CHAPTER 9  BOND ORDINANCES

 

 

I.         GENERAL INFORMATION   9/14/07

 

The authorization of bonds is a method by which municipalities incur debt to finance capital projects over time rather than provide for the total cost of the project in the current annual budget. 

 

The municipality issues bonds or notes in order to borrow, and these are known as municipal obligations.

 

A bond ordinance authorizes the capital improvement, appropriates money for that purpose, and authorizes the issuance of bonds or notes to finance all or part of the cost.

 

A.         MULTIPURPOSE OR SINGLE PURPOSE 9/15/10

 

1.         Regular, general BOND ORDINANCE: "ALL" Property owners in the municipality will benefit from the capital improvement.

 

2.         Local Improvement/Assessment Ordinance

 

            A local improvement is one for which the total cost (or a portion of it), may be assessed upon the lands in the vicinity which stand to gain special benefit by the improvement.

 

 

II.        EXPENDITURE OF FUNDS   9/14/07; 10/1/11

 

A.         The Local Bond Law provides that any local unit, by bond ordinance, may incur indebtedness, borrow money, authorize and issue negotiable obligations for financing specified items.

 

B          Capital Projects may be paid for: 10/1/11

 

1.         By the expenditure of funds from moneys immediately available in the Capital Improvement Fund.

 

2.         Through the sale of municipal bonds or notes to finance the purchase.

 

 

III.      CONTENTS OF BOND ORDINANCE   9/14/07

 

A.         An authorization for the issuance of obligations, the purpose for which the bonds are to be issued, an estimate of the maximum amount of the bonds or notes to be issued, and an estimate of the cost of the purpose for which the bonds or notes are to be issued.

 

B.         The period of usefulness of the purpose for which the bonds or notes are to be issued.

 

C.         A determination that the supplemental debt statement has been filed, the amount of the subject obligations are within the allowable debt limitation of the municipality, and the specific amount by which the gross debt is increased.

 

D.         Expenses included in cost (often referred to as Chapter 20 expenses) cover such items as architect's fees, accounting, engineering and inspection costs, legal expenses, publication, etc.  About ten percent (10%) of the total amount of the obligations authorized are allocated for these expenses. Interest on the obligations can be included as well. 9/15/10

 

E.         Every bond ordinance shall contain a statement that allows a twenty (20) day time limit from the date of publication of the ordinance following final adoption for anyone questioning the validity of the ordinance to file a suit, action or proceeding (commonly referred to as "Estoppel").

 

F.         Provision that the capital portion of the budget is amended if the project was not included in the capital budget to the extent of the authorization included herein. 9/15/10; 10/1/11

 

 

IV.         PROCEDURES FOR ADOPTION   9/14/07

 

A.         FIRST READING/INTRODUCTION

1.         Written document;

2.         Read by title only;

3.         Final passage must be at least ten (10) days after the first reading.

 

4.         Chief Financial Officer must submit to the Municipal Clerk a Supplemental Debt Statement. [N.J.S.A. 40A:2-10]  10/31/05

 

(a)        Supplemental Debt Statement indicating annual debt, as of the end of the prior calendar or fiscal year, whichever is appropriate, plus cumulative interim debt: [N.J.S.A. 40A:2-10]

 

(b)        The Supplemental Debt Statement is filed with the Municipal Clerk no later than the day the Bond Ordinance is introduced and electronically with the Director of the Division of Local Government Services.  9/15/13

 

Helpful tip: See reference material LFN 2013-03; New Jersey Department of Community Affairs, Division of Local Government Services; http://www.nj.gov/dca/divisions/dlgs/resources/local_fin_notices.html 9/15/14

 

(1)        It is recommended by DLGS that the Chief Financial Officer file with the Clerk and with the Director on the same email; before the Bond Ordinance is introduced.  9/15/13

 

(2)        A Supplemental Debt Statement cannot be filed until after the Annual Debt Statement has been filed.  9/15/13

 

(3)        The Clerk should retain the email to the CFO confirming receipt of the Supplemental Debt Statement as there will be no other form of confirmation. 9/15/14

 

