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

Summary

An Assembly Commerce and Economic Development Committee statement to Assembly, No. 3971, State of New Jersey, dated May 7, 2020, reporting the bill favorably with committee amendments. The bill would let counties and municipalities issue "coronavirus relief bonds" to cover revenue shortfalls and unanticipated expenses directly attributable to the COVID-19 pandemic, repaid over a 10-year period and secured by ad valorem taxes. Local Finance Board approval is required only for bonds exceeding 30% of the prior year budget or terms longer than 10 years, and the board must decide applications within 45 days. A local unit must first apply for other financial assistance and subtract assistance received, and bonds must be initially issued within 24 months after the end of the emergency.

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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

· 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.

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 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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