Mayor Yaede wants to circumvent governor on energy tax receipts issue
For nearly four years, politicians from around New Jersey have formed an allegiance in an attempt to convince Gov. Chris Christie to give municipalities in the state millions of dollars in funds the towns say belong to them.
While the officials have greatly increased public consciousness of the issue in that time, they haven’t had much luck swaying the governor. He’s already vetoed one bill on the issue, and his administration has promised he’d do the same if similar legislation came across his desk.
With frustration building and her town’s budget becoming a constant source of angst without the funds, Hamilton mayor Kelly Yaede decided to get creative. She wants to try a different method to get the cash back, one she calls “If you can’t beat ’em, bypass ’em.”
In short, Yaede has proposed amending the state constitution in order to force a general election vote on whether the public believes the funds—called energy tax receipts—should be given in full to municipalities for town budgets and for property tax relief. Should a proposed amendment pass both houses of the state legislature with at least 60 percent approval, it would head to the ballot in the next general election. There, registered voters would voice their opinion.
An Election Day win would mean the amendment would become law, without the need for the governor’s signature. The recent raise of the state minimum wage took a similar path to becoming law. Otherwise, legislation needs the governor’s approval in order to pass.
The issue has its roots in the fact utility companies are not taxed like home or business owners. In place of property taxes, utilities pay municipalities money called energy tax receipts for any property it has in that town, from power lines to generators and beyond. Utility companies used to deliver this money directly to towns until the early 1980s, when the state began acting as a collection agent. Just as Hamilton Township collects and disperses taxes for the school district, the fire districts and Mercer County, the state began receiving the energy tax receipts for all New Jersey municipalities and passing the proper amount on to the towns.
While municipalities must pass on 100 percent of the money it collects on behalf of other entities, they do not receive the same courtesy from the state, which takes a cut of the energy receipts for itself. This practice is called “the state skim.”
Yaede has singled out the state skim as the culprit behind the 7-cent tax increase in this year’s proposed municipal budget, and has funneled her frustration into her effort to eradicate the skim. Township administration claims the state government has kept $19.7-million in energy receipts belonging to Hamilton the last four years combined, money Yaede said could be used to decrease taxes in Hamilton.
“The municipal government does not have a spending problem,” Yaede said. “It is a revenue issue that Hamilton and other towns are having. It’s frustrating to have the state claim towns of our size are spending too much on public safety, garbage collection, road repairs when the state continues to keep our $5 million annually.”
But the state hasn’t returned the full amount of energy receipts to municipalities in nearly 30 years, starting with Republican Gov. Tom Kean’s administration. Christie took the skim one step further in order to solve a deepening budget crisis at the state level. In fiscal year 2005, the state skimmed $72-million. In fiscal year 2011, that amount jumped to $889-million. The administration in Hamilton is saying that number is now at a lower-but-still-substantial $404-million statewide annually.
Hamilton business administrator John Ricci said the state now considers those funds a revenue, money the state counts on and factors into its budget. In 2012, then-Hamilton mayor John Bencivengo—facing a 2-cent municipal tax hike—took exception to this, going to the statehouse to testify on the issue. Mayors across New Jersey have accused the state of balancing its budget with energy receipts money. Administrations like Hamilton’s would very much like to enjoy the same option.
There hasn’t been much response to efforts in the governor’s office. Efforts by the New Jersey League of Municipalities have gained traction in the state legislature but have been ignored or rejected by the governor. Yaede and her administration have struck out on their own, meeting with state division of local services director Tom Neff and with Christie deputy chief of staff Lou Goetting, a former municipal business administrator. Each told the Hamilton representatives to not expect any change from the current order.
“[Goetting] certainly understands the issue,” Ricci said. “We communicated, and at this point, nothing is changing on the energy receipts.”
