Many municipal governments will struggle with their budgets this year, but only a few will have the unfortunate historic distinction of introducing their first local tax in decades.

Upper Township, Upper Deerfield Township, Downe Township and Washington Township have all avoided asking their residents to pay for local services, but officials say that luxury may soon disappear.

“We’re not sure what we’re going to do, but it doesn’t look good for this year,” Upper Deerfield Mayor Jim Crilley said.

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Ten governments in New Jersey entered the year with a local-purpose tax rate of zero, all of them relatively small and rural.

Seven of those communities are located in southern New Jersey — where the governments benefit from a substantial amount of aid money for preserved open space while offering limited services for their residents.

But several factors, all related to the still-recovering economy, leave elected officials with almost no option but to raise local taxes.

“I don’t think any of us want to make a prediction of where we will stand,” Upper Township Mayor Richard Palombo said. “But is it likely? Yeah.”

Declining revenues and rising costs have affected all governments, but the most substantial problems facing these governments have been deep cuts to state aid that otherwise allowed them to forgo local taxes.

More than half of the $11.2 million budget in Palombo’s township is made up of aid money paid because it hosts the B.L. England coal-to-electric power plant. The state has steadily reduced that amount — including a $212,000 reduction from 2009 to 2010.

Upper Township will lose another $66,000 this year, as the state starts to phase out aid payments for tax-exempt preserved land. The township may eventually lose all the $198,000 it received last year.

Downe Township similarly lost $63,800 in state aid last year and anticipates losing another $120,500 this year from its less than $1 million budget.

Washington Township, in Burlington County, lost $26,260 last year, but this year it will lose a third of its aid money for the 84 percent of its land that is preserved open space — more than $365,000 from a $1.8 million budget.

And Upper Deerfield, with a $5.7 million budget, lost about $358,500 in state aid last year. With anxiety about aid decreasing again this year, while pension and health care costs increase and revenues decline, the administration there is pessimistic about keeping the zero tax rate.

“It’s something the committee’s reviewing,” said Township Clerk/Administrator Roy Spoltore, “but with the reduction in state aid, a tax rate is really inevitable in the future.”

That is not to say that taxes will suddenly skyrocket in any of these towns.

Upper Deerfield’s Crilley estimated the increase in his tax rate to be about 3 cents per $100 of assessed property value — $36 a year for the average homeowner, who already pays $4,571 in county and school taxes.

But no government official wants to be labeled as the first to put a number in the column of a tax bill that had normally been filled with zeroes.

“I don’t want to raise taxes at all,” Palombo said. “Anything in the local tax rate is something people aren’t going to be happy with.”

Similar issues have affected Woodland Township and New Hanover Township in Burlington County and Lower Alloways Creek Township in Salem County, the other governments in southern New Jersey that entered the year with no local taxes.

Lower Alloways Creek is home to three nuclear power plants and received $5.2 million in aid money from the state in 2009 for hosting them. 

The state withheld more than $235,000 from that figure last year, though, and as Mayor Ellen Pompper said, “who knows what will happen this year?”

“We’re certainly going to have to cut an awful lot of stuff to keep it at zero,” she said. “We don’t know our numbers yet, but it’s not going to be good.”

“We’re going to have to change our way of life, that’s for sure.”

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