New Jersey League of Municipalities

I. Affordable Housing—A-500 Scheduled for a vote

As indicated in our June 10 letter and our June 6 letter, A-500, which changes laws related to affordable housing, is now scheduled for a vote by the full Assembly this Monday, June 16.

Yesterday, the Assembly State Government amended the bill to make it identical to the Senate companion, S-1783. Unfortunately, the amended bills are not available online yet, but will be posted at http://www.njleg.state.nj.us/ at some point.

After the concept of a 2.5% commercial developers fee was first raised, we were briefed on the concept by the Department of Community Affairs. Based on that briefing, we have included in our analysis the figure of $125 million annually as the revenue from such a fee. We do not doubt that the Department offered its best estimates at the time, but we note that the Office of Legislative Services (OLS) indicated that it cannot estimate the fiscal impact of A-500. OLS cannot estimate the revenues from the commercial development fee. The State cannot tell us how much revenue can be directed to the production of affordable housing. In turn, we cannot anticipate the full extent of the impact on the taxpayer.

Based on the on-going concerns from previous correspondence and this new concern based on the OLS estimate, we recommend contacting your Assembly representatives and ask them to oppose A-500.

Its Senate companion, S-1783, can be scheduled for a vote in the Senate. The next Senate voting session is Monday, June 23. We also recommend that you contact your State Senator and ask them to oppose A-500 and S-1783.

A-500 and S-1783 is moving quickly. We believe your concerns should be expressed to your legislators immediately.

The League remains opposed to the above set of bills which would exempt certain renewable energy systems from real property taxation.

The renewal energy system is any equipment that is part of or added to a building—whether residential, commercial, industrial or mixed use—as an accessory use that produces general energy needs for that building. The tax exemption applies to the accessory property installed in any building, for example, residential houses, warehouses, shopping centers, etc.

Once the local unit certifies the accessory property as a renewable energy system, the property shall be exempt from property taxation under Title 54. The bill further provides:

The local unit may at any time inquire into the right of a claimant to the exemption.
The local unit may require the submission of proof to determine the right to the continuance of the exemption.
The local unit shall have the right to inspect the premises which are subject of the claim for exemption.

The mandatory exemption results in tax consequences for local units. It reduces the municipal tax base and shifts the burden onto other property taxpayers in the municipality through higher tax rates. It also creates additional administrative burdens for local units.

The proposals may be well intentioned; however its negative impact during these tight budgetary times was not given due consideration. It is an indirect subsidy opposed by the League unless amended to provide State reimbursement to municipalities.

On Monday, June 16, the Assembly is scheduled to vote on A-2896. This bill will deny a municipality reasonable compensation for a hotel liquor license.

A-2896 would prohibit a municipality from establishing a minimum bid for issuance of a hotel liquor license in certain cases.

The automatic license available to new hotels and motels with at least 100 rooms prevents the typical bid process, since the pool of potential bidders is limited to one. There is no auction process as with other license sales, because of the circumstances. Accordingly, the municipality will set a minimum bid to establish the value of the new license. If the price is too high, the property owner will not bid. In that case, the municipality can set a lower minimum bid.

This bill simply says that “… no minimum bid shall be required for the issuance of a license … if the dining facilities of the hotel or motel are regularly and principally used to provide only meals for catered events and breakfast for guests ….” In effect, this allows the hotel’s owner to set the value of the license and gives the municipality, which will be called on to provide public safety and other services to the facility, no recourse. Absent the establishment of a minimum bid, the owner of the property could bid $1 and get the license.