B.         LEGAL ADVERTISING  10/31/05

 

1.         Publish the ordinance in full or summary in the official newspaper of the municipality with notice at least one (1) week prior to the scheduled public hearing date, together with the notice of introduction of the ordinance, which notice shall include the date (which shall be at least ten (10) days after introduction/first reading), time and place of further consideration for final passage. 10/31/04

 

2.         The bond ordinance may be published by a summary thereof in a form prescribed by the Local Finance Board.  If a summary is published, the summary shall contain a clear and concise statement prepared by the Municipal Clerk of the Governing Body setting forth the purpose of the ordinance, the amount of indebtedness being authorized and the time and place when and where a copy of the ordinance can be obtained, without cost, by any member of the general public. 10/31/04; 10/1/11

 

3.         Exception: Local Improvement Ordinances require publication notice ten (10) days prior to the hearing.

 

4.         When calculating advertising date, the date of publication is not counted/date of hearing is counted.

 

C.         ORDINANCE POSTING

 

1.         Post in full or by summary on the bulletin board or other place upon which public notices are customarily posted in the principal municipal building of the municipality.

 

2.         Copies must be made available to the public during the week prior to the hearing and no fee may be charged for providing copies. 10/31/04

 

D.         AFFIDAVITS/INTRODUCTION

 

            Notarized Affidavit of Publication with newspaper tear sheet from official newspaper, or Municipal Clerk, is obtained.

 

E.         AMENDMENT

 

            Must be introduced prior to final adoption;

 

1.         Must be published in full (only introduction and adoption can be published in summary) once at least two (2) days prior to the date set for further consideration, together with notice of the date, time and place at which it will be further considered for final adoption; 10/31/04

 

2.         At the public hearing, it may be read by title only if:

 

a.         At least one (1) week prior to such date it shall have been posted on the bulletin board or other place upon which public notices are customarily posted in the principal municipal building of the municipality,

 

(1)        A copy of such bond ordinance, and

 

(2)        A notice that copies of such bond ordinance will be made available during such week and up to and including the date of such meeting for further consideration to the members of the general public, and

 

b.         Such copies of said bond ordinance shall have been made available accordingly.  All persons interested shall again be given an opportunity to be heard. Following public hearing, the Governing Body may proceed to reject, finally adopt or further amend such bond ordinance.

 

F.         DOWN PAYMENT REQUIREMENT

 

            No bond ordinance shall be adopted unless it appropriates a sum as a down payment, which sum is not less than five percent (5%) of the amount of the obligations authorized.

 

            The amount must be available prior to final adoption from any one (1) or more of the following sources:

 

1.         By provision in a previously adopted budget for down payment or for capital improvement purposes;

 

2.         From moneys then actually held by the local unit and previously contributed for such purpose other than by the local unit;

 

3.         By emergency appropriation.

 

G.         PUBLIC HEARING  10/31/05

 

1.         Hearing can be adjourned to another specified date and time without publication of ordinance or notice. [N.J.S.A. 40:49-2b]

 

2.         Receipted Supplemental Debt Statement from the Division of Local Government Services is acknowledged. [N.J.S.A. 40A:2-10]

 

H.         FINAL ADOPTION

 

1.         Final adoption must be at least ten (10) days after first reading by roll call vote;

 

2.         Affirmative vote of two-thirds (2/3rds) of full membership of the Governing Body is required in all municipalities on all bond ordinances.

 

3.         Publication of bond ordinance in full or by summary together with the estoppel statement which permits anyone aggrieved  of the passage of the ordinance to file a petition with the Municipal Clerk questioning its validity within twenty (20) days of publication of adoption of the ordinance. 10/31/04

 

4.         If petition (protest) is filed with Municipal Clerk within the twenty (20) day period, signed by registered voters equal in number to at least fifteen (15%) percent of the number of votes cast in the municipality at the last general election at which members of the General Assembly were elected, ordinance remains inoperable until ratified by referendum of the voters.

 

5.         Affidavit of Publication upon adoption with newspaper tear sheet from official newspaper, or Municipal Clerk, is obtained.

