The Town Crier - Legislative Backgrounder

On March 3, The Division of Local Government Services released Local Finance Notice 2021-06, addressing the Transitional Aid Application Process. Municipalities that which intends to apply for CY 2021 Transitional Aid to Localities must notify the Department of Local Government Services no later than March 15, with a Notice of Intent to Apply via email to dlgs@dca.nj.gov .

Transitional Aid is the only discretionary aid available for CY 2021 municipal budgets and will only be available to CY municipalities that have severe structural difficulties and anticipate difficulties making payments toward nondiscretionary or critical obligations including, but not limited to, debt service, contractual obligations, and payroll.

Any mayor and chief administrative officer for each municipality that is currently not receiving Transitional Aid and wishes to apply for 2021 aid must attend an orientation meeting to discuss the application process on March 23, at 2:00pm in Conference Room 235A of the Department of Community Affairs located at 101 South Broad Street, Trenton, New Jersey. The current deadline for applications is April 9, 2021.

New Applicants

For a municipality to apply they must meet the submit to the following criteria:

• Submit to state oversight of hiring, procurement, and other matters.
• Enact or strengthen comprehensive pay to play ordinances.
• Preform reasonable revaluations or reassessment of property as required by law
• Submit to additional fiscal control measures as may be directed by the Division of Local Government Services.
• All applicants who are awarded with transitional aid must sign a Memorandum of Understanding (MOU) with the Division of Local Government Services.

Eligibility to Apply

All applicants must meet the following minimum criteria to be considered for the award of transitional aid.

•  The municipality received Transitional Aid during CY 2020. For municipalities seeking Transitional Aid for the first time please see the requirements above for new applicants.
• All financial documents must be received by the Division on or before April 9, 2021. For the purposes of budget introduction only, municipalities may anticipate 85% of transitional aid funds received in CY 2020. This level of funding is not a guarantee and is only permitted for the limited purposes of advancing a budget for introduction. The budget will be subject to Division review.

• The municipality must demonstrate reductions or limited increases in salary and wage costs. The Division of Local Government Services expects that the municipality shall have engaged with its unions and non-union employees to effectuate savings through reduced salary costs, reduced staffing levels, modified work rules, modified controllable benefits costs, or other efforts to mitigate salary and wage costs.

• The levy in the introduced budget must contain a tax increase of no less than the maximum permitted by the levy cap workbook or 6%, whichever is less. It should be noted that this requirement is for planning purposes only and will not prohibit aid from being awarded allowing for a final budget with different levy.

• The municipality must demonstrate severe fiscal distress that will result in a constrained ability to raise sufficient revenues to meet budgetary requirements. If such fiscal distress was created by the municipality, with examples being deliberately deferring costs, issuing debt with balloon payments, or imprudently using one-time resources without taking steps to plan loss of the revenue, the applicant’s chance of success will be diminished substantially.

• The budget must show spending restraint from CY 2020. This must include documented efforts to share municipal services, including public safety dispatch, code enforcement, public health services, and other services offered by neighboring municipalities, area boards of education, local authorities, or the county, if those costs are less than the current full cost of providing equivalent service. Municipalities should document demonstrated efforts to reduce energy costs, including bidding for electricity and natural gas, and implementation of renewable energy systems.

• The municipality must provide an assessment of existing local revenues, including whether rates or collections can be increased, and a plan to implement potential changes.

• The municipality must agree to introduce a model pay-to-play ordinance prior to April 9, 2021, pursuant to P.L. 2005, c.271, limiting the awarding of public contracts by the municipality or its agencies to business entities that have made a contribution pursuant to N.J.S.A. 19:44A-1 et seq. and restricting the contributions that the holders of a contract can make during the term of a contract.

• For applicants not currently receiving transitional aid, the municipal governing body must adopt a resolution authorizing application to the Division and acknowledging that upon submission of the application, State oversight shall begin immediately and will be terminated only upon one of the following conditions: 

• The application for aid is withdrawn.
•  Notice is received that no award of funds will be provided in CY 2021. If a grant is awarded, then supervision is memorialized pursuant to the terms of an MOU executed as a condition of award.

•  Applicants not currently receiving transitional aid may apply if they meet the criteria above and must have suffered an extraordinary revenue loss or extraordinary appropriation increase.

Contact: Andrew LaFevre, Legislative Analyst, alafevre@njlm.org , 609-695-3481 ext: 116