SENATE BUDGET AND APPROPRIATIONS COMMITTEE
SENATE, No. 2412
with committee amendments
STATE OF NEW JERSEY
DATED: OCTOBER 9, 2014
The Senate Budget and Appropriations Committee reports favorably Senate Bill No. 2412, with committee amendments.
As amended, this bill, titled the “Water Infrastructure Protection Act,” would authorize municipalities and municipal, county, and regional utilities authorities to lease or sell their water or wastewater assets to a private entity, without any referendum, if an emergent condition exists. The bill would provide these public entities with greater flexibility to address an emergent condition impacting its water or wastewater services if such condition may be better addressed by private operation of some or all of the public owner’s water or wastewater assets.
Under the bill, emergent conditions would exist if either: (1) the system has a combined sanitary and storm sewer overflow system; (2) the system is located in Water Supply Critical Area I or II; (3) the ground water has the potential of sodium intrusion or any other intrusion that may negatively impact the system; (4) the system has received environmental violations, has existing unfulfilled administrative consent orders, or has previously entered into such consent order; (5) there is a present deficiency concerning the availability or potability of water, or the provision of water at adequate volume or pressure, and the public owner lacks the capacity to remedy the deficiency; or (6) there is material damage to the infrastructure of the system and the public owner lacks the capacity to remedy the damage. The appropriate public officials and a licensed engineer would have to certify that one of these conditions exists. The certification would be the subject of a public hearing and have to be approved by the Department of Environmental Protection.
If the public owner is a municipality or municipal utilities authority, a petition may be filed with the municipal clerk protesting the resolution authorizing the lease or sale of water or wastewaters assets without a public referendum within 20 days after the notice of the approval of the emergent conditions certification is published. If the petition is signed by a number of legal voters of the municipality equal to at least 15% of the total votes cast in the municipality at the last election at which members of the General Assembly were elected, a resolution to lease or sell water or wastewater assets would be suspended from taking effect until the lease or sale of such assets is approved in a public referendum in accordance with R.S.40:62-4 and R.S.40:62-5. If such petition is not filed within this timeframe, a resolution to lease or sell water or wastewater assets would not be subject to a public referendum.
The public owner would advertise a request for qualifications pending approval of the emergent conditions certification by the Department of Environmental Protection. If the certification is approved, the public owner would next determine the qualified respondents and issue a request for proposals. The request for proposals would have to include relevant technical submissions, documents, and criteria including but not limited to a description of the facilities and the debt related thereto and the evaluation criteria to be used in the selection of the designated respondent. After a review of the proposals submitted by qualified respondents, the governing body of the owner would, by resolution, designate one respondent, whose proposal is found to be most advantageous to the public, taking into consideration the request for proposals criteria.
After the designated respondent is selected, negotiations for a contract for the lease or sale of the water or wastewater assets would commence between the public owner and the designated respondent. After an agreement on a proposed contract is reached between the public owner and the designated respondent, the governing body of the public owner would then, by resolution, cause the proposed contract to be submitted to the Board of Public Utilities for approval and cause the proposed use of proceeds to be submitted to the Director of the Division of Local Government Services in the Department of Community Affairs for approval. After these matters are approved by their respective reviewing agencies, the governing body of the public owner would be able to, by resolution, enter into a contract with the designated respondent for the lease or sale of the water or wastewater assets.
Each worker from an apprenticeable trade employed in the performance of the contract would have to be an apprentice participating in a registered apprenticeship program or have completed a registered apprenticeship program, unless the contractor or subcontractor certifies that each worker will be paid no less than the journeyman rate for the apprenticeable trade performed established under the prevailing wage laws. The contractor or subcontractor must be paid, or pay a worker who it employs, no less than the prevailing wage rate determined by the Commissioner of Labor and Workforce Development pursuant to the “New Jersey Prevailing Wage Act,” P.L.1963, c.150(C.34:11-56.25 et seq.). Any contractor or subcontractor hired by a designated respondent in performance of such a contract must also comply with the provisions of “The Public Works Contractor Registration Act,” P.L.1999, c.238 (C.34:11-56.48 et seq.).
The committee amended the bill to require that of the proposed use of proceeds to be submitted to the Director of the Division of Local Government Services once an agreement on a proposed contract is reached between the public owner and the private entity, the amount dedicated to capital improvements must equal at least 50 percent of the remaining proceeds once the debt is defeased.
The committee amendments also require that any contractor or subcontractor, or any worker employed by the contractor or subcontractor, hired by a private entity pursuant to this bill be paid the prevailing wage rate. Any contractor or subcontractor hired by a private entity in performance of such a contract must also comply with the provisions of “The Public Works Contractor Registration Act,” P.L.1999, c.238 (C.34:11-56.48 et seq.).
The Office of Legislative Services (OLS) concludes that the enactment of this legislation would have an indeterminate impact on State and local finances. Municipalities and local utilities authorities may choose to sell their water or wastewater assets using the process established by the bill. But they are not required to do so. Consequently, enactment of the bill would not by itself alter the sale of water or wastewater assets by municipalities and local utilities authorities. It is conceivable that the bill might impel some municipalities and local utilities authorities to utilize the new process for selling or leasing their waster or wastewater assets. The OLS, however, does not speculate on the number of public entities that may invoke this optional authority and any resultant cost savings.
The use of any proceeds generated by the lease or sale of the water or wastewater assets must be approved by the Director of the Division of Local Government Services in the Department of Community Affairs. After the retirement of all utility or authority debt, the amount dedicated to community and capital improvements must represent at least 50 percent of the remaining proceeds. The bill provides no further direction regarding the purposes for which the proceeds of the sale or lease should be expended.
The lease or sale of water or wastewater assets by a municipality or local or regional utilities authority may also affect State revenues generated by collections of the Public Utility Excise Tax, the Public Utility Franchise Tax, and the Public Utility Gross Receipts Tax. Municipalities and local and regional authorities are currently exempted from the payment of these taxes. The sale of a water or wastewater system by a municipality or a local or regional authority to a private system operator would likely increase their tax liability, which, in turn would increase State excise, franchise, and gross receipts tax revenues.