N.J. Stat. § 40A:3-1 Short title
This act shall be known and may be cited as the "Municipal Qualified Bond Act." L.1976, c. 38, s. 10, eff. June 28, 1976.
N.J. Stat. tit. 40A, ch. 3
N.J. Stat. tit. 40A, ch. 3
in effectN.J. Stat. § 40A:3-2 Findings, declarations.
1. The Legislature finds and declares that: a. Maintenance of strong financial credit in New Jersey municipalities is essential in providing necessary capital improvement or property at minimum cost, for the citizens of this State; b. While the credit status of New Jersey's municipalities is sound, it can be strengthened by a pledge of and statutory lien on State Urban Aid, Gross Receipts Tax, State Revenue Sharing, Municipal Purposes Tax Assistance Fund distributions, Business Personal Property Tax Replacement Revenues and any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs to guarantee debt service payments on qualified bonds; c. Such a pledge and statutory lien should expand the market for and lower the interest costs on qualified bonds issued pursuant to the terms of P.L.1976, c.38, thus reducing the borrowing costs of participating municipalities. L.1976, c.38, s.1; amended 1991, c.180, s.1; 2015, c.95, s.35.
N.J. Stat. § 40A:3-3 Definitions.
2. For the purposes of P.L.1976, c.38, unless the context clearly requires a different meaning: a. "Business Personal Property Tax Replacement Revenues" means the funds distributed to municipalities pursuant to P.L.1966, c.135 (C.54:11D-1 et seq.) or pursuant to any other law hereafter enacted providing for funds to municipalities in lieu of or in substitution for or supplementing the funds presently provided pursuant to P.L.1966, c.135 (C.54:11D-1 et seq.); b. "Debt service" means and includes payments of principal and interest upon qualified bonds issued pursuant to the terms of P.L.1976, c.38 or amounts required in order to satisfy sinking fund payment requirements and any other amounts, including fees and charges due under the applicable documents, with respect to such bonds; c. "Director" means Director of the Division of Local Government Services in the Department of Community Affairs, established pursuant to P.L.1974, c.35 (C.52:27D-18.1); d. "Local Finance Board" means the Local Finance Board in the Division of Local Government Services in the Department of Community Affairs, established pursuant to P.L.1974, c.35 (C.52:27D-18.1); e. "Paying agent" means any bank, trust company or national banking association having the power to accept and administer trusts, named or designated in any qualified bond of a municipality as the agent for the payment of the principal of and interest thereon and shall include the holder of any sinking fund established for the payment of such bonds; f. "Qualified bonds" means those bonds of a municipality authorized and issued in conformity with the provisions of P.L.1976, c.38; g. "State urban aid" means the funds made available to municipalities pursuant to P.L.1971, c.64 and all acts supplementing that act or pursuant to any other law hereafter enacted providing for funds to municipalities in lieu of or in substitution for the funds presently provided pursuant to acts supplementing P.L.1971, c.64; h. "State revenue sharing" means the funds made available to municipalities pursuant to P.L.1976, c.73 (C.54A:10-1 et seq.) or pursuant to any other law hereafter enacted providing for funds to municipalities in lieu of or in substitution for the funds presently provided pursuant to P.L.1976, c.73; i. "Gross receipts tax revenues" means funds collected pursuant to P.L.1940, c.4 (C.54:30A-16 et seq.) and P.L.1940, c.5 (C.54:30A-49 et seq.), and apportioned and paid to municipalities pursuant to those acts; and j. "Municipal Purposes Tax Assistance Fund distributions" means the moneys distributed to municipalities from the "Municipal Purposes Tax Assistance Fund" pursuant to the "Municipal Purposes Tax Assistance Act of 1980," P.L.1980, c.12 (C.54:1-46 et seq.), or pursuant to any other law hereafter enacted for the distribution of moneys to municipalities in lieu of or in substitution for the monies distributed pursuant to the "Municipal Purposes Tax Assistance Act of 1980," P.L.1980, c.12 (C.54:1-46 et seq.). L.1976, c.38, s.2; amended 1978, c.35, s.2; 1991, c.180, s.2; 2015, c.95, s.36.
