Proposed New Jersey Bills Promote Municipal Consolidation

New Jersey lawmakers are currently considering two companion bills that would make it easier for New Jersey communities to pursue municipal consolidation. The legislation, which has bi-partisan support, recently cleared the by the Assembly State and Local Government Committee.

 Proposed New Jersey Bills Promote Municipal Consolidation

The goal of the proposed bill (A-1739/S-316) is to increase the flexibility, clarity, and available tools of optional municipal consolidation process. Consolidations are currently governed by the Uniform Shared Services and Consolidation Act, which was enacted in 2007. However, due to the complexity of the process, only one municipal consolidation has taken place. Below are several key changes that would be implemented under the new bill, as set out in the statement issued by the Assembly State and Local Government Committee:

  • Non-contiguous municipalities would be permitted to consolidate if located within a reasonable distance of one another.
  • Towns seeking to consolidate would be allowed to develop their own process for the equalization of property assessments in the new municipality, subject to the approval of the Director of the Division of Taxation in the Department of the Treasury in consultation with the local assessors and governing bodies.
  • Existing debt, or debt newly created by any financial arrangement between any or all of the former municipalities in furtherance of any aspect of a consolidation plan, may be apportioned among the taxpayers of the consolidating municipalities as debt within special taxing districts in any manner that the parties mutually agree upon in the consolidation plan.
  • Consolidating municipalities would be permitted to enter into any financial or other agreement to adjust benefits between the municipalities, provide indemnification from legal actions stemming from a consolidation, or provide incentives or other acts to facilitate municipal consolidation.
  • Severance pay may be authorized, subject to State review, for employees of the consolidating municipalities who are to be terminated by the new municipality in order to encourage these employees to stay in their positions until the consolidation is effectuated.
  • The Local Finance Board and the Director of the Division of Taxation would be expressly permitted to, in making decisions concerning consolidation, pursue a waiver of a law, rule, or regulation that may not have anticipated a phase-in or consolidation of services through referral of the matter to the appropriate agency pursuant to provisions of existing law.

To bring greater clarity with respect to the municipal consolidation process, the bill specifies that a referendum must be held in a new municipality on whether to have a municipal open space tax, and the amount or rate of such tax, even if all the consolidating municipalities have an open space tax at the same rate.

In addition, the voters of each participating municipality must approve of a proposed consolidation in order for it to be implemented, regardless of the process used to pursue it. Under current law, voter approval is only required if a consolidation results from a Municipal Consolidation Study Commission initiated by municipal applications.

For more information about the proposed legislation or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.

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