By Robert S. Goldsmith, Esq. and Michael J. Coskey, Esq.
Greenbaum, Rowe, Smith & Davis LLP

August 15, 2024

The purpose of this article is to provide clarity on the application of the financial disclosure requirements of the Local Government Ethics Law, N.J.S.A. 40A:9-22.1 (the “LGEL”), and its implementing regulations, to officials, including the executive director/director, and board members serving a Special Improvement District (“SID”)

The Local Government Ethics Law, N.J.S.A. 40A:9-22.1 (the “LGEL”) requires “local government officers” annually file a financial disclosure statement to identify the local government officer’s source(s) of income. See N.J.S.A. 40A:9-22.6. The LGEL defines a local government officer to include, in-part, “a managerial executive employee of a local government agency, as defined in rules and regulations adopted” by the Division of Local Government Services (the “DLGS”) in the Department of Community Affairs (the “DCA”). N.J.S.A. 40A:9-22.3(g). Here, the specific omission in the final rules of SID officials and board members provides indisputable proof that the LGEL’s financial disclosure requirements are not applicable to such individuals.

On September 6, 2016, DLGS proposed to include a new class of titles to be considered managerial executives under the definition of “local government officer,” which would have specifically listed and subjected SID’s executive director/director and its board members to the reporting requirements. See PRN 2016-137, 48 N.J.R. 1726, No. 25.  That proposed rule was adopted, effective March 6, 2017. A copy of the proposed rule can be accessed through the following PRN 2016-137 (48 NJR 1726(a)).pdf.

However, after reconsideration, the DLGS on July 3, 2017, proposed deleting “special improvement executive director/director and its members.”  See 49 N.J.R. 1761-2762. The new proposal details:

[a]fter further analysis, the Director concluded that SIDs are not equivalent to authorities or commissions that are quasi-independent local government entities.  Rather, they are more appropriately considered private non-profits acting in partnership with a municipality to provide benefits to their members. * * *

See PRN 2017-112 (49 N.J.R. 1761-2762). A copy of the proposed rule can be accessed through the following NJReg070317_V49_13.pdf

Thus, the final rule adopted and effective December 4, 2017, establishes that the DLGS intentionally and specifically excluded SID executive director/director and its members, i.e., SIDs from the list of entities for which disclosure is required. See N.J.A.C. 5:35-2.1.

This is somewhat confusing because the regulatory listing does not specifically say that SIDs are not included, however, the DLGS, in revising the proposed rule to remove these titles, evidences a clear determination on the part of the DLGS that SID executive director/director and its members, are not subject to the disclosure requirements of the LGEL.