 

I.          EFFECTIVE DATE  10/31/05

 

1.         Twenty (20) days after first publication of the notice of final adoption providing no suit or action against the ordinance is filed during the twenty (20) days (referred to as "Estoppel"). [N.J.S.A. 40A:2-18]

 

2.         If protest is filed with Municipal Clerk within the twenty (20) day period signed by registered voters representing fifteen percent (15%) of the number of votes cast at the last general election at which a member of the General Assembly was elected - ordinance remains inoperable until ratified by referendum of the voters. [N.J.S.A. 40:49-27]

 

J.          UPON ADOPTION  10/31/05

 

            Bond Counsel will require the Municipal Clerk to submit Affidavits of Publication, certified copies of minutes, Affidavits that no protests have been filed, etc.

 

 

 

EXHIBIT

SAMPLE NOTICES FOR PUBLICATION OF ORDINANCES

 

NOTICE OF PUBLIC HEARING: 10/31/04

 

                                    NOTICE OF PENDING BOND ORDINANCE AND SUMMARY

 

The bond ordinance published herewith (if published in summary - the summary terms of which are included herein) was introduced and passed on first reading at a meeting of the (insert name of Governing Body) of the (insert name of municipality), in the County of (insert name of county), State of New Jersey on (insert date) It will be further considered for final passage after public hearing at a meeting of said (insert name of Governing Body) to be held at the (insert address of hearing location) on (insert date) beginning at (insert time)p.m.  During the week prior to and including the date of such meeting, copies of the full ordinance will be made available at no cost and during regular business hours at the Clerk's Office for members of the General Public who shall request the same.  The summary of the terms of such bond ordinance follows:

Title:

Purpose(s):

Bonds/Notes Authorized:

Grants (if any) Appropriated:

Section 20 Costs:

Useful Life:

________________________, Municipal Clerk.

 

This Notice is published pursuant to N.J.S.A. 40A:2-17.

 

 

NOTICE OF FINAL ADOPTION: 10/31/04

 

                                          BOND ORDINANCE STATEMENTS AND SUMMARY

 

Ordinance No. ---/Title of Ordinance.

The bond ordinance published herewith  (if published in summary - the summary terms of which are included herein) has been finally adopted by the (insert name of governing body) of the (insert name of municipality, in the County of (insert name of County), State of New Jersey on (insert date) and the twenty (20) day period of limitation within which a suit, action or proceeding questioning the validity of such Ordinance can be commenced as provided in the local bond law has begun to run from the date of the first publication of this statement.  Copies of the full ordinance are available at no cost and during regular business hours at the Clerk's Office for members of the General Public who shall request the same.  The summary of the terms of such bond ordinance follows:

Title:

Purpose(s):

Bonds/Notes Authorized:

Grants (if any) Appropriated:

Section 20 Costs:

Useful Life:

________________________, Municipal Clerk. Signed by Municipal Clerk.

 

 

 

EXHIBIT

ORDINANCE ACTIVITY CHART

 

ORDINANCE

TYPE

 

BOND

IMPROVEMENT

ASSESSMENT

INTRODUCTION

In Writing - Read by Title - Introduced by Motion

Affirmative Vote of Majority of Members Present Required

SUPPLEMENTS

TO INTRO

Supplemental Debt Statement

Supplemental Debt Statement

LEGAL ADVER

SUPPLEMENTS

In full or summary

7 days before hearing

10/31/04; 9/15/10

In full or summary

10 days before hearing

10/31/04; 9/15/10

OTHER NOTICES

& POSTING

Supplemental Debt Statement

to Division of Local Government

Service; Post; Copies for

public at no charge 9/15/10

Supplemental Debt Statement to Division of Local Government Service; Post; Copies for public at no charge; Notice to affected property owners/7 days prior to hearing 9/15/10

AFFIDAVITS

9/15/17

2 Affidavits/Publication – one after

introduction and one after adoption

2 Affidavits/Publication – one after introduction and one after adoption

1 Affidavit of Service – proof that each homeowner affected has been sent a copy of the ordinance

AMEND PRIOR

TO HEARING

Read by Title - Amended by Resolution - Consideration at least one week later; publish in full 2 days prior to hearing  10/31/04