N.J. Stat. § 40A:3-4 Issuance of qualified bonds.
3. a. Bonds issued by any municipality pursuant to provisions of this act shall be "qualified bonds" and shall be entitled to the benefit of the provisions of this act. b. Whenever the governing body of a municipality determines, by passage of a bond ordinance upon first reading, to issue bonds for any lawful purpose, it may file an application and a certified copy of the ordinance as passed on first reading with the Local Finance Board to qualify the bonds pursuant to the provisions of this act. Upon receipt of any such application, the Local Finance Board shall cause an investigation to be made, taking into consideration such factors as the need for the facilities to be financed from the proceeds of such proposed qualified bonds, the ability of the municipality to supply other essential public improvements and services and during the ensuing 10 years to pay punctually the principal and interest on its debts, the reasonableness of the amounts to be expended for each of the purposes or improvements to be financed pursuant to such bonds, and such other factors as the Local Finance Board may deem necessary. c. If such investigation shows to the satisfaction of the Local Finance Board that such municipality should be entitled to issue qualified bonds pursuant to the provisions of this act, the Local Finance Board may by resolution determine that such municipality is entitled to issue qualified bonds. In considering any ordinance submitted to it and before endorsing its consent thereon, the Local Finance Board may require the governing body of any municipality to adopt resolutions restricting or limiting any future proceedings with respect to the authorization of bonds or other matters deemed by the Local Finance Board to affect any estimate made or to be made by it in accordance with subsection b. of this section. Every resolution so adopted shall constitute a valid and binding obligation of such municipality running to and enforceable by, and releasable by the Local Finance Board. d. Within 60 days after the submission to it of an application made in accordance with subsection b. of this section, the Local Finance Board shall cause its consent to be endorsed upon the ordinance authorizing the issuance of qualified bonds, if it shall be satisfied and record by resolution that the municipality is entitled to issue qualified bonds. If the Local Finance Board is not so satisfied, it shall cause its disapproval to be endorsed upon such ordinance within said period of 60 days. e. If the governing body of a municipality shall determine by resolution that a maturity schedule for its qualified bonds, other than the maturity schedule approved by the Local Finance Board pursuant to subsection c. of this section, is in the best interest of said municipality, it may make application to the Local Finance Board setting forth such belief and the grounds therefor and requesting approval of a schedule of maturities for such qualified bonds set forth in the application. Within 60 days after submission to the Local Finance Board of such application, the Local Finance Board shall cause its approval to be endorsed thereon if it shall be satisfied, and shall record by resolution its findings, that the belief set forth in such application is well founded and that the issuance of the bonds pursuant to the revised maturity schedule in such application would not materially impair the credit of the municipality or substantially reduce its ability, during the ensuing 10 years, to pay punctually the principal of and interest on its debts and supply essential public improvements and services. If the Local Finance Board is not so satisfied, it shall cause its disapproval to be endorsed on such copy within said period of 60 days. f. A municipality that has issued qualified bonds shall not be required to obtain the approval of the Local Finance Board prior to issuing any other bonds solely by reason of having previously issued qualified bonds, unless such approval is otherwise required by law. L.1976, c.38, s.3; amended 1991, c.180, s.3; 2015, c.95, s.13.
N.J. Stat. § 40A:3-5 Recitals in bonds; authorization; issuance; maturity.
4. a. All qualified bonds when issued shall contain a recital to the effect that they are issued pursuant to Title 40 of the Revised Statutes or Title 40A of the New Jersey Statutes and are entitled to the benefits of the provisions of P.L.1976, c.38. Except as otherwise provided in P.L.1976, c.38, all qualified bonds shall be authorized and issued in the manner provided for in Title 40 or Title 40A. Qualified bonds shall mature not later than 30 years from their date of issuance without regard to any limitations as to maturities or amounts of annual installments for bonds as provided in Title 40 or Title 40A. b. The proceedings of the municipality authorizing the issuance of qualified bonds shall contain such covenants and provisions for protecting and enforcing the rights and remedies of the bondholders as set forth in P.L.1976, c.38 or as may be reasonable and proper and not in violation of law, including covenants restricting the issuance of additional qualified bonds. L.1976, c.38, s.4; amended 2015, c.95, s.37.
