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Sales Tax Scheme to Preserve Open Space Could Cost $17B Over 30 Years, OLS Says

Agency numbers considerably higher than total estimated by bill's backers.

If the state dedicates a tiny portion of its sales tax to fund open space preservation, it could drain about $17 billion from the general fund over 30 years, according to a fiscal estimate prepared by the New Jersey Office of Legislative Services.

The proposal, widely and enthusiastically endorsed by an array of conservation and environmental organizations, is viewed as the best chance by open-space advocates to establish a stable source of financing to acquire open space, buy up flood-prone properties, and preserve farmland and historic treasures.

If the state doesn't move ahead, they argue, it will have little or no money to preserve open space, with virtually all of the funds from a 2009 Green Acres bond issue allocated.

“This legislation will literally prevent decades of open space acquisition from grinding to a halt,’’ said Tom Gilbert, chairman of Keep It Green, a coalition of more than 180 park and conservation groups working to create a stable source of funding for the effort.

The legislation, the subject of a public hearing yesterday in the Statehouse Annex, proposes a constitutional amendment to be considered in a voter referendum in November, if the bill is approved overwhelmingly by the Senate and Assembly. It would dedicate one-fifth of one cent of the state’s 7 percent sales tax for open space, farmland, and historical preservation annually for 30 years.

Based on fiscal year 2012 revenues, this would generate more than $200 million a year, according to proponents, a target they have long argued is needed to meet the state’s open-space needs.

In its fiscal note, the OLS said the cost could be considerably higher. It based its estimate on a long-run average annual growth rate of 4.7 percent for the states and use tax. If that rate is maintained, the OLS projected the long-term revenue loss to the general fund could potentially run approximately $17 billion over the 30-year life of the program.

If approved by voters, the first three years of the program it would siphon approximately $886 million out of the general fund, according to OLS projections. It also would divert significantly more than $200 million from the sale tax.

In fiscal year 2015, the loss in sales tax revenue to the general fund would be about $275 million; in fiscal year 2016, the loss would run approximately $288 million; and in fiscal year 2017, the cost would top $301 million, according to the OLS.

Where the Christie administration stands on the issue is unknown.

The governor pledged to enact a stable source of funding when he ran for election in 2009, but has yet to propose any initiative. Department of Environmental Protection Commissioner Bob Martin has told lawmakers he has submitted a proposal to the governor, but has repeatedly declined to provide any details.

The measure does, however, have bipartisan support. Sen. Christopher Bateman (R-Somerset), a cosponsor of the measure (SCR-138), said some of his Republican colleagues are coming on board.

“In New Jersey, we’re at a critical crossroads,’’ Bateman said. “There’s no harm in letting the voters decide.’’

The question critics of the proposal raised is whether New Jersey could further reduce state revenue at a time of recurring budget crises.

“Right now, there’s a hole in this year’s budget and there’s a hole in next year’s budget,’’ said Jeff Tittel, director of the New Jersey Sierra Club. “We’re broke and we keep putting more reliance on the same sources of funding,’’ he said, referring to repeated diversions nearly $1 billion in clean energy funds raised from utility ratepayers.

He and others questioned whether the diversion of sales tax revenue would lead to unintended consequences, such as new cuts in existing programs. The DEP has seen its total operating budget drop to $216 million from more than $300 million, Tittel noted.

Eileen Swann, policy manager at the New Jersey Conservation Foundation, disputed that point, saying no sales tax revenue goes to support programs at the DEP.

Sen. Bob Smith (D-Middlesex), the prime sponsor of the measure and chairman of the Senate Environment and Energy Committee, argued that the state has no choice but to move forward, especially in the wake of Hurricane Sandy. The superstorm increased enormously the state’s need to invest in making New Jersey more resilient, he said.

“We need to deal with the acquisition of flood-prone properties,’’ Smith said. “This is critically important for the state and we hope to get it on the ballot in November.’’

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