Dear Chairmen Kenny and Burzichelli:

We, respectfully, ask that this letter be made part of the official record of your Committee’s deliberation. It addresses the League’s position on local option taxes, which were discussed at your Committee meeting on October 12, 2006.

We sincerely hope that this special session, with its four joint committees, will be successful in fixing New Jersey’s massive and chronic property tax crisis. We have committed our resources and energies toward that end and we will continue to do so. We honestly want to help this special session find a way to fix the problem.

Over the last three months, we have witnessed the hearings of your special joint legislative committee for property tax reform. We sincerely respect the six Legislators who accepted the challenge, spelled out in ACR-3. We sincerely respect the long hours and hard effort that you have dedicated to reform. And we sincerely respect your obvious sincerity in keeping open minds and putting aside any simplistic preconceptions of the cause of, and the cure for, the crisis we confront. You have listened to all the experts. You have evaluated all the evidence. And you will soon fearlessly formulate a set of proposals designed to deliver some immediate relief and, as Governor Corzine said in his address at the beginning of this process, to make the property tax, in the years to come, “less and less a portion of the total funding pie.”

In short, we have been privileged to witness the Joint Legislative Committee process at its best.

Respectfully, we ask the members of the Committee to remember that we have never suggested that there is a simple, exclusively ‘revenue side,’ fix to the crisis. Accordingly, local officials, through the League of Municipalities, have never ignored the ‘spending side’ of the problem. Realizing that, on average, 70% of the cost of local government is personnel and personnel related cost, we have already presented, to the Pensions and Benefits Committee, testimony and a detailed study that sought to focus attention on the large and rapidly growing impact of public employee salaries, pensions and benefits on local property taxes. And, while we, along with a host of expert witnesses, have advised the Consolidation and Shared Services Committee that consolidations and service sharings have had a limited impact on New Jersey’s property tax crisis, we have offered the members of that Committee suggestions on how the process can be streamlined and encouraged. Anything that might contribute to a solution needs to be explored.

But, even if this special session enacts the ‘spending side’ reforms we’ve asked for, the problem will not be fixed. Some attention will need to be given to the ‘revenue side’ of the equation. No matter how much you think government should or should not spend. No matter where you think money is needed or money is wasted. No matter what the appropriate level of revenue elected officials need to meet their responsibilities to the people who elected them, the simple fact of the matter is that there has to be a fairer way of raising it.

That needs to be the primary focus of any effort dedicated to property tax reform. And that effort, in our estimation, needs to, decisively and in short order, move our State from our 46% reliance on property taxes, down to the National average of about 30%.

Toward that end, we would like to comment on the utility of local option taxes.

The members of this Committee need to know that, while local option taxes can be a tool to reduce local property taxes, in some cases, and while they can represent a partial solution to the crisis, they will, in many places and for good reasons, not be used.

If your municipality is located along the Delaware River or Bay, and if this special session gives you nothing more than a local option sales tax, chances are your residents and businesses will not see any relief. For reasons of economic competitiveness, in order to protect local businesspeople and in order to keep local jobs, your governing body will not use this tool, lest buyers take their business across the bridges to the West Bank.

If your municipality is home to a high percentage of retirement communities, and if this special session gives you nothing more than a local option wage tax, chances are your struggling seniors will not see any relief. For the reason that this option would only affect a small percentage of your residents, many of them young families struggling to realize the American Dream, your governing body will not use this tool.

For years, we advocated a local option hotel tax. Earlier this decade, the Legislature gave us that tool. Thank you for that. However, not every municipality has hotels, and of those that do, for reasons of economic competitiveness, not every one has been able to use this tool. Please do not repeal the hotel tax, in some cases, it helps. We only want to emphasize the point that local option taxes do not represent a comprehensive state-wide solution to a chronic and oppressive state-wide problem like our over-reliance on the property tax.

That being said, please be advised that we have long supported, and continue to support, development impact fees. We have lobbied for that tool in the Legislature’s regular sessions and, if that comes before you, we will lobby for it in this special session. It can be a very valuable property tax relief tool in a rapidly developing municipality. But even that would not represent comprehensive, state-wide and sustainable property tax reform.

In our opinion, as Mayor Passanante told you in Collingwood, this special session of the Legislature will have been a success if it does nothing more than coalesce support in both Houses for action to advance a Citizens Convention.  Our taxpayers need to know that if the State Legislature fails to enact real and sustainable property tax reform, then they themselves can take the next crack.