Township Committee Passes Resolution for the Restoration of State Energy Tax

This story was originally published on April 13, 2012. Due to a glitch in the system, it has been republished.

The Lacey Township Committee passed a resolution calling for the restoration of Energy Taxes to Municipalities.

“The past several years, 2010, 2011 namely, the town has seen cuts in its Energy Taxes along with other towns in the state of New Jersey so we are looking to urge the governor and the legislature to possibly restoring those funds to our municipalities,” Township Administrator Veronica Laureigh said.

Since 2007, Lacey’s energy tax has been cut by the state approximately $870,647. The township will be receiving $11,107,558 from the energy tax for 2012.

With the announcement of the closing of Oyster Creek Generating Station in 2019, members of the committee have expressed concern in the past that the state would continue to decrease their energy tax, which accounts for approximately 42.6 percent of Lacey’s budget. In 2010 alone, the state cut $450,000 from Lacey’s energy tax.

Although, the closing of Oyster Creek would not affect the distribution of Energy Tax Receipts Tax Aid to Lacey and the funds would remain equivalent to 2002 levels of the same amount the township is currently receiving, said Scott Brodsky, an Associate Fiscal Analyst for the Office of Legislative Services in a letter to Sen. Christopher Connors.

Committeeman David Most has said in the past that the township cannot rely on the state to maintain the Energy Tax Receipt during these economic times. As a result, Most continues to work to ensure a smooth transition to another generating station once Oyster Creek closes in 2019.

“It is a concern of mine,” Most said. “There are bills in place that are supposed to protect it but it’s important that we stand on our own two feet so we can secure that funding.”

Municipalities are not a revenue business, he said. As costs go up, the township’s revenue decreases. Although the Energy Tax Receipt was not supposed to decrease, it has and relying on the Act would not be a good business decision for Lacey Township, he added.

“Why would we leave that up to chance?” he said. “I don’t want to leave that possibility there. Things change. Legislation changes. We need to stabilize the town and by having industry in the backyard and creating revenue, that’s what security is all about. That’s what we’re trying to do, make Lacey Township whole.”

Even if the Energy Tax is maintained at its current level, Lacey struggles to balance its budget. As the township continues its 2012 budget process, the committee is looking for ways to make up for its shortfall, which could be as much as $600,000.

But the issue is not just a problem for Lacey Township, Mayor Mark Dykoff said. Each municipality is allotted funds from the Energy Tax and it’s an initiative of the New Jersey State League of Municipalities to restore those funds.

“The Energy Tax is determined by statute,” said Bill Dressel, Executive Director of the state’s League. “The amount of dollars that goes to Lacey as well as every other municipality in the state has not increased. A greater share of those dollars has been diverted by the state.”

The Energy Tax Receipts Property Tax Relief program is supposed to be a revenue replacement plan intended to replace property tax relief funding that was formerly generated through taxes assessed and collected locally, the League’s website said.

“The taxes were put in place and had always been collected in order to relieve the burdens heaped upon our municipal property taxpayers,” the League’s site says. “The diversion of these property tax relief revenues to other State needs has been practiced for over 25 years; but never to the dramatic levels of 2010.”

The funding is determined according to a statute that allows an inflation deflator index, which has not been followed by democratic and republican administrations, Dressel said.

According to an energy tax calculator on the League’s website, while Lacey received $11.9 million in 2006, the township should have had an Energy Tax of $12.7 million. In 2008, the municipality’s state aid was maintained but it should have been $14.1 million.

The figure has since decreased to $11.1 million. The calculator shows that Lacey should have been receiving more than $15 million in 2011.

“The municipalities incorrectly believe they have a right to these monies and they don't,” Lisa Ryan, spokesperson for the Department of Community Affairs said.

Energy Tax Receipts are a sales tax on households’ utility bills, she said. The revenue that comes from this “sales tax” is distributed based on a formula set by the state and prescribed to each year’s budget.

But regardless of the formula, funds have and can continue to be diverted to the state, Dressel said.

“Anything is possible,” Dressel said. “Any law can be changed by legislative theory. They can do whatever they want.”

Approximately 40 years ago, municipalities used to assess electric power infrastructure in their own communities and taxed the utilities to offset property taxes, he explained.

But since, the statute has changed so the funding is collected by the state rather than directly to municipalities and the index isn’t being applied, he said.

Gov. Chris Christie’s efforts by developing toolkit management reforms will not help townships balance their budgets, the League says. The League of Municipalities’ initiative asks for the Energy Tax to be restored to 2009 levels.

State aid has been maintained under the current budget from the previous year and is expected to remain stable for 2013 as well, Ryan said.

“This stable funding - coupled with such reforms as the two percent property tax cap, pension and health benefits changes, and a two percent cap on interest arbitration awards - is driving down the cost of local government and controlling the property tax problem,” she said.

But the loss of revenue has left municipalities scrapping to make ends meet, Dressel said.

“Even though we have a two percent cap and the government and legislature has done some very good reform, we’re still seeing costs coming in above the cap,” Dressel said. “A larger portion of the dollars being diverted, (to offset the state’s budget crisis), should come back to municipalities.”

The League also asks the state to work with administration and legislature to comply with state statutes regarding Energy Tax distributions or to allow municipalities to directly collect utility revenues locally.

“We’re not saying that in this budget year they should return it all to the municipalities,” Dressel said. “They should acknowledge statutes and have a discussion about phasing in the dollars over time. We think that’s a reasonable approach.”

The governor’s office directed Lacey Patch to contact the Department of Community Affairs, who did not return calls for comment.

For more information on the Energy Tax Receipt, visit the League of Municipalities’ Energy Tax Restoration Resource Center online.