But Yaede expects her amendment to find support in the state legislature, which has taken interest in the energy receipts. In June 2012, both houses passed a bill by wide margins that would have restored the funds the state had taken from municipalities. Christie voted that bill in July 2012. Another bill—aimed at eventually allowing towns to collect some energy receipts directly—passed in the assembly with 89 percent approval last June. The Senate never voted on it.
To get started, Yaede has partnered with assemblyman Wayne DeAngelo (D-Hamilton) to write the amendment proposal and introduce it in the legislature. She said she has notified the League of Municipalities of her intentions, and has received support from around the state.
Robbinsville mayor Dave Fried approved of Yaede’s proposal, and said restored energy receipts would allow him to lower taxes. Fried said his administration has toyed with attempting to retrieve the funds on its own, sending a tax bill to utility companies that have property in Robbinsville. He’s unsure what would happen should the township decide to do that, but he said he’s frustrated with the municipal government’s inability to control things within its own town.
“Giving local government the tools to govern themselves is more of the answer,” Fried said. “Local government has the ability to respond to local needs better. But we have such little control over the local problems that it’s very, very frustrating to be a mayor.”
In Fried’s mind, the amendment would give towns more say. He knows residents would approve a ballot measure. It’s just a matter of getting the legislature on board.
“I think it’s a great idea,” Fried said, “but I don’t think anyone has the courage to put it on the ballot.”
Others are unsure if an amendment is the right course of action.
East Windsor mayor Janice Mironov has led the League of Municipalities’ committee on energy tax receipts restoration for nearly four years. She said the League hears of policy proposals from time to time, but only currently lends its support to the refiled version of the failed bill from last June. It also supported the bill vetoed by Christie in 2012.
She said those measures have gained great traction within the state, and has forced the energy receipts issue into the forefront. Mironov did not speak directly about Yaede’s proposal.
“I’m really pleased by the strong support we’ve received from mayors of both parties from around the state,” Mironov said.
Assemblyman Daniel Benson (D-Hamilton), who served as a primary sponsor of both bills in the assembly, has worked with the League of Municipalities for more than three years on the energy receipt issue. Benson formerly served on Hamilton Township council and as a Mercer County freeholder. He said he understands the plight of municipal governments, and would support any idea that would get money back in the hands of the taxpayers.
But he said Yaede may be more effective working with the group of officials who have partnered with the League of Municipalities. A wider alliance may be helpful, he said, particularly because some members of the legislature have shown hesitance in changing or amending the state constitution.
“There is an existing coalition that has been working on this for awhile,” Benson said. “I think it’s important for the mayor to get involved with that group.”
Hamilton councilman Kevin Meara met with Benson more than a year ago to discuss what government in Hamilton could do to force change in the statehouse. While council had Yaede as a member, it passed two resolutions requesting Christie return the entire energy receipts amount to the towns, one in 2010 and one in 2012. Meara was also a member of those boards.
Meara has some insight on the issue himself; he works for the township’s utility company, PSEG. He said he’s afraid a constitution amendment might be too risky and roundabout a route to get that money back. Should a vote on a constitutional amendment fail, state law states the issue can’t be heard again for another three years.
“I don’t know if a referendum is going to serve the public,” Meara said. “It would be detrimental if it was to fail. It’s really not that difficult. But I’m not against her proposal.”
Meara said Yaede, instead, should use her clout as mayor of one of New Jersey’s largest municipalities to force the state to act on the issue itself. He said, in the end, the success of every effort will be in their hands.
“If the will of that body is the gross receipts will be skimmed, then the gross receipts will be skimmed,” Meara said. “They certainly have the power to change it. If we’re not going to get the money back, it’s because of the will of the people in Trenton. It’s that simple.”
That fact has been a source of frustration for Yaede, who said she has done everything possible to keep government lean in Hamilton. She cut $1.2-million in spending from the budget last year and another $3-million this year. With those cuts and restored energy receipts, the township would have been able to decrease taxes this year, she said.
“We don’t have a spending problem here in Hamilton,” Yaede said. “We have made government leaner and more efficient. But the strain is hurting us. It’s becoming unbearable.”
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