S2042

An Act concerning urban enterprise zones, and amending and supplementing P.L.1983, c.303.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 6 of P.L.1983, c.303 (C.52:27H-65) is amended to read as follows:

6. It shall be the duty of the authority to:

a. Promulgate criteria for the designation of zones pursuant to the provisions of this act;

b. Receive and evaluate applications of municipalities for the designation of zones;

c. Enter into discussions with applying municipalities regarding zone development proposals;

d. Act as agent of the State with respect to zone development plans, and in determining the State-furnished components to be included in those plans;

e. Designate zones in accordance with the provisions of this act and promulgate rules and regulations necessary to carry out its duties under this act;

f. Exercise continuing review and supervision of the implementation of zone development plans;

g. Receive and evaluate proposals of qualifying municipalities in which enterprise zones are designated for funding of projects and increased eligible municipal services from the enterprise zone assistance fund, and to certify annually to the State Treasurer amounts to be paid from the enterprise zone assistance fund to support approved projects and increased eligible municipal services in designated enterprise zones;

h. Assist and represent qualifying municipalities in any negotiations with, or proceedings before, other agencies of State Government or of the federal government, to secure necessary or appropriate assistance, support and cooperation of those agencies in the implementation of zone development plans in accordance with the provisions of this act and any other applicable State or federal law;

i. Upon request, assist agencies of municipal government in gathering, compiling and organizing data to support an application for designation of a zone, and in identifying and coordinating the elements of a zone development proposal suitable for the zone sought to be designated;

j. Provide assistance to State and local government agencies relating to application for the security of permits, licenses and other regulatory approvals required by those agencies, to assure consideration and expeditious handling of regulatory requirements of any zone business, zone business association or zone neighborhood association; regulatory agencies of the State and its agencies and instrumentalities may agree to any simplification, consolidation or other liberalization of procedural requirements which may be requested by the authority and which is not inconsistent with provisions of law;

k. Assist the State in applying to, or entering into negotiations or agreements with, the federal government, for federal enterprise zone designations; and

l. Exercise continuing review of the implementation of this act, and to report annually to the Governor and the Legislature on the effectiveness of enterprise zones in addressing the conditions cited in this act, including any recommendations for legislation to improve the effectiveness of operation of those zones. The report shall be submitted one year from the effective date of this act, and annually thereafter.

m. Impose reporting requirements for any ongoing project and any closed project of an enterprise zone including, but not limited to, requirements for the disclosure, to the governing body and the chief executive officer of the entity created or designated by the governing body of a qualifying municipality to function as the zone development corporation for the zone within which the project is or is to be located, of (1) all pertinent information related to issues that are associated with the character and fitness of contractors, consultants, grantees, and loan recipients, or any person seeking a contract or consultancy with, or a grant or loan from, the entity, including any pending litigation, criminal actions, insolvency or judgment for nonpayment of debt, or misfeasance involving enterprise zone funds, and (2) any pertinent information concerning performance in connection with the project, including, as appropriate, an analysis and explanation of any cost overruns or high unit costs, and any corrective actions taken by the enterprise zone to improve upon its performance.

n. Establish codes of conduct and ethics policies and guidelines applicable to members of the governing body and the staff of the entity created or designated by the governing body of a qualifying municipality to function as the zone development corporation for a zone, which codes, policies and guidelines shall define those situations which may create either an actual conflict, or the appearance of a conflict, involving such governing body members, staff or other persons who provide economic development services or funding on behalf of that entity functioning as a zone development corporation. The policies and guidelines established pursuant to this subsection shall specify the types of actions or relationships that are permitted or prohibited, and shall include any
additional guidance that may assist such governing body members, staff or other such persons in avoiding potential conflicts of interest.

(cf: P.L.1983, c.303, s.6)

2. (New section) a. The annual report of the authority required pursuant to subsection l. of section 6 of P.L.1983, c.303 (C.52:27H-65) shall include information that would allow for substantive review of each zone's strategies and progress in meeting its short-term objectives, and an analysis of the extent to which the long-term goals set forth in each zone development plan have been met.

b. The entity created or designated by the governing body of a qualifying municipality to function as the zone development corporation of an enterprise zone shall cooperate fully with the authority in the annual performance review and in the authority's performance of its other duties. Local officials, State agencies and qualified businesses shall provide information requested by the authority necessary for the annual report on each enterprise zone.

c. The authority's annual report shall also describe the current strategies and priorities for economic revitalization of each zone including, but not limited to, the number of jobs created, the number of jobs retained, the amount of private capital leveraged with public funds, the number of businesses created, the types of business expanded, retained or created, as well as consideration of the improvements in the physical infrastructure of the zone.

d. The authority shall promulgate rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) as necessary to establish standards to be used to measure performance against objectives on an annual report basis in order to facilitate the requirements of this section, including the establishment of financial penalties to be imposed by the authority on the entities, created or designated by the governing bodies of qualifying municipalities to function as zone development corporations, that fail to properly manage or accurately report the status of projects within their respective zones.