SUPPLEMENTS/

HEARING

Receipted Supplemental Debt

Statement acknowledged 9/15/10

Receipted Supplemental Debt Statement acknowledged 9/15/10

FINAL

ADOPTION

At least 10 days after introduction

Affirmative vote of 2/3 membership

Affirmative vote of 2/3 membership; Special Procedure if protest filed

NOTICE OF

FINAL ADOPTION

Publish in full or summary with

Special Notice or Estoppel

Statement; 10/31/04; 9/15/10

Publish in full or summary with Special Notice or Estoppel Statement Ordinance becomes unconfirmed assessment 10/31/04; 9/15/10

AFFIDAVITS

9/15/17

2 Affidavits/Publication – one after

introduction and one after adoption

2 Affidavits/Publication – one after introduction and one after adoption

1 Affidavit of Service – proof that each homeowner affected has been sent a copy of the ordinance

EFFECTIVE DATE

20 days after notice of

final adoption published

unless protest filed

20 days after notice of final adoption published unless protest filed

AFTER

ADOPTION

File certifications as

required by Bond Counsel

File certifications as required by Bond Counsel; Notice to affected property owners

 

 

 

V.           LOCAL ASSESSMENT IMPROVEMENT ORDINANCES  10/31/05; 9/14/07

 

A.         FIRST READING/INTRODUCTION

 

1.         Written document; [N.J.S.A. 40A:2-17]

 

2.         Read by title only; [N.J.S.A. 40A:2-17]

 

3.         Final passage must be at least ten (10) days after first reading. [N.J.S.A. 40:49-2b]

 

4.         Roll call vote with affirmative vote of a majority of the members present.

 

5.         Governing Body may undertake installation of an improvement by improvement assessment ordinance when it receives a petition from property owners requesting same and agreement to pay the cost in accordance with specifications set forth in N.J.S.A. 40:56-3.

 

6.         Chief Financial Officer must submit to the Municipal Clerk a Supplemental Debt Statement. [N.J.S.A. 40A:2-10]

 

B.         LEGAL ADVERTISING [N.J.S.A. 40A:2-17]

 

1.         Publish the ordinance in full or summary in the official newspaper of the municipality with Special Notice at least ten (10) days prior to the scheduled public hearing/final adoption date. The notice for a Bond Ordinance differs from the notice for other ordinances.

 

2.         When calculating advertising date, the date of publication is not counted/date of hearing is counted.

 

C.         NOTICES, OTHER

 

1.         Local Improvement Ordinances to all affected property owners by personal service or Certified Mail at least one (1) week prior to hearing. [N.J.S.A. 40:49-6] Failure to notify a property owner does not invalidate the proceeding. [N.J.S.A. 40:45-5.3]  9/15/16; 9/15/18

 

2.         Two (2) certified copies of the proposed ordinance and three (3) original copies of the Supplemental Debt Statement must be sent to the Division of Local Government Services for review, receipting and return to the Municipal Clerk prior to the scheduled public hearing date. [N.J.S.A. 40A:2-10]  9/15/10; 9/15/16; 9/15/18

 

D.         AMENDMENT OF ORDINANCE PRIOR TO FINAL ADOPTION [N.J.S.A. 40A:2-17]

 

1.         Ordinance as amended must be read by title at the hearing date previously scheduled, amended by resolution setting forth the amendment.

 

2.         Published in full with a notice of introduction and time and place when ordinance as amended will be further considered. Amendments must be published in full. Only introduction and adoption can be by summary.