N.J. Stat. § 40A:3-6 Bond anticipation notes
Any municipality which has authorized qualified bonds may issue bond anticipation notes (hereinafter "notes" ) in anticipation of the issuance of permanent qualified bonds to the extent permitted by the provisions of Title 40A or any other applicable laws, subject to such additional terms or conditions with respect to such notes as may be fixed or required by the local finance board to insure that funds are borrowed only as needed to meet required payments for construction, reconstruction, development, extension, improvement, or acquisition of the facilities or improvements to be financed by the issuance of permanent qualified bonds. L.1976, c. 38, s. 5, eff. June 28, 1976.
N.J. Stat. § 40A:3-7 Certification, withholding; lien; covenants.
6. a. Each municipality which issues qualified bonds shall certify to the State Treasurer the name and address of the paying agent, the maturity schedule, interest rate and dates of payment of debt service on such qualified bonds within 10 days after the date of issuance of such qualified bonds. After receipt of such certificate the State Treasurer shall withhold from the amount of business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing and any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs payable to such municipality an amount of such business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing and any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs which will be sufficient to pay the debt service on such qualified bonds as the same shall mature and become due. The State Treasurer shall, on or before each principal and interest payment date, forward such withheld amounts to the paying agent for such qualified bonds for deposit to the account established with such paying agent for the purpose of paying the debt service on such qualified bonds. Notwithstanding any other provision of law to the contrary, a statutory lien and trust is automatically and without further act or filing created and impressed upon the business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing, and any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs so payable to such municipality that are withheld or are required to be withheld by the State Treasurer under P.L.1976, c.38 (C.40A:3-1 et seq.), which statutory lien and trust shall be paramount and superior to all other liens and interests of any kind in favor of the holders of qualified bonds, for the sole purpose of paying debt service on the qualified bonds issued pursuant to P.L.1976, c.38 (C.40A:3-1 et seq.). The lien created under this subsection for the benefit of bondholders is perfected without delivery, recording, or notice. All such business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing, and any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs that are withheld or are required to be withheld by the State Treasurer under P.L.1976, c.38 (C.40A:3-1 et seq.) shall be exempt from being levied upon, taken, sequestered, or applied toward paying the debts of the municipality other than for payment of debt service on such qualified bonds. All such business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing, and any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs that are withheld or are required to be withheld by the State Treasurer under P.L.1976, c.38 (C.40A:3-1 et seq.) shall be deemed to be held in trust for the sole purpose of paying the debt service on such qualified bonds. b. The State of New Jersey hereby covenants with the purchasers, holders and owners, from time to time, of qualified bonds that it will not repeal, revoke, rescind, modify or amend the provisions of subsection a. of this section so as to create any lien or charge on or pledge, assignment, diversion, withholding payment or other use of or deduction from any business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing or any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs to be apportioned and paid to any paying agent of qualified bonds which is prior in time or superior in right to the payment required by subsection a. of this section; provided, however, that nothing herein contained shall be deemed or construed to require the State of New Jersey to continue to make payments of business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing or any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs or to limit or prohibit the State from repealing or amending any law heretofore or hereafter enacted for the payment or apportionment of said revenues or aid or the manner, time, or amount thereof. c. It being the original and continuing intent of the State that all such business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing, and any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs that are withheld or are required to be withheld by the State Treasurer under P.L.1976, c.38 (C.40A:3-1 et seq.) shall be subject to a statutory lien and trust, the provisions of P.L.2015, c.95 shall apply to all qualified bonds whether issued prior to or following enactment of that act. All persons shall be forever estopped from denying that qualified bonds, whenever issued pursuant to subsection a. above, are entitled to the benefits of the provisions of P.L.1976, c.38 (C.40A:3-1 et seq.), including but not limited to the statutory lien and trust created pursuant to subsection a. of this section. L.1976, c.38, s.6; amended 1978, c.35, s.3; 1991, c.180, s.4; 2015, c.95, s.38.
