Would Provide Aid to Towns Facing Loss of Corporate Headquarters
TRENTON – Legislation sponsored by Senators Ronald Rice and Nia H. Gill to create a state aid program to help offset property tax losses in municipalities caused by the departure of a large-scale business was approved today by the Senate Community and Urban Affairs Committee.
“When a large business leaves a town or city, the community not only suffers job loss but also from the sudden loss of revenue. This can result in funding cuts to public safety, municipal services and to programs within local schools,” said Senator Rice. “The fund created under the bill will provide temporary state aid to compensate for the lost property tax revenues until the tax base sufficiently recovers. This will help protect against severe tax hikes or service cuts that could jeopardize the quality of life for residents in the community.”
A number of major corporations have announced plans recently to shutter their local facilities and move operations out of New Jersey, resulting in millions of tax dollars lost to the host communities. Roche, a Swiss drug maker with headquarters located in Nutley and Clifton, announced last year that it would move its operations out of the state and lay off 1,000 employees. Hertz announced that it would move its headquarters from Park Ridge to Florida.
The bill (S-2595) would provide relief to towns experiencing the loss of a major corporate facility through the creation of the “Corporate Disinvestment Property Tax Relief Act” municipal aid program. Under the bill, a municipality would be eligible to receive aid if it has a decrease in its property tax base as a result of a reduction in the assessed valuation of a major business ratable due to the departure of a business.
“The loss of a major corporate facility results in a reduction in tax revenue to the host municipalities. This could have a dramatic impact on both municipal services and on taxes,” said Senator Gill. “This aid will help municipalities dealing with a departing business meet its budgetary needs and maintain similar levels of services. In towns like Clifton and Nutley, this measure could help stave off a property tax hike or budget cuts that otherwise would cause harm to the community.”
A taxable property would qualify as a major business ratable if it is classified as commercial or industrial and is utilized by the property owner as its corporate headquarters. The business would also have to: (a) comprise the largest assessed valuation of any line item of ratable in the municipality; (b) equal or exceeds 10 percent of the tax base of the municipality; (c) equal or exceeds $150 million in equalized assessed valuation; or (d) employ not less than 1,000 employees affected by the departure.
To receive this aid, an eligible municipality would be required to apply to the Director of the Division of Local Government Services. A municipality receiving this aid would be required to use the aid to reduce the local property tax levy for school and municipal purposes.
An approved eligible municipality would annually for up to six years receive an aid distribution to make up for the revenue loss resulting from a decreased ratable base. However, aid would be reduced each year in proportion to any subsequent increase in the valuation of the major business ratable. The director would cease the distribution of aid to an eligible municipality beginning any tax year in which the value of the major business ratable returns to an amount that equals or exceeds 95 percent of the original value.
The bill was approved by a vote of 4-0-1. It now heads to the Budget and Appropriations Committee for consideration.