Committee Statement to Assembly No. 3971 - Assembly Commerce and Economic Development Committee (May 7, 2020)

Summary

Statement to Assembly, No. 3971, with committee amendments, dated May 7, 2020, from the Assembly Commerce and Economic Development Committee of the State of New Jersey, reporting Assembly Bill No. 3971 favorably. As amended, the bill would allow counties and municipalities to borrow moneys through the issuance of bonds and notes to cover revenue shortfalls and additional costs directly attributable to the COVID-19 pandemic, using what it calls coronavirus relief bonds repaid over a 10-year period. Local Finance Board approval would be required if a local unit seeks bonds above 30% of its prior year budget or a repayment term longer than 10 years. The committee amendments change that threshold from 20% to 30% and delete certain other provisions.

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ASSEMBLY COMMERCE AND ECONOMIC DEVELOPMENT
                COMMITTEE

                         STATEMENT TO

                     ASSEMBLY, No. 3971

                        with committee amendments



       STATE OF NEW JERSEY
                            DATED: MAY 7, 2020

          The Assembly Commerce and Economic Development Committee
      reports favorably and with committee amendments Assembly Bill No.
      3971.
         This bill, as amended by the committee, would allow counties
      and municipalities to borrow moneys (through the issuance of
      bonds and notes) to cover the revenue shortfalls and additional costs
      that are directly attributable to the COVID-19 pandemic.
         Municipalities and counties are experiencing revenue shortfalls
      and expense overruns because of the COVID-19 pandemic, and
      these fiscal consequences of the pandemic are likely to continue.
      Local units of government have significant fixed statutory expenses
      and provide essential services. The costs of providing many
      essential services is likely to increase as a result of the COVID-19
      pandemic. Collection of revenues is likely to decrease during the
      pandemic and for a period of time afterwards.
         This bill would establish a new financing mechanism to enable
      local units to borrow money to address the costs attributable to
      increased expenses and revenue shortfalls due to the COVID-19
      pandemic, and to pay back that money over a 10-year period.
         Under the bill, as amended, a local unit that requires moneys
      because of a loss of revenue, unanticipated expenses, or both, which
      are directly attributable to the COVID-19 pandemic may incur
      indebtedness, borrow money, and authorize and issue "coronavirus
      relief bonds." Coronavirus relief bonds would be payable from, and
      secured by a pledge of, ad valorem taxes levied upon all the taxable
      property within the local unit without limitation as to rate or
      amount.
         The process for authorizing the issuance of bonds under this bill
      would follow the process currently applicable to the issuance of
      refunding bonds under the “Local Bond Law,” N.J.S.40A:2-1 et
      seq., except that a local unit will not be required to secure Local
      Finance Board approval unless:
           the local unit seeks to issue bonds in an amount that exceeds
              30% of the local unit’s prior year budget; or
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       the local unit seeks to issue bonds with a repayment term
        longer than 10 years.
   To the extent any provision governing refunding bonds under the
“Local Bond Law,” conflicts with the bill’s provisions, the
provisions of the bill would control.
   In addition to the procedures for adoption of a bond ordinance
required under the Local Bond Law, after introduction and first
reading of a refunding bond ordinance authorizing the issuance of
coronavirus relief bonds, and at least one week prior to the date set
for further consideration, a local unit must display the introduced
refunding bond ordinance on the home page of its website together
with a summary of the ordinance, notice of introduction of the
ordinance, and of the date, time, and place of further consideration
for final passage of the ordinance.
   The bill, as amended, requires a local unit, prior to authorizing
the issuance of coronavirus relief bonds, to apply for financial
assistance that may be available to the local unit from the federal
government, the State, and other sources to address revenue
shortfalls and expenditures due to the COVID-19 pandemic, if any.
The bill, as amended, sets forth criteria for determining the total
amount of coronavirus relief bonds that a local unit may issue.
   First, a local unit must subtract all amounts of assistance
provided to the local unit from the federal government, the State,
and other sources to address revenue shortfalls and expenditures
due to the COVID-19 pandemic. Second, the local unit must
determine the amount of lost or delayed tax and other revenues
experienced by the local unit, and the amount of unanticipated
expenses that are incurred by the local unit, due to COVID-19
within 24 months after the end of the Public Health Emergency and
State of Emergency declared in New Jersey due to COVID-19. The
bill then limits that amount by providing that the total amount of
coronavirus relief bonds that a local unit may issue cannot cause the
local unit to exceed its net debt limitation under the Local Bond
Law.
   Under the bill, as amended, a local unit may use the proceeds
from the sale and issuance of coronavirus relief bonds to address a
revenue shortfall experienced by the local unit, and to cover the
costs of unanticipated expenses, that are directly attributable to the
COVID-19 pandemic and which occurred within 24 months after
the end of the Public Health Emergency and State of Emergency
declared in New Jersey due to COVID-19.
   The bill, as amended, authorizes a local unit, in anticipation of
the issuance of coronavirus relief bonds, to borrow money and issue
and renew negotiable notes in accordance with the provisions of the
Local Bond Law, however, the bill allows a note issued in
anticipation of the issuance of coronavirus relief bonds to be issued
for a period not exceeding two years.
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    The bill, as amended, provides that coronavirus relief bonds, or
notes in anticipation thereof, must be initially issued within 24
months after the end of the Public Health Emergency and State of
Emergency declared in New Jersey due to COVID-19.
    Final maturity of a coronavirus relief bond must be within ten
years from the initial issuance of the bond. However, a local unit
may apply to the Local Finance Board for a longer repayment term.
If the local unit demonstrates a need for a longer repayment term to
the satisfaction of the Local Finance Board, the board may
authorize a longer repayment term. The maturity schedule may
include a combination of notes and bonds as deemed appropriate by
the local unit, and bonds will mature in amounts deemed
appropriate by the local unit.
    The bill, as amended, requires the Local Finance Board to render
a decision on an application for approval submitted to it under the
bill within 45 days of the submission of a complete application to
the board. Failure of the board to act on an application within that
timeframe will result in an approval of the application.
    The bill, as amended, provides that a county improvement
authority may exercise its purpose and power under sections 11 and
12 of P.L.1960, c.183 (C.40:37A-54 and C.40:37A-55) to pool
loans for local governmental units within the county or any
beneficiary county that are refunding bonds for the pooling of
coronavirus relief bonds.
    The bill, as amended, authorizes the Division of Local
Government Services to issue guidelines necessary or appropriate to
implement the bill’s provisions.