N.J. Stat. § 40A:3-8 Payment of principal and interest due on qualified bonds; payment of operating expenses
Nothing contained in this act shall be construed to relieve any municipality of the obligation imposed on it by law to include in its annual budget amounts necessary to pay, in each year, the principal and interest maturing and becoming due on any qualified bonds issued by such municipality; provided, however, that to the extent of the amounts withheld from business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing and any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs payable to such municipality and forwarded to the paying agent for such qualified bonds pursuant to section 6, such budgeted amounts, to the extent not needed to pay debt service on such qualified bonds, may be applied to the payment of the operating expenses of such municipality for such year; and provided, further, that in any year in which business personal property tax replacement revenues, gross receipts tax revenues, municipal purposes tax assistance fund distributions, State urban aid, State revenue sharing or any other funds appropriated as State aid and not otherwise dedicated to specific municipal programs are not appropriated, such budgeted amounts shall be used to pay the debt service maturing and becoming due in such year on such qualified bonds of the municipality. L.1976,c.38,s.7; amended 1978,c.35,s.4; 1991,c.180,s.5.
N.J. Stat. § 40A:3-9 Application to projects commenced prior to effective date of act
The provisions of this act shall not be construed to prohibit any municipality from applying for authorization to issue qualified bonds pursuant to the terms of this act in connection with the construction, reconstruction, development, extension, improvement or acquisition of any capital improvement or property notwithstanding that the construction, reconstruction, development, extension, improvement or acquisition was authorized, approved or commenced prior to the effective date of this act. L.1976, c. 38, s. 8, eff. June 28, 1976.
N.J. Stat. § 40A:3-10 Severability
If any clause, sentence, paragraph, section or part of this act shall be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder thereof, but shall be confined in its operation to the clause, sentence, paragraph, section or part thereof directly involved in the controversy in which such judgment shall have been rendered. L.1976, c. 38, s. 9, eff. June 28, 1976.
N.J. Stat. § 40A:3-11 Issuance of qualified bonds under ordinances not in compliance with act if in compliance prior to issuance or to refund outstanding bonds
a. Qualified bonds may be issued pursuant to the provisions hereof for the purpose of funding ordinances which have been adopted in the absence of compliance by the municipality with the provisions as to approval for qualification set forth herein, even if notes have been sold or other obligations incurred pursuant to said ordinance, provided that prior to the issuance of such bonds the municipality shall have complied with such provisions. In addition, outstanding bonds of a local unit may be refunded by the issuance of qualified refunding bonds whether or not in advance of the maturity or redemption date of the outstanding bonds in any amount determined to be necessary by the governing body of the municipality to effect the refunding. A bond ordinance authorizing qualified refunding bonds shall become effective and qualified refunding bonds shall be sold and issued in the manner provided in N.J.S. 40A:2-52 to 40A:2-60, both inclusive, and the provisions of said sections shall be applicable thereto and to such refunding bonds and such refunding bonds shall recite that they are issued pursuant to said provisions and this act. b. The Local Finance Board shall in undertaking the investigation required by subsection b of section 3 of P.L.1976, c. 38 (C. 40A:3-4), take into consideration the probable capacity of the municipality to pay at maturity the qualified refunding bonds proposed to be issued and all other obligations thereof then outstanding, taking into consideration the assessed and true valuation of taxable property in the municipality, the equitable distribution of the burden of interest and debt redemption charges in connection with such qualified refunding bonds and the obligations theretofore outstanding or which may necessarily thereafter be incurred. L.1978, c. 35, s. 1, eff. June 19, 1978.
Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://www.njleg.state.nj.us/legislative-activity/statutesFetched: 10/17/2026