Burzichelli Bill to Adjust Interest Rate Allowed to Accrue on Unpaid Municipal & Public Utility Bills, Help Residents in Debt Continues Advancing

(TRENTON) – Legislation sponsored by Assemblyman John Burzichelli to help residents who have fallen behind on their bills get back on their feet by providing a more consistent approach to setting and assessing interest rates on certain unpaid utility bills, as well as delinquent municipal taxes, assessments and other municipal liens and charges was advanced Thursday by an Assembly panel.

“We have all fallen on hard times every now and then. In some cases, families may struggle to keep up with their bills and have to scramble to pay off a debt that is now higher because of the interest,” said Burzichelli (D-Gloucester/Salem/Cumberland), who serves as vice-chair of the committee. “The current system has huge variation in interest rates and how they accrue on late payments, which can make paying back a debt difficult. Some rates have remained the same for over forty years and are as high as 18 percent which is unfair given the current economic climate. This bill would create a standard system where interest rates rise and fall based on market conditions.”

The bill (A-3576) amends the state’s sewerage authorities law, the municipal and county utilities authorities law, the Municipal and County Sewerage Act, the County and Municipal Water Supply Act and the New Jersey Water Supply Authority Act to provide that the interest rate permitted to accrue on (1) unpaid service charges owed to a sewerage or municipal authority; (2) unpaid rates, rentals, connection fees or other charges owed to a local unit or units operating a county or municipal sewerage facility or a county or municipal water supply; and (3) unpaid rents, fees and charges owed to an 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 service charge was due until the date it is paid.

The current rate of interest on unpaid service charges (owed to a sewerage or municipal authority) is fixed by statute at a rate of 1 1/2 percent per month, and has remained unchanged since 1982. The current rate of interest on unpaid rates, rentals, connection fees or other charges (owed to a local unit or units operating a county or municipal sewerage facility or a county or municipal water supply) is set by statute at a rate 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.

Meanwhile, interest is permitted to accrue on unpaid rents, fees, and charges (owed to an authority for water sold from or for the use of services of a water system project) 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 a rate that accrues 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 also amends a section of the laws concerning real property taxation so the interest rate that can accrue on delinquent 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 on a 360 day calendar, from the date the tax was payable until the date payment is made. The current rate allowed to accrue on delinquent 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 cannot exceed 18 percent per annum on any amount in excess of $1,500. It has remained unchanged since 1979.

The bill also 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 that interest and penalties that may be due on rents, rates and other service charges required to be paid to municipalities or a water or sewerage commission of a municipality, will be charged and assessed as may be permitted for delinquent municipal taxes, assessments, and other municipal liens or charges in accordance with R.S.54:4-67. The statutes governing municipally owned sewer and water utilities do not specify the interest rate or the penalties permitted to accrue and be charged for unpaid rents, rates, and other service charges.

In addition, the bill amends the sewerage authorities law and the municipal and county utilities authorities law, and supplements the New Jersey Water Supply Authority Act to specify the period of time that is required to elapse before interest is permitted to accrue on unpaid public utility bills issued by public providers of water and sewer services. The bill provides that at least 30 days must elapse following the date the payment is originally due on the aforementioned charges before interest on the unpaid balance is allowed to accrue.

The bill was released by the Assembly Appropriations Committee.