3. Section 29 of P.L.1983, c.303 (52:27H-88) is amended to read as follows:

29. a. There is created an enterprise zone assistance fund to be held by the State Treasurer, which shall be the repository for all moneys required to be deposited therein under section 21 of P.L.1983, c.303 (C.52:27H-80) or moneys appropriated annually to the fund. All moneys deposited in the fund shall be held and disbursed in the amounts necessary to fulfill the purposes of this section and subject to the requirements hereinafter prescribed. The State Treasurer may invest and reinvest any moneys in the fund, or any portion thereof, in legal obligations of the United States or of the State or of any political subdivision thereof. Any income from, interest on, or increment to moneys so invested or reinvested shall be included in the fund.

The State Treasurer shall maintain separate accounts for each enterprise zone designated under this act, and one in the authority's name for the administration of the Urban Enterprise Zone program. The State Treasurer shall credit to each account an amount of the moneys deposited in the fund equal to the amount of revenues collected from the taxation of retail sales made in the zone and appropriated to the enterprise zone assistance fund, or that amount of moneys appropriated to the fund and required to be credited to the enterprise zone account of the qualifying municipality pursuant to section 21 of P.L.1983, c.303 (C.52:27H-80).

The State Treasurer shall promulgate the rules and regulations necessary to govern the administration of the fund for the purposes of this section including, but not limited to:

(1) regulations requiring the entity, created or designated by the governing body of a qualifying municipality to function as the zone development corporation for an urban enterprise zone, to establish separate bank accounts for "first generation funds" and "second generation funds" and requiring the authority to adequately review, compile, and monitor quarterly reports submitted by each such entity to the authority with regard to "second generation funds;"

(2) regulations requiring the authority to develop a loan database in order to determine the status of loan repayments and loan defaults involving the use of "first generation funds" and "second generation funds" by the entity created or designated by the governing body of a qualifying municipality to function as the zone development corporation for an urban enterprise zone, to evaluate the ability of each such entity to effectively monitor its loan programs, and to determine if further funding should be provided to the zone; and

(3) regulations requiring the authority to determine whether a business has met all of its outstanding tax obligations before the authority grants approval to the business as a qualified business, and requiring the authority to withdraw approval of a business as a qualified business upon determination by the authority that a qualified business is delinquent in meeting all of its outstanding tax obligations.

As used in this subsection, "first generation funds" refer to the funds credited to the enterprise zone account of each municipality from the enterprise zone assistance fund, and "second generation funds" refer to funds generated from the repayments of loans to individuals and businesses from the enterprise zones account of each municipality and the proceeds from the sale of property and equipment acquired through the enterprise zone program.

b. The enterprise zone assistance fund shall be used for the purpose of assisting qualifying municipalities in which enterprise zones are designated in undertaking public improvements, economic development projects and in upgrading eligible municipal services in designated enterprise zones.

c. The governing body of a qualifying municipality in which an enterprise zone is designated and the [zone development corporation] entity created or designated by the governing body of the qualifying municipality to function as the zone development corporation for that enterprise zone may, by resolution jointly adopted after public hearing, propose to undertake a project for the public improvement of the enterprise zone or to increase eligible municipal services in the enterprise zone, and to fund that project or increase in eligible municipal services from moneys deposited in the enterprise zone assistance fund and credited to the account maintained by the State Treasurer for the enterprise zone.

The proposal so adopted shall set forth a plan for the project or for the increase in eligible municipal services and shall include:

(1) A description of the proposed project or of the municipal services to be increased;

(2) An estimate of the total project costs, or of the total costs of increasing the municipal services, and an estimate of the amounts of funding necessary annually from the enterprise zone account;

(3) A statement of any other revenue sources to be used to finance the project or to fund the increase in eligible municipal services;

(4) A statement of the time necessary to complete the project, or of the time during which the increased municipal services are to be maintained;

(5) A statement of the manner in which the proposed project or increase in municipal services furthers the municipality's policy and intentions for addressing the economic and social conditions existing in the area of the enterprise zone as set forth in the zone development plan approved by the authority; and

(6) A description of the financial and programmatic controls and reporting mechanisms to be used to guarantee that the funds will be spent in accordance with the plan and that the project or increased municipal service will accomplish its purpose.

As used in this section, "project" means an activity funded by the zone assistance fund through the qualified municipality and implemented by the entity created or designated by the governing body of the qualifying municipality to function as the zone development corporation, including the purchasing, leasing, condemning, or otherwise acquiring of land or other property, or an interest therein, in the enterprise zone or as necessary for a right-of-way or other easement to or from the enterprise zone; the relocating and moving of persons or businesses displaced by the acquisition of land or property; the rehabilitation and redevelopment of land or property, including demolition, clearance, removal, relocation, renovation, alteration, construction, reconstruction, installation or repair of a land or a building, street, highway, alley, utility, service or other structure or improvement which will lead to increased economic activity within the zone; the acquisition, construction, reconstruction, rehabilitation, or installation of public facilities and improvements, except buildings and facilities for the general conduct of government and schools; the establishment of revolving loan or grant programs for qualified businesses in the zone to encourage private investment and job creation, matching grant programs for the establishment or operation of pedestrian malls, special improvement districts and tax increment districts, or other appropriate entity; marketing, advertising and special event activities that will lead to increased economic activity or encourage private investment and job creation in the zone, but not including the expenditures therefor which are required to be reported pursuant to "The New Jersey Campaign Contributions and Expenditures Reporting Act," P.L.1973, c.83 (C.19:44A-1 et seq.) and the costs associated therewith including the costs of an administrative appraisal, economic and environmental analyses, environmental remediation, engineering, planning, design, architectural, surveying or other professional or managerial services

