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New Jersey Could Punish Cities for Not Sharing Services

Submitted by pharbin on Tue, 03/13/2012 - 12:06.

A bill approved by a New Jersey senate committee aims to encourage cities to share municipal services or face reduced state funding.

The Senate Community and Urban Affairs Committee approved Senate Bill S-2 on Feb. 27. If it becomes law, the bill would give the state's Local Unit Alignment, Reorganization, and Consolidation Commission, or LUARCC, increased influence to motivate municipalities to share services.

According to the proposed bill, LUARCC would conduct studies of municipal governments to determine whether sharing services would yield cost reductions. If the study determines that sharing services would help the local government, then the people of that municipality would vote on the proposal in a referendum.

This is where things get interesting. If the voters decide against entering into a shared services agreement, then the state will cut the city's funding by the amount that LUARCC estimates the local government would have saved.

For example, if LUARCC determined that two nearby cities could save $20,000 per year by sharing purchasing operations, but the voters decide against it, then the two cities would receive $20,000 less per year in state funding.

New Jersey State Senate President Stephen Sweeney, who co-sponsored the bill, says that the state has to take "the stick approach" to getting New Jersey's 566 municipalities to get serious about sharing services. "The carrot hasn't worked," he adds.

Most of the focus of the bill has been on encouraging municipalities to share core services, such as police, fire, and public works. However, the bill is broad and covers all municipal services. A report released in April 2011 by the New Jersey Department of Community Affairs lists the common types of services that the state encourages municipalities to share. The list includes cooperative purchasing and finance services.

Senate Bill S-2 faces both strong support and harsh criticism. Supporters point to new state laws putting a 2 percent cap on property taxes as reason enough to get serious about sharing services, as it will allow local governments to function with the decreased revenue.

Opponents argue that the law would take decisions about local government away from the residents. Although voters could opt not to implement a shared services agreement, their cities would suffer from reduced state funding as a result.

The bill has yet to be voted on by the full New Jersey Senate. In addition, while Governor Chris Christie is a staunch supporter of sharing services, he has yet to endorse Senate Bill S-2. He instead believes in using property tax caps to motivate local governments.

Given the broad support for shared services at the state level, accounts payable departments working for municipal governments in New Jersey should probably expect to see increased centralization in the future.