January 9, 2012

SENATE BILL NO. 441 (First Reprint)

To the Senate: While I appreciate the intent of the sponsors of this

legislation, I cannot approve of a law that would potentially serve as a disincentive to local units seeking to enter into shared service agreements. Accordingly, pursuant to Article V,

Section I, Paragraph 14 of the New Jersey Constitution, I am returning Senate Bill No. 441 (First Reprint) with my

recommendations for reconsideration. I consider the enactment of Cap 2.0, as the key first step in controlling the States crushing property tax burden, to be one of the most important achievements of my Administration thus far. This bill would explicitly provide that shared services

agreements may not call for an annual cost increase in excess of two percent unless approved by the voters at public referendum. While this would advance the worthwhile public policy goal of preventing local units from exceeding the statutorily mandated two percent property tax levy cap, it may also have the

unintended consequence of impeding shared services agreements between local governmental entities. I believe are that critical shared tools services in reining and in consolidation property tax

agreements

increases at the local level. local units constrain costs

Such agreements not only help by eliminating duplication and

implementing economies of scale, these arrangements also often lead to improved through quality the in the delivery of of governmental We must

services

marshalling

resources.

encourage, rather than impose a disincentive for, local units to enter these arrangements. Indeed, there are times when a

shared service agreement, even with annual increases in excess of two percent, still may be the most cost-effective manner to

proceed. units.

This legislation would remove that option from local

However,

share

the

sponsors

concern

that

some

local

units may abuse their negotiating leverage in order to seek unfair increases from their partners in shared service

arrangements.

I believe the best way to address this issue is

to ensure that local units are properly advised regarding the potential pitfall of excessive fee increases. Accordingly, I am

returning this legislation with a recommendation to require the Division of Local Government Services in the Department of

Community Affairs to issue guidance on the adoption of shared service agreements, which guidance shall recommend appropriate considerations regarding future cost increases. I am also returning this legislation today to address

another local finance issue, which I have been advised is in need of legislative correction. Under current law,

municipalities may bond, with the approval of the Local Finance Board, to cover cash payments for tax appeal settlements and adjudications. However, if a municipality pays the tax appeals

immediately, it is no longer able to bond for those expenses. As such, current law actually incentivizes towns to act in a fiscally appeals irresponsible immediately, manner rather by than issuing paying debt the for these tax from

appeals

existing funds.

Therefore, I am also returning this legislation

with my recommendation to correct that issue. Accordingly, I herewith return Senate Bill No. 441 (First Reprint) and recommend that it be amended as follows: Page 2, Title, Line 1: After concerning insert local budgets, finances and After c.63 insert and supplementing N.J.S. 40A:41 et seq

Page 2, Title, Line 2:

Page 2, Section 1, Lines 28-35:

Delete in their entirety and insert c. The Director of the Division of Local Government Services shall issue, on its website or otherwise, and update as appropriate, guidance for local units seeking to enter into an agreement with any other local unit to provide or receive services. Such guidance shall include recommendations that recipients of services strongly consider contractual protections against unreasonable fee increases. Insert 2. (New Section) Any municipality that has ended the previous budget year with a deficit in operations caused, whether in whole or in part, by obligations created from tax appeals, may issue notes with the approval of the Local Finance Board on such conditions as the Local Finance Board deems appropriate. The amount of notes authorized pursuant to this provision shall not exceed the cash payments or tax credits due to tax appeals and shall be authorized by a bond ordinance approved by the Local Finance Board. Delete 2 and insert 3 Delete and shall be applicable to shared service agreements executed after the date of enactment Respectfully, /s/ Chris Christie Governor

Page 2, Line 37:

Page 2, Section 2, Line 38: Page 2, Section 2, Lines 38-39:

[seal] Attest: /s/ Kevin M. ODowd Deputy Chief Counsel to the Governor