A6287

An Act permitting municipalities that host certain prisons to raise revenue, including through payments in lieu of taxes and certain employer payroll taxes, amending and supplementing P.L.1977, c.272, and supplementing P.L.1970, c.326 (C.40:48C-6 et seq.).

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 1 of P.L.1977, c.272 (C.54:4-2.2a) is amended to read as follows:

As used in [this act] P.L.1977, c.272 (C.54:4-2.2a et seq.):

"State property" means land and improvements owned by the State and includes, but shall not be limited to, State offices, hospitals, institutions, including, but not limited to, State prisons and correctional facilities, schools, colleges, universities, garages, inspection stations, warehouses, barracks and armories together with abutting vacant land held for future development for the same purposes. State property shall not include that used or held for future use for highway, bridge or tunnel purposes or property which is qualified under State law for any other State payment in lieu of taxes.

(cf: P.L.1977, c.272, s.1)

2. (New section) a. Notwithstanding any law, rule, or regulation to the contrary, the State shall make payments in lieu of taxes to each municipality that submits a bill pursuant to subsection b. of this section, and within which the State government owns real property that is operated as a prison or correctional facility, for the purpose of requiring the State to reimburse each municipality the costs of providing services to the prison or correctional facility. The State shall submit quarterly payments in lieu of taxes in an amount equal to a facility’s maximum inmate capacity multiplied by $2.50 per day.

b. Each municipality in which a State prison or correctional facility property is located may, in accordance with an ordinance adopted for this purpose, request, charge, and collect the payments in lieu of taxes from the State related to the costs of providing services to the prison or correctional facility. The amount to be requested, charged, and collected shall be equal to a facility’s maximum inmate capacity multiplied by $2.50 per day. The tax collector shall bill the State for each State prison or correctional facility for the payment in lieu of taxes at the same time that property tax bills are sent. The payments in lieu of taxes shall be payable by the State Treasurer quarterly in equal installments at the same time that property tax bills are due. Notwithstanding the provisions of section 15 of P.L.1970, c.326 (C.40:48C-15) to the contrary, the sums so received shall be budgeted for the items to which municipal and school purpose taxes may be applied. A municipality that collects a payment pursuant to this section shall promptly transfer to the appropriate school district an amount equal to the school portion of the combined municipal and school purpose tax rate.

c. Nothing in P.L. c. (C. ) (pending before the Legislature as this bill) shall be construed as voiding any negotiated payment in lieu of taxes attributable to the location of a State prison or correctional facility within a municipality that exceeds the amount otherwise due pursuant to subsection b. of this section, or to prohibit any such negotiated payment.

d. The State Treasurer, in consultation with the Local Finance Board, and the Local Finance Board, in consultation with the State Treasurer, shall promulgate, pursuant to "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), such rules and regulations as may be necessary to implement the provisions of this section. At a minimum, the rules and regulations shall establish requirements and procedures concerning the process by which municipalities may request, charge, and collect payments pursuant to this section.

3. (New section) Each municipality in which a State prison or correctional facility property is located is authorized and empowered to impose and collect, pursuant to section 15 of P.L.1970, c.326 (C.40:48C-15), an employer payroll tax, at a rate of up to one percent of the employer's payroll of employees, who work within that State prison or correctional facility. Notwithstanding the provisions of section 15 of P.L.1970, c.326 (C.40:48C-15) to the contrary, the sums so received shall be budgeted for the items to which municipal and school purpose taxes may be applied.

4. This act shall take effect immediately.

STATEMENT

This bill would allow each municipality that hosts a tax-exempt prison or correctional facility to raise additional revenue through payments in lieu of taxes and certain employer payroll taxes. While general law excuses State and federal government entities from paying property tax based upon the assessed value of property they own and use for public purposes, provisions of current law obligate the State to make payment in lieu of taxes (PILOT) payments to each municipality that foregoes property tax revenues, because of the location of tax-exempt State-owned real property therein. Applicable law defines "State property," for these purpose, to include "institutions," however, it is not clear whether the term "institutions" includes prisons and correctional facilities. This bill clarifies that a State prison is an institution and a type of "State" property subject to PILOT payments.

Under the bill, a PILOT is to be made with respect to real property owned by a State prison or correctional facility which is situated within the corporate boundaries of municipalities located in the State. The PILOT is required to be in an amount equal to a facility’s maximum inmate capacity multiplied by $2.50 per day.

The bill provides that the PILOT will be payable quarterly in equal installments at the same time that property tax bills are due, and the sums are to be budgeted for the items to which municipal and school purpose taxes may be applied. The bill further requires that a municipality that collects such a payment to promptly transfer a school portion to the appropriate school district.

The bill also authorizes each such municipality wherein a State prison or correctional facility property is located to impose and collect from the State an employer payroll tax of not more than one percent related to the employees of the State prison or correctional facility.