Ordinance to Raise Taxes

ON the agenda for the Lakewood township committee meeting is An Ordinance for first reading in  to establish Cap Bank - would allow the township to raise taxes and  exceed the state mandated cap from its current of rate of 2.5 percent to 3.5 percent and to bank any unused funds after the township’s final appropriation. 

What is a CAP Bank? 

  State law authorizes municipalities to increase expenses from prior year by Cost of Living Adjustment (COLA) not to exceed 2.5% while the law authorizes municipalities to increase expenses up to 3.5%.

  Because the law limits COLA to 2.5% but authorizes  increase to 3.5% the difference of 1% is allowed to be “banked” and utilized in as additional authority for the total budget.  CAP Bank allows municipalities to have more room in available appropriations in case of unanticipated increases above 2.5%. For example; in 2009 Pension increases were above 2.5% but at the same time no allowance in CAP was given for this increase and all costs had to be absorbed within the CAP.  The same occurred with health insurance line item in 2010 budget.  State insurance cost increased 18% and had to be absorbed with the CAP.  Municipality without CAP bank would be forced to cut other necessary line Items to accommodate this increase and eventually might have to ask for CAP referendum.