New Jersey bill would let municipalities borrow to ease coronavirus revenue woes
A municipal bonding bill approved by New Jersey lawmakers Thursday that would enable local governments to borrow to offset some revenue losses driven by the COVID-19 pandemic may not get the blessing of Gov. Phil Murphy.
The Democrat-controlled state Senate approved the legislation Thursday in a party-line 25-15 vote, but Murphy has not indicated whether he will sign the measure into law because of concerns about parts of the bill. The state Assembly passed the bill in May.
The press office for the Democrat governor did not immediately respond for comment.
Lori Buckelew, assistant executive director of the New Jersey League of Municipalities, said local governments need immediate tools to borrow for combatting virus-related revenue hits, which would be delayed if Murphy opts to use a conditional veto on the measure and send it back to the legislature. The Murphy administration and legislators have been communicating about disagreements with aspects of the bill such as oversight of the borrowing, she said.
“We hope it doesn’t get to that point [of a veto] because borrowing is ultimately going to have to part of the solution for local governments to address the revenue shortfalls they are facing,” said Buckelew. “They need the flexibility.”
Municipalities across the state have lost parking and permit fees as well as court fines, and localities are also bracing for bigger revenue declines later in the year from tax appeals, she said.
The municipal borrowing bill would enable localities to issue bonds for up to 30% of their annual budget without customary approval from the state Local Finance Board. Local governments would also not be required to put proposed bond issues before voters and they would have up to 10 years to repay the debt, according to the bill.
Fitch Ratings analyst Kevin Dolan said the borrowing measure would help New Jersey municipalities weather near-term headwinds incurred since the pandemic took hold in March, prompting stay-at-at-home orders and closures of many businesses. The ultimate credit impact of bonding for sustaining operating costs will hinge on how individual municipal government replenish reserves in future budgets, he said.
“It’s an opportunity for local governments to offset unprecedented revenue losses due to the pandemic,” Dolan said. “This is another means of them getting through this downturn.”
Republicans who opposed the bill said it would allow municipalities to issue too much debt without direct state oversight. State Sen. Declan O’Scanlon, R-Little Silver, also objected to lack of language that would require local governments to exhaust all financial options before borrowing.
Regina Egea, president of the conservative-leaning Garden State Initiative, said local governments should be finding ways to cut expenditures instead of resorting to borrowing. Excess spending and taxes on the local government level, she said, hurt the state competitively by causing homeowners to want to bolt from high property taxes.
“The mayors and town leaders who understand how irresponsible this behavior is will stand up and call this out for what it is; avoiding the hard work that is required in these challenging times," Egea said. “The towns that address the spending and revenue problem, and do not push it off for another day through borrowing, will ultimately have stronger property values.”
Murphy signed another borrowing measure on July 16 that permits the state to borrow up to $9.9 billion using either general obligation bonds or short-term debt through the Federal Reserve’s Municipal Liquidity Facility program. The New Jersey Supreme Court on Aug. 5 will hear a legal challenge to the borrowing. The Republican State Committee argues GO bonds cannot be issued to sustain operating costs without voter approval under the state’s constitution.