 

3.         Publication must be at least two (2) days prior to the date of consideration of the amended ordinance.

 

E.         PUBLIC HEARING

 

1.         Called up for second reading and final passage (by title if properly posted; read in full if not properly posted). [N.J.S.A. 40:49-2c]

 

2.         Hearing can be adjourned to another specified date and time without publication of ordinance or notice. [N.J.S.A. 40:49-2b]

 

3.         Receipted Supplemental Debt Statement is acknowledged. [N.J.S.A. 40A:2-10]

 

F.         FINAL ADOPTION [N.J.S.A. 40A:2-17]

 

1.         Final adoption must be at least ten (10) days after first reading [N.J.S.A. 40A:2-17] by roll call vote.

 

2.         Affirmative vote of two-thirds (2/3rds) of the full membership of the Governing Body is required in all municipalities. [N.J.S.A. 40A:2-17]

 

3.         Prior to or after public hearing, ordinance hearing can be adjourned to another specific date. Ordinance need not be readvertised if date of adjourned hearing specified. [N.J.S.A. 40A:2-17]

 

4.         If, prior to final adoption, objections are filed with the Municipal Clerk by the owners of two-thirds (2/3rds) in value of lands proposed to be assessed for benefits derived from ordinance, the Governing Body may adopt the ordinance regardless, subject to the provisions set forth in N.J.S.A. 40:49-8.

 

G.         EFFECTIVE DATE 9/15/09

 

Local improvement assessment ordinance, twenty (20) days after publication of the notice of final adoption unless protest is filed with the Municipal Clerk by taxpayers representing ten percent (10%) of assessed value of the municipality. In such case, ordinance remains inoperable until approved by referendum of the voters. [N.J.S.A. 40:49-9]

 

H.         UPON ADOPTION

 

1.         Bond Counsel will require the Municipal Clerk to submit Affidavits of Publication, certified copies of minutes, Affidavits that no protests have been filed, etc.

 

2.         Local Improvement Assessment Ordinances shall be mailed to all affected property owners. Upon adoption of the local improvement assessment ordinance, the assessments contained therein become unconfirmed assessments on the effective date.  9/15/16

 

 

 

VI.       SALE OF BONDS/SHORT TERM FINANCING 10/31/05; 9/14/07

 

A.         Expenditure of Funds

 

1.         The Local Bond Law provides that any local unit, by bond ordinance, may incur indebtedness, borrow money, authorize and issue negotiable obligations for financing: [N.J.S.A. 40A:2-3]

 

a.         Any capital improvement or property which it may lawfully make or acquire, or

 

b.         Any purpose for which it is authorized or required by law to make an appropriation, except current expenses and payment of obligations (other than those for temporary financing).

 

2.         Prior to the expenditure of public funds, the project must be included in the municipality's Capital Budget. The Capital Budget projects anticipated expenditures for property, improvements or equipment over a six (6) year period or a three (3) year period for municipalities with population under 10,000, but the actual expenditure of the funds must be authorized by specific ordinances. 10/1/11; 9/15/12

 

3.         Capital projects may be funded as follows:  9/15/10; 9/15/12

 

a.         By the expenditure of funds from moneys immediately available in the Capital Improvement Fund (cash):

 

(1)        Requires the adoption of a Capital Ordinance;

 

(2)        Must be introduced, public hearing set, published and adopted by a majority vote of members present;

 

(3)        There is no estoppel (20 day waiting period) requirement.

 

b.         Through the sale of municipal bonds or bond anticipation notes to finance the purchase.

 

B.         Basic Requirements for expenditure of funds for capital projects through bonding:

 

1.         In order to introduce/adopt a bond ordinance, the capital portion of the budget must contain the improvement for the current year or must be amended to include same.

 

2.         There must be available a down payment of five percent (5%) appropriated in the capital budget for the purpose(s) of the bond ordinance. [N.J.S.A. 40A:2-11]

 

3.         Debt Limitations - No bond ordinance may authorize net debt in excess of three and one-half percent (3 1/2%) of the average of the prior three (3) years' equalized assessed real property valuation. [N.J.S.A. 40A:2-6]

 

a.         Exceptions to the debt limitation may be approved by the Local Finance Board for reasons set forth in N.J.S.A. 40A:2-7 including but not limited to:

 

(1)        If such debt does not exceed two-thirds (2/3rds) of the amount of obligations (exclusive of utility and assessment obligations) for which payment has been provided in the current fiscal year, plus two-thirds (2/3rds) of the amount raised in the tax levy of the current fiscal year by the local unit for the payment of bonds or notes of any school district; [N.J.S.A. 40A:2-7g]

 

(2)        If the three and one-half percent (3 1/2%) limit is being exceeded for a self-liquidating project if such obligations are deductible from gross debt. [N.J.S.A. 40A:2-7h]

 

b.         Permission for the exceptions must be sought and obtained from the Local Finance Board after introduction and before final adoption.

