Measure Would Help Encourage Cost Savings By Capping Annual Fee Increases for Shared Service Agreements
TRENTON – The Senate Community and Urban Affairs Committee today approved a bill sponsored by Senator Shirley K. Turner that would help promote cost-savings between local governments by holding the line on the annual fees charged for shared service agreements.
“Absent any contract specifications, the local unit providing the service might be in a position to demand excessive annual fee increases from a dependent unit,” said Senator Turner (D-Mercer). “For the local government that is dependent on another government for services, much is at stake. If it is forced to terminate an agreement and resume providing the service itself, the costs could be great. Hopefully, this bill will increase the reliability of shared service agreements and provide more incentives for local officials to consider this measure as a way to streamline costs.”
The bill (S-441) would cap the annual fee increases for a shared service agreement at 4 percent, the same cap that is in place for local property tax levy increases (or the amount permitted by state waiver).
Under current law, local units of government are allowed to enter into a shared service agreement with another local unit(s) in an effort to reduce administrative expenses and save money through efficiencies of scale. For example, two neighboring municipalities that provide trash removal for their respective residents might enter into a shared service agreement that allows one of the municipalities to provide trash removal for the residents of both.
The bill now heads to the full Senate for approval.
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