The New Jersey Division of Local Government Services Local Finance Board wants to make sure that counties and municipalities are paying their bills on time. It recently proposed two new rules that would alter the procedures for the payment of local unit debt obligations.
According to the rule proposal, “Local units making late payments on their debt obligations, or missing payments entirely, could potentially jeopardize other local units’ continued access to capital markets and compromise the liquidity and solvency of local governments throughout the State.” Although the Local Finance Board states that there have only been isolated instances of municipalities making late debt payments, it believes they still signal that action is needed to ensure all local units continue to meet their debt obligations in a timely fashion.
Below is a brief summary of each proposed rule:
- Proposed N.J.A.C. 5:30-8.6(a) directs chief financial officers of local units to schedule automated payment of any debt payments, and that debt payments be scheduled to take place at least 10 days before payment is due. The term “local unit” as used in this rule means a municipality, county, local authority, or fire district.
- Proposed N.J.A.C. 5:30-8.6(b) requires a local unit to immediately report to the Director of the Division of Local Government Services (Director) of a failure to make the 10-day automated debt payment deadline, or the potential or actual failure to make a debt payment by the date and time when said obligation becomes due.
Lastly, the rules provide that a chief financial officer whose local unit fails to comply with this section may be subject to disciplinary action by the Director of the Division of Local Government Services.
For more information about how the now rules may impact your municipality, we encourage you to contact a member of Scarinci Hollenbeck’s Public Law Group.