Dec 20, 2012: Introduced in the Senate, Referred to Senate Community and Urban Affairs Committee
Many municipalities, particularly distressed urban municipalities, are limited by the lack of municipal options within the "tax sale law," R.S.54:5-1 et seq., from pursuing valuable opportunities for revenue generation and urban revitalization. If given the opportunity to take control of tax liens under favorable conditions, municipalities could benefit from interest, penalties on lien redemption, and the opportunity to foreclose on liens not redeemed. Those municipalities could benefit significantly as a result, both in terms of revenue generation and urban revitalization. While increasing municipal options related to tax liens can serve the public interest, participating municipalities would also face significant obligations. For that reason, it is appropriate for the State to establish a pilot program through which municipalities meeting specific criteria may pursue these opportunities under the supervision of the Division of Local Government Services. To be eligible to participate in the program, the municipality would have to qualify for aid under P.L.1978, c.14 (C.52:27D-178 et seq.). Under the pilot program, any eligible municipality will be able to submit an application to the division to participate. The application would need to include an analysis of the projected benefits of participation in the program, a plan detailing how municipal responsibilities would be carried out, a discussion of what individuals would be responsible for the program, and a discussion of larger municipal revitalization efforts. Based on these aspects of the application, the division would designate participating municipalities. Participating municipalities would enjoy greater power with regard to tax sale properties. Through resolution, the municipality would be able to direct a municipal official to bid at auction on one or more parcels of real estate whenever its governing body determines that the property would be either useful for a public purpose or financially beneficial. The municipal official would be authorized to preempt all other bidding on that property, allowing the municipality to obtain the tax lien at an advantageous rate. At its next meeting following the tax lien sale, the municipal governing body would have to approve the sale through resolution. Without this final approval, the municipality would be barred from bidding on the same property at the next tax sale. For tax liens on owner-occupied properties obtained under the provisions of this bill, for which the household income is below the region's median income, municipalities may provide by resolution that no additional interest would accrue on uncollected taxes for the first six months following the tax sale. To benefit from this interest waiver, the homeowner would have to first apply to the municipal tax collector to be found eligible. To most effectively manage its tax liens, participating municipalities may contract with the county, another municipality, or any other qualified public or private entity. Management needs may include actions such as the collection of delinquent taxes, tax foreclosure, and the resale of foreclosed properties. To fund unpaid tax liens, a participating municipality may incur indebtedness, borrow money, and authorize and issue negotiable refunding bonds in any amount determined necessary if approved by the Local Finance Board in the Department of Community Affairs. The municipality may also issue bond anticipation notes prior to bond issuance. Any bonds or notes issued will be backed by the municipality's taxing power. Municipal proceeds from the redemption of tax liens, or from the sale of associated property, would be held in a debt service reserve fund to the extent needed for repayment of principal and interest on the bonds and notes in the current fiscal year. Any amount in excess of that needed for principal and interest repayment could be transferred to the municipality's general fund as miscellaneous revenue. Bonds may be further secured with State urban aid, and designated as qualified refunding bonds, through the process required by section 1 of P.L.1978, c.35 (C.40A:3-11). Any participating municipality will be able to operate under the pilot program for no less than five years, unless removed by the division. Participating municipalities will be required to provide annual reports to the division on the status of the program. Upon municipal request, the division may extend the number of years the municipality may participate in the program, in increments of three years, without limitation on the number of extensions. If the division finds that a participating municipality is not adequately carrying out its responsibilities under the program, or that the municipality's fiscal condition is being materially harmed by continued participation in the program, it will notify the municipality, and provide a list of corrective actions that must be taken to remain in the program. At the end of one year from notification, if the division finds that those undesirable conditions have not materially changed, the division may order the municipality removed from the program. In such an event, the division shall take the steps necessary to ensure that any legal or financial obligations the municipality has entered are met. Within eight years of the effective date of this act, the director shall produce recommendations on whether or not the program should be continued.