Towns want state to return millions in utility taxes

Staff Writer

Monmouth and Middlesex officials have joined a chorus of voices throughout New Jersey in calling on the state to turn more than $1 billion in energy receipts taxes over to the towns that deserve them.

Middletown Township Committeeman Anthony Fiore said his governing body will consider a resolution on March 18 urging state legislators to order a statewide referendum on the issue, which he said has cost the town more than $10 million in recent years.

“It is completely unfair,” said Fiore, referring to the state’s “skim” of utility taxes for more than a decade. “This would be no different than the township collecting school taxes and not paying the school board the money they receive. It’s exactly the same concept.”

The concept of utility taxes was established many decades ago, requiring utilities to directly compensate towns for hosting energy infrastructure such as electrical substations and gas lines.

In the early 1980s, the state began collecting those fees, however, keeping a percentage and disbursing the rest to towns, according to officials with the League of Municipalities, which has actively campaigned against the practice for years.

“Increasingly, the state has diverted money over the years to handle their own budget problems,” said Jon Moran, a legislative analyst with the league. “But in 2008, 2009 and 2010, there were drastic cuts. … The statutes allow the state to keep a percentage of the monies, and we are fine with that. But the state has gone far beyond that.”

According to a League of Municipalities report, the state has wrongfully appropriated hundreds of millions of dollars in municipal receipts taxes to balance its own budget in each of the years since.

In 2011 alone, Fiore said, Middletown lost about $4 million, more than 6 percent of the total municipal budget.

“It would make an enormous difference to towns, certainly to Middletown,” Township Administrator Anthony Mercantante said.

“The reality is that the municipalities with this utility infrastructure are entitled to these funds. … If there is a gas main break, does the state send anybody to deal with the emergency? No. So why should the state receive the money?”

In Long Branch, the city received $3.02 million in energy tax receipts in 2013, the same level as the previous year.

Finance Director Ron Mehlhorn Sr. said the full amount owed to the city would be “substantially more.”

“Theoretically, had it stayed the same, we’d be getting millions of dollars more,” he said. “If we had this money, we’d be in pretty good shape. [The state] keeps telling usabouta2percentcap,buttheyhavethe right to do whatever they are doing. “I don’t think we ever lost money, but as it kept going up, they kept more.”

Mayor Adam Schneider said the city has used energy tax receipts to decrease property taxes in the past.

“The energy receipts were benefiting taxpayers,” he said. “It was property tax relief, and then they glommed onto the money.”

Schneider said taxpayers often are unaware when revenues like the energy tax receipts are cut, pitting them against the municipality and not the state.

“As they typically do at the state level, when they do something like that, then they complain that we didn’t cut the budget,” Schneider said. “Taxes go up, and they point the finger at us.”

Fiore and league officials are throwing their weight behind two companion bills recently introduced in the state Senate and Assembly that would incrementally increase the municipal portion of the taxes and allow towns to collect it directly.

Both bipartisan bills were still in committee as of March 4.

State Sen. Linda Greenstein (D-Mercer), co-sponsor of the Senate bill, said the state grab of energy tax receipts is hurting taxpayers and faulted Gov. Chris Christie for holding up the legislation.

“The problem is, the state is skimming and keeping for itself hundreds of millions of dollars each fiscal year from taxes paid by energy suppliers,” Greenstein said. “The money was originally intended to go to the local governments. … Every penny taken away [from municipalities] is that much more paid by families through property taxes or cuts to municipal services.

“In the last session, we put the bill before the governor and he vetoed it. I think the time is now to go again and push strongly to see that this happens in any way we can make it happen.

“It has some bipartisan support out there. Certainly, the League of Municipalities is very in favor of it. It did pass the Legislature already. … The issue is, the governor is holding it back.”

A similar bill was passed by the Legislature in 2012 that would have returned an additional $66 million to towns in the 2013 budget, but it was ultimately vetoed by Christie.

Due to the likelihood of another gubernatorial veto, Fiore said he is joining other New Jersey mayors in calling for a public referendum on the issue.

Moran said the league has not specifically considered pursuing a referendum, but he hopes the bills would muster enough support in the Legislature to override any potential veto.

“We would hope, of course, that the governor would reconsider his position,” he said.