Bill > S4468

Introduced Session

This bill modifies the interest rates and provides for the deferral of interest that is permitted to accrue on unpaid water and sewer service bills issued by certain public (i.e. governmental) providers of water and sewer services as well as unpaid municipal taxes, assessments, and other municipal liens and charges. The bill amends the "sewerage authorities law," P.L.1946, c.138 (C.40:14A-1 et seq.) and the "municipal and county utilities authorities law," P.L.1957, c.183 (C.40:14B-1 et seq.) to provide that the interest rate permitted to accrue on unpaid service charges due and required to be paid to a sewerage authority or a municipal authority will be equal to the prevailing municipal bond yield, and will be assessed for each month or fraction thereof, compounded annually at the end of each year, from the date the service charge was due until the date the charge is paid. The current interest rate on unpaid charges is fixed by statute at a rate of 1 1/2 percent per month, and has remained unchanged since January 1982. The bill amends the "Municipal and County Sewerage Act," P.L.1991, c.53 (C.40A:26A-1 et seq.) and the "County and Municipal Water Supply Act," P.L.1989, c.109 (C.40A:31-1 et seq.) to provide that the interest rate permitted to accrue on unpaid rates, rentals, connection fees, or other charges due and required to be paid to a local unit or units operating a county or municipal sewerage facility or a county or municipal water supply will be equal to the prevailing municipal bond yield, and will be assessed for each month or fraction thereof, compounded annually at the end of each year, from the date the payment was due until the date the payment is made. The current interest rate on unpaid rates, rentals, connection fees, or other charges is set by statute at a rate that is at least equal to the monthly index for the immediately preceding month for 20-year tax exempt bond yields as compiled by the "Bond Buyer" or any similar index, and has remained unchanged since the laws were enacted in 1992 and 1989, respectively. The bill amends a section of the laws concerning real property taxation, R.S.54:4-67, to provide that the interest rate permitted to accrue on unpaid municipal taxes, assessments, and other municipal liens or charges due to the governing body of a municipality will not exceed three percentage points above the prime rate, and will be assessed for each month or fraction thereof, based upon a 360 day calendar year, from the date the tax was payable until the date payment is made. The current interest rate on unpaid municipal taxes, assessments, and other municipal liens or charges is fixed by statute at a rate that cannot exceed 8 percent per annum on the first $1,500 of the delinquency and that cannot exceed 18 percent per annum on any amount in excess of $1,500, and has remained unchanged since 1979. The bill amends various sections of the laws concerning municipally owned sewer and water utilities, including section 1 of P.L.1952, c.324 (C.40:62-83.1), R.S.40:62-107, R.S.40:62-107.6, R.S.40:62-141, and R.S.40:62-142, to stipulate the rates of interest and penalties due on rents, rates, and other service charges required to be paid to municipalities or a water or sewerage commission of a municipality. Under the bill, interest and penalties will be charged and assessed as permitted for unpaid municipal taxes, assessments, and other municipal liens or charges in accordance with R.S.54:4-10 67. The bill supplements the "New Jersey Water Supply Authority Act," P.L.1981, c.293 (C.58:1B-1 et seq.) to establish that the interest rate permitted to accrue on unpaid rents, fees, and charges required to be paid to the authority for water sold from, or for the use of services of, a water system project will be equal to the prevailing municipal bond yield, and will be assessed for each month or fraction thereof, compounded annually at the end of each year, from the date the bill is originally payable until the actual date of payment. Currently, interest accrues on unpaid rents, fees, and charges at two separate rates set by regulations: the authority charges interest on unpaid payments related to the sale of water from the Raritan Basin System at a rate tied to the interest rate accruing on the authority's short-term deposits and charges interest on unpaid payments related to the sale of water from the Manasquan Reservoir Water Supply System at a rate that cannot exceed 18 percent per annum. The bill defines "prevailing municipal bond yield" as the average estimated yield that would be offered on 20-year general obligation bonds with a composite rating of approximately "A" as reflected by the "Bond Buyer 20-Bond Municipal Bond Index" during the first week of the last month of the calendar year immediately preceding the calendar year in which the rates, rents, or sewer and water services charges were due or otherwise required to be paid. During the first week of December 2014, the average estimated yield offered on 20-year general obligation bonds with a composite rating of approximately "A" was 3.83 percent; during the first week of December 2015 that yield was 3.57 percent. The bill defines "prime rate" as that term is defined by the State Uniform Tax Procedure Law, R.S.54:48-1 et seq., and as is determined and redetermined by Director of the Division of Taxation in the Department of the Treasury for purposes of setting and assessing interest due and required to be paid in connection with a delinquent or deficient payment of a State tax pursuant to R.S.54:49-3 or R.S.54:49-6, respectively. During the first week of December 2014, the prime rate as determined by the Director of the Division of Taxation for purposes of setting and assessing interest was 3.25 percent; during the first week of December 2015 that rate was 3.25 percent. In addition, the bill amends the "sewerage authorities law," P.L.1946, c.138 (C.40:14A-1 et seq.) and the "municipal and county utilities authorities law," P.L.1957, c.183 (C.40:14B-1 et seq.), and supplements the "New Jersey Water Supply Authority Act," P.L.1981, c.293 (C.58:1B-1 et seq.), to specify the period of time required to elapse before interest accrues on unpaid utility bills issued by those providers of services. The bill requires at least 30 days to elapse following the date the payment or charge is originally due before interest on the unpaid balance is permitted to accrue. The bill takes effect immediately and applies to all charges, rates, rents, fees, and payments and all municipal taxes, assessments, and other municipal liens and charges that become due or otherwise are first required to be paid on or after the first day of the first fiscal year, of the sewerage authority, municipal authority, governing body or bodies of a local unit or unity, municipality, or authority to which the charge, rate, rent, fee, municipal tax, assessment, or other municipal lien or charge is due or otherwise required to be paid, beginning at least 120 days after the date of enactment. The purpose of this bill is to provide a more standard, consistent approach to setting and assessing interest rates on unpaid water and sewer service bills issued by certain providers of water and sewer services as well as unpaid municipal taxes, assessments, and other municipal liens and charges that allows interest rates to rise and fall based on prevailing rates in the current marketplace.

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John Burzichelli (D)*, 

Introduced in the Senate, Referred to Senate Economic Growth Committee (on 05/19/2025)

Official Document