes of the governing body or any subdivision of the municipality;

-- directing litigation and the municipality’s legal affairs;

-- disposing of municipally-owned assets;

-- amending or terminating any existing contracts (excluding financing instruments such as bonds);

-- modifying the terms, including wages and hours, or other terms of collective negotiations agreements or terminating any collective negotiations agreements to which the municipality is a party;

-- negotiating, on behalf of the municipality, future collective bargaining agreements;

-- abolishing any positions in the municipality;

-- unilaterally appointing, transferring, or removing employees;

-- entering into shared services agreements on behalf of the municipality;

-- procuring goods and services on behalf of the municipality;

-- retaining bond counsel and adopting bond ordinances;

-- exercising on behalf of the municipality any authority granted by the “Local Redevelopment and Housing Law,” P.L.1992, c.79 (C.40A:12A-1 et seq,), the “Redevelopment Area Bond Financing Law,” P.L.2001, c.310 (C.40A:12A-64 et seq.), or the “Long Term Tax Exemption Law,” P.L.1991, c.431 (C.40A:20-1 et seq.); and

-- authorizing and filing on behalf of the municipality a petition and other pleadings and papers with any United States court or federal bankruptcy court for the purpose of effecting a plan of readjustment or composition of debts as set forth in R.S.52:27-40 et seq. The bill provides that the power to file a bankruptcy petition is subject to the written approval of the majority of the members of the legislative Joint Budget Oversight Committee.

When exercising powers, the bill requires the director, to the extent practicable, to comply with all notice, hearing, and other requirements to which the municipality in need of stabilization and recovery is generally subject. Although the director shall not be deemed a “public body” pursuant to the "Senator Byron M. Baer Open Public Meetings Act,” P.L.1975, c.231 (C.10:4-6 et seq.), the bill provides that the director shall, to the extent practicable, comply with its requirements when taking action on behalf of the municipality in need of stabilization and recovery that would otherwise be subject to that act.

The bill also authorizes the director to use early retirement incentives under P.L.1999, c.59 (C.43:8C-2) as a mechanism to help stabilize the finances, restructure the debts, or assist the financial rehabilitation and recovery of the municipality in need of stabilization and recovery.

COMMITTEE AMENDMENTS:

The amendments make certain technical changes to the bill, including a change to the title of the bill to reflect that section 13 of the bill amends P.L.1999, c.59 and corrections to certain statutory references.

The amendments also clarify that with respect to the Director of the Division of Local Government Services’ authority to dispose of municipally-owned assets the director may not sell, convey, lease, or dispose of a water asset pursuant to an agreement with a private entity for one year after the effective date of the bill.

FISCAL IMPACT:

The Office of Legislative Services (OLS) estimates that the bill may result in an indeterminate increase in State costs and an indeterminate impact on the revenues and expenditures of affected municipalities, if the Department of Community Affairs exercises the discretionary authority granted by the bill to assume operational control of government functions normally executed by a municipality deemed in need of stabilization and recovery. Without specific information regarding the State’s plan for the fiscal recovery and rehabilitation of a municipality deemed in need of stabilization and recovery, however, the OLS cannot determine how the implementation of the bill may affect State expenditures as well as municipal revenues and expenditures.