As used in this section, "eligible municipal services" means the hiring of additional policemen or firemen assigned duties in the enterprise zone, or the purchasing or leasing of additional police or fire vehicles, equipment or apparatus to be used for the provision of augmented or upgraded public safety services in the enterprise zone and its immediate vicinities.

d. Upon adoption by the governing body of the qualifying municipality and by the entity created or designated by the governing body of the qualifying municipality to function as the zone development corporation, the proposal shall be sent to the authority for its evaluation and approval. The authority shall approve the proposal if it shall find:

(1) In the case of a project, that the proposed project furthers the policy and intentions of the zone development plan approved by the authority, and that the estimated annual payments for the project from the enterprise zone account to which the proposal pertains are not likely to result in a deficit in that account;

(2) In the case of an increase in eligible municipal services, that the proposal furthers the policy and intentions of the zone development plan approved by the authority; that the qualifying municipality has furnished satisfactory assurances that the additional policemen or firemen to be hired, or the additional vehicles, equipment or apparatus to be purchased or leased, shall be used to augment or upgrade public safety in the enterprise zone, and shall not be used in other areas of the municipality; that the qualifying municipality shall annually appropriate for the increased eligible municipal services an amount equal to 20% of the amount of annual payments for the eligible municipal services from the enterprise zone account and shall not request for the increased eligible municipal services an amount equal to more than 35% of the amount of annual payments into the enterprise zone account, unless the municipality and the authority have entered into an agreement or agreements to the contrary prior to July 1, 1992; and that the estimated annual payments for the eligible municipal services from the enterprise zone account to which the proposal pertains are not likely to result in a deficit in that account.

e. If the authority shall approve the proposal, it shall annually, upon its receipt of a written statement from the governing body of the qualifying municipality and the entity created or designated by the governing body of the qualifying municipality to function as the zone development corporation, certify to the State Treasurer the amount to be paid in that year from the enterprise zone account in the enterprise zone assistance fund with respect to each project or increase in eligible municipal services approved. The authority may at any time revoke its approval of a project or an increase in eligible municipal services if it finds that the annual payments made from the enterprise zone assistance fund are not being used as required by this section.

f. Upon certification by the authority of the annual amount to be paid to a qualifying zone with respect to any project or increase in eligible municipal services, the State Treasurer shall pay in each year to the qualifying municipality from the amounts deposited in the enterprise zone assistance fund the amount so certified, within the limits of the amounts credited to the enterprise zone account of the qualifying municipality.

g. An amount not to exceed one-third of the amount deposited in the account created in the name of the authority in the enterprise zone assistance fund shall be used by the authority for the coordination and administration of the program throughout the State, including but not limited to costs for personnel, operating expenses and marketing. The balance of the remaining amount shall be distributed to qualifying municipalities in proportion to each municipality's contribution to the enterprise zone assistance fund for the coordination and administration of the program within the municipality, including but not limited to costs for personnel, operating expenses and marketing.

(cf: P.L.2002, c.64, s.1)

4. (New section) The authority shall establish an enterprise zone network to allow enterprise zones to exchange information and share best practices concerning project development and implementation within the zones. The network shall promote the training and education of the staff of any entity created or designated by the governing body of a qualifying municipality to function as a zone development corporation, support the development of solutions to common problems of enterprise zones, encourage the establishment of uniform performance measurements and the use of quantitative evaluations of enterprise zone projects, and assist with any other enterprise zone problems or opportunities that may arise or otherwise be identified.

5. This act shall take effect immediately.

STATEMENT

This bill amends section 6 of the "New Jersey Urban Enterprise Zones Act," P.L.1983, c.303 (C.52:27H-60 et seq.) (the "act") to require the New Jersey Urban Enterprise Zone Authority (the "authority") to impose greater reporting requirements on enterprise zones for ongoing and closed projects and to establish codes of conduct for zone development corporation board members, staff, and other persons associated with the provision of zone development corporation services and funding.

The bill amends section 29 of the act to require the State Treasurer to issue regulations requiring enterprise zones to establish separate bank accounts for "first generation" and "second generation" funds, requiring the authority to develop a loan database to track the status of "first generation" and "second generation" funds, and requiring the authority to determine whether outstanding tax obligations of zone businesses have been met as a condition of granting approval of a business as a qualified business.

The bill also requires the authority to establish an enterprise zone network to promote the exchange of information and sharing of best practices among zones.

The provisions of this bill are based upon recommendations of the Office of the State Auditor as a result of the State Auditor's audit of the Urban Enterprise Zone program for the period of July 1, 2000 to February 28, 2006.