 

4.         Period of Usefulness  [N.J.S.A. 40A:2-22]

 

a.         The improvement(s) for which a bond ordinance is prepared must have a period of usefulness (Reasonable Life).  For example:

 

(1)        Buildings and structures, depending on whether Class A, B or C, - forty (40) years, thirty (30) years, and twenty (20) years respectively;

 

(2)        Bulkheads, jetties if concrete or metal - fifteen (15) years; if wood - ten (10) years;

 

(3)        Land acquisition for public purpose - forty (40) years;

 

(4)        Sidewalks - ten (10) years;

 

(5)        Streets and roads - five (5) years, ten (10) years or twenty (20) years depending on surface composition;

 

b.         No local unit shall authorize obligations for any improvement or purpose having a period of usefulness of less than five (5) years. [N.J.S.A. 40A:2-21]

 

C.         Introduction, Adoption, Publication and Notification requirements for bond ordinance - See Section IV of this Chapter.

 

 

VII.     SALE OF BONDS   9/14/07

 

A.         All bonds must be offered at public sale upon the submission of sealed bids or through the submission of electronic proposals in accordance with N.J.S.A. 40A:2-29 and rules promulgated by the Local Finance Board,  unless meeting the exceptions set forth in N.J.S.A. 40A:2-27.  10/31/04; 10/31/05

 

B.         Each municipality has a bond rating assigned by financial agencies such as Moody's and Standard & Poors (AAA being the highest rating), and these ratings are based upon the stability of the local government, property values and financial status.  Ratings will directly affect the sale of bonds.

 

C.         The municipality must adopt a resolution by the affirmative majority vote of the full authorized membership of the Governing Body to hold a sale.  The resolution must indicate:

 

1.         The form of notice of sale;

 

2.         The form of the bonds; and

 

3.         The person who will sell same.

 

D.         More than one (1) bond ordinance may be combined into a single issue for purposes of a bond sale.

 

E.         The notice of sale must be published in two (2) newspapers at least one (1) week prior to the sale, one (1) newspaper must be the newspaper designated by the municipality and the other in a New York or New Jersey based newspaper carrying bond notices. [N.J.S.A. 40A:2-30]  Contents for the notice are set forth in N.J.S.A. 40A:2-31.

 

F.         Receipt of Bids [N.J.S.A. 40A:2-32]

 

1.         Bids must be received in accordance with the date, time and place set by notice with an indication provided that the bids will be opened on a precise date and time and none will be accepted after the time designated;

 

2.         Each bid submitted and then opened by the Municipal Clerk or designated person, must be submitted with a cashier's check in an amount equaling two percent (2%) of the principal amount of the bonds;

 

3.         The Governing Body awards to the lowest responsible bidder by resolution with the affirmative vote of two-thirds (2/3) of the full membership.

 

 

VIII.    BOND ANTICIPATION NOTES (BANS) 9/15/12

 

Pending the sale of bonds, the municipality may raise money on a temporary basis through the issuance of temporary notes (bond anticipation notes - sometimes referred to as BANS). BANS are issued to obtain financing for projects that will eventually be financed through the sale of long-term bonds. These may be sold at private sale and the C.F.O. is given the authority to conduct these private sales. The process followed by the C.F.O. is as follows:

 

Quotes are solicited from local banks;

 

A determination is made as to which is the lowest proposal and an award is made by the C.F.O.;

 

The Municipal Clerk may execute documents to authorize the sale;

 

The C.F.O. is required to prepare a written report to the Governing Body which is listed on the agenda at the next meeting. The report must include the principal amount, interest rate, and maturities of the notes sold, the price obtained and the name of the purchaser.

 

Bans are issued for one (1) year and can be renewed for nine (9) more years for a total of ten (10) years.

 

 

CHAPTER 9 BOND ORDINANCES
Published by ClerkBase
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