On Thursday, May 14, the New Jersey Legislature through the Assembly Commerce and Economic Development Committee passed Assembly Bill 3971, which effectively authorizes New Jersey municipalities and counties to issue "coronavirus relief bonds."
The Assembly initially released a revised rendition of A3971 on May 7, and a corresponding bill was introduced in the Senate (S2475) on May 11, 2020. Specifically, A3971/S2475 permits counties and municipalities to issue bonds and/or notes for the loss of revenue and/or unanticipated expenses directly attributable to the COVID-19 pandemic with appropriate safeguards and oversight from the State of New Jersey Division of Local Government Services.
As proposed, New Jersey counties and municipalities (local unit) would be permitted, at their discretion, to bond for short-term and/or long-term to finance both the lost revenues and the increased expenses resulting from the Coronavirus pandemic. A local unit would authorize the issuance of these bonds by adoption of a refunding bond ordinance. In the proposed legislation, a down payment and Local Finance Board approval shall not be required unless the local unit seeks to issue bonds in an amount that exceeds 30% of the prior year's budget or if the repayment term is longer than 10 years.
The bills would establish a new financing mechanism to enable local units to borrow money to address the costs attributable to increased expenses and revenue shortfalls of the next twenty-four months due to the pandemic. This mechanism would also enable these entities to pay back that money over a maximum of a 10-year period without Local Finance Board approval. Ideally, this design helps to protect taxpayers from facing large tax increases during a time when they and the economy are most vulnerable.
As of May 14, 2020, the bill awaits review by the Senate Community and Urban Affairs Committee. We will continue to monitor and report on the progress of A3971/S2475. If you have any questions on the implications of this bill, reach out through the link below or through your Bowman representative. Make sure to stay tuned into the latest regulatory and business news through the Bowman Blog.