History of Energy Tax Receipts in NJ
Every year during the State’s budget debate, “State Aid to Municipalities” is discussed.
But what is that?
Originally, these were taxes assessed and collected locally from utilities for the use of their public land, and the funds went into municipal programs and services. Overtime, for the convenience of the public utility companies, the State began collecting these funds so that public utilities did not need to submit taxes to multiple municipalities, they were able to pay one lump sum. Ultimately the State rebranded them as local municipal revenues. Currently, these same funds are referred to as “State Aid” programs, or replacement programs intended to replace property tax relief funding. Overtime, this forced municipalities to turn to property taxes to supplement funding.
Franchise Tax: 1884 to Today
Today’s “Energy Tax” is the direct lineal descendant of the Public Utility Gross Receipts and Franchise Taxes, or Franchise Tax. Initially, the tax was just a Franchise Tax, but in 1919, the Public Utility Gross Receipts taxes were added to become PUGRAFT. The tax was created for entities having lines or mains located in, on, or over, any street, highway or other public place, and provided for a 2% assessment on gross receipts of telegraph, telephone, cable and express companies. This tax was revenue collected by the municipality. Read on...Link to page
State Collection Begins
In 1980, legislation passed providing for the State collection of these taxes, after which the State would distribute the funds to the municipalities. This was done for the convenience of the utility companies, so that they were able to make a single payment to the State, rather than make multiple payments to various municipalities. In addition to the change of who collected the taxes, the reforms also capped the distribution that any municipality would receive with a municipal purposes tax rate of $0.10 or less in each of the three preceding years, and further capped the distribution to all municipalities at $700 per capita. The Municipal Purposes Tax Assistance Fund (MPTAF) was established to collect the amounts that were not distributed pursuant to the caps. Read on...Link to page
The Effects of Energy Deregulation
In the mid-1990s energy deregulation took hold in New Jersey, and the future of the Franchise Tax was very much in doubt. Read on...Link to page
Energy Tax Receipts Property Tax Relief Act (ETR)
In 1997, reforms changed the way these taxes were distributed. A new program, the Energy Tax Receipts Property Tax Relief Act replaced the previous method of distributing funds guaranteed to municipalities. The intent of the Energy Tax Receipts (ETR) program was to ensure that municipalities receive at least the same amount of money that they received from Franchise Taxes in the past. Read on...Link to page
What Does this All Mean?
Beginning in the 1980’s, the State took control over the collection and distribution of the various energy taxes, all previously collected by municipalities, and as a result municipalities began receiving less than 100% of these taxes collected. Read on...Link to page
How Does this Add to the Property Tax Dilemma?
Currently, the largest portion of money received by municipalities from the State is a partial replacement for funds that were originally collected by municipalities, and were direct sources of municipal revenue. Read on...Link to page
NJLM's Position & How You Can Help
The League strongly supports the State’s stopping of the diversion of these funds, and calls for the full restoration of Energy Tax Receipts. The diversion of Energy Tax Receipts has resulted in billions of dollars denied to local property tax payers. Ways you can help restore Energy Tax Receipts funding are provide, as well as an Energy Tax Receipt calculator to find out how much your community has lost. Read on...Link to page