COMMITTEE AMENDMENTS:
The committee amended the bill to:
    Change a bill provision that would require Local Finance
      Board approval of a proposed bond ordinance so that Local
      Finance Board approval will be required if the local unit seeks
      to issue bonds in an amount that exceeds 30%, instead of 20%,
      of the local unit’s prior year budget.
    Clarify that coronavirus relief bonds will be payable from, and
      secured by a pledge of, ad valorem taxes levied upon all the
      taxable property within the local unit without limitation as to
      rate or amount.
    Delete from the bill a provision that would have required a
      bond ordinance authorizing issuance of coronavirus relief
      bonds to provide that bonds and notes issued under the bill may
      be paid in full prior to full maturity without incurring a penalty
      for early repayment.
    Delete provisions that require a local unit to “thoroughly
      investigate” the availability of other types of financial
      assistance related to the COVID-19 pandemic, and that require
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    a local unit to subtract from the amount of coronavirus relief
    bonds a local unit may issue, amounts of assistance
    “anticipated by, or available to” the local unit. After these
    deletions, the bill will require a local unit: prior to authorizing
    the issuance of coronavirus relief bonds, to apply for financial
    assistance that may be available to it to address revenue
    shortfalls and expenditures due to the COVID-19 pandemic, if
    any; and when determining the total amount of coronavirus
    relief bonds that a local unit may issue, to first subtract all
    amounts of assistance provided to the local unit from the
    federal government, the State, and other sources to address
    revenue shortfalls and expenditures due to the COVID-19
    pandemic.
   Delete from the bill one of the thresholds related to the total
    amount of bonds a local unit can issue under the bill.
    Specifically, the amendments delete a provision providing that
    the total amount of coronavirus relief bonds that a local unit
    may issue shall not exceed an amount that will not cause the
    local unit to exceed the maximum amount of tax anticipation
    notes the local unit may issue. After this deletion, the bill will
    still limit the total amount of coronavirus relief bonds that a
    local unit may issue by providing that the issuance cannot
    cause the local unit to exceed its net debt limitation under the
    Local Bond Law.
   Provide that coronavirus relief bonds may be issued in one or
    more series.
   Provide that final maturity of a coronavirus relief bond will be
    determined based upon the initial issuance of the bond, and not
    on the initial issuance of a note in anticipation thereof.
   Clarify that to the extent any provision governing refunding
    bonds under the “Local Bond Law” conflicts with provisions of
    the bill, the provisions of the bill will govern.
   Clarify that a county improvement authority may pool
    coronavirus relief bonds for local governmental units located
    within the county or any beneficiary county.


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