You asked us to describe two New Jersey property tax relief programs: Regional Efficiency Development Incentives (REDI) and the Regional Efficiency Aid Program (REAP).

SUMMARY

REDI and REAP reduce property taxes by encouraging municipalities (including counties and school districts) to collaborate on delivering services they normally delivery alone. REDI indirectly reduces property taxes by helping a group of municipalities determine if they can cut costs by jointly delivering a service. (A Connecticut bill (sHB 6718) creating a similar program died in committee last session. ) REAP directly reduces property taxes for residential taxpayers in these municipalities by giving them property tax credits, for which the state reimburses municipalities.

The 1998 property tax commission that proposed these programs focused on how municipalities could reduce taxes by consolidating services or assigning them to a regional entity. While this approach could lower tax bills through cost sharing and economies of scale, the commission reasoned municipalities would not try it without state support ("New Jersey's Shared Service Incentive Programs," 2001 Presentation by New Jersey Department of Community Affairs to the Capitol Regional Council of Governments).

Connecticut's various property tax commissions also recognized how service costs increase property taxes, but shied away from recommending intergovernmental approaches. Instead, they recommended the state take over certain local services, such as general assistance, or cover a larger share of those it funds, such as education. But the legislature recently made it easier for towns to collaborate on activities. It allowed them to share tax revenue (PA 00-85), jointly perform any function they could perform alone (PA 01-117), and collaboratively assist a fiscally strapped town (PA 01-158).

REDI (P. L. 1999, CHAPTER 60)

Purpose

This program aims to reduce property taxes by encouraging municipalities to collaborate on delivering services they otherwise deliver alone. It assumes that they can deliver some services more efficiently if they share, consolidate, or regionalize them and, consequently, save enough money to lower taxes. Municipalities include counties, cities, towns, school districts, and special districts. The Education Department administers the program for school districts and the Community Affairs Department administers it for all other municipalities.

Eligible Services and Activities

Any two or more municipalities qualify for REDI funding, which reimburses them for feasibility studies and initial implementation costs for a wide range of services. The state picks up the tab for the first $ 15,000 of doing the study and 90% of the costs above that amount. Municipalities must match the balance.

Municipalities also qualify for combination grants and loans to launch the service. They can receive grants to cover the first $ 100,000 of the implementation costs and loans to cover costs above that amount. They cannot use the funds for capital costs or to lease items and equipment with a useful life of more than five years.

REDI does not fund well established programs specifically designed to produce cost savings, such as joint insurance and health insurance funds, cooperative purchasing and pricing systems, and energy aggregation and start-up costs.

(REDI also provides loans to help governments launch early retirement incentive programs. )

Local Government Resolutions

Municipalities seeking reimbursement for planning and implementation costs must first adopt authorizing resolutions. Resolutions authorizing reimbursements for feasibility studies must also describe their purpose. Those authorizing reimbursement for implementation costs must also authorize the municipalities to execute joint service agreements with each other.

REAP (P. L. 1999, CHAPTER 61)

This program reduces the property taxes for residential taxpayers in municipalities that jointly provide services, including those that were started before REDI was adopted. The education and community affairs departments calculate the credit amounts according to a statutory formula that weighs, among other things, the cost of delivering the service and each municipality's degree of fiscal distress.

The credits are permanent, and the legislature must annually appropriate enough funds to cover the cost. Credit amounts increase if municipalities collaborate to deliver more services. The law specifies the process municipalities must follow to claim the credits and record the credit amounts on residential tax bills.

REAP funding has increased since the program was launched in 2000. That year, 130 municipalities were reimbursed for credits totaling over $ 16 million. The number of participating municipalities climbed to 249 in 2001 as REAP reimbursements reached $ 19. 54 million (Department of Community Affairs press release, July 3, 2001 www. state. nj. us/dca/news/pr070301. htm).

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