ASSEMBLY APPROPRIATIONS COMMITTEE

 

STATEMENT TO

 

ASSEMBLY COMMITTEE SUBSTITUTE FOR

ASSEMBLY, No. 5570

 

STATE OF NEW JERSEY

 

DATED:  JUNE 18, 2019

 

      The Assembly Appropriations Committees reports favorably an Assembly committee substitute for Assembly No. 5570.

      This substitute bill establishes the Gateway Development Commission (“GDC”) for the primary purpose of constructing the transportation projects known as the Gateway Program.  The Gateway Program is intended to maintain and increase passenger rail capacity, reliability, safety, and security between New Jersey and New York and consists of component projects within Phase One and Phase Two of the project.  The bill specifically delineates Phase One to include: the Hudson Tunnel project; the Portal North Bridge project; and the Hudson Yards right-of-way preservation project.  The bill leaves open the projects which are to be included in Phase Two, which is subject to a memorandum of understanding between the two states.

 

Purposes

 

      The purposes of the GDC are to facilitate the Gateway Program, coordinate the activities of governmental entities involved in the Gateway Program, act as a coordinating agency to facilitate the Gateway Program, pursue efforts to assist federal and state agencies and other entities to further passenger rail transportation between the two states, to take any and all actions that may be necessary or appropriate to qualify for financial assistance, loans, grants, or other funding that may be available for the Gateway Program, and to facilitate the Gateway Program by accepting, collecting, and receiving funds pursuant to a memorandum of understanding entered into pursuant to the bill and by establishing, levying, and collecting tolls and fees payable by entities using the Project.  The GDC’s power to establish tolls and fees is limited in such a manner that the GDC: is prohibited from establishing tolls or fees at a rate greater than is necessary to facilitate the Gateway Program; is required to adopt any tolls or fees by board action, provided that the board complies with public hearing requirements established in the bill; is prohibited from conflicting with federal law or the laws of the state of New York and the state of New Jersey; may only impose tolls or fees on the New Jersey Transit Corporation (NJ Transit) in a manner expressly and specifically authorized pursuant to a memorandum of understanding executed pursuant to the bill.  Any revenue from such a toll or fee is required to count toward the New Jersey share of funding pursuant to the memorandum of understanding.

 

Commission membership

 

      The GDC is to consist of seven commissioners, with three commissioners appointed by New York, three commissioners appointed by New Jersey, and one appointed by Amtrak.  Commissioners are required to take and subscribe an oath of office, execute a commissioner’s statement, and participate in board training.  The bill establishes requirements for when commissioners are required to recuse themselves from GDC actions and requires the commissioners from New York and New Jersey to file annual financial disclosure statements consistent with the state law from which the commissioner is appointed.  The Amtrak commissioner is required to file an annual financial disclosure statement consistent with the requirements for Amtrak employees and officers.

 

Organization of the commission

 

      The GDC board is to have two co-chairpersons, one from New York and one from New Jersey. Which commissioner serves as chairperson is to be determined by the laws of each respective state.  If state law does not specify how to select the co-chairperson, the bill provides that the co-chairperson from a state is to be selected by that state’s commissioners.

      The powers of the GDC may be exercised by the commissioners at a meeting duly called and held where at least two commissioners from New York, two commissioners from New Jersey, and the Amtrak commissioner are present.  Action may be taken and motions and resolutions adopted by the GDC through the affirmative vote of at least two New York commissioners, two New Jersey commissioners, and the Amtrak commissioner.  The bill provides that each state’s governor has a veto over any action of any commissioner appointed therefrom.  Each governor has 10 business days after the meeting minutes are provided to the governor to review actions taken at a GDC meeting.  During that 10-day period, each governor may approve the meeting minutes or may veto any action therein recited as having been taken by a commissioner of that governor’s respective state.  If the governor does not return the meeting minutes within 10 days, the minutes for actions taken by that state’s commissioners are deemed approved.

 

Transparency and accountability measures

 

      The GDC is required to adopt a mission statement, adopt a code of conduct, establish a whistleblower access and assistance program, and establish policies regarding contact with lobbyists, and have an efficiency study of the GDC conducted by an independent entity at least every five years.

      The bill provides for duties and powers of an inspector general, who is responsible for receiving and investigating all complaints regarding fraud, waste, and abuse by commissioners, officers, and employees of the GDC.  The inspector general is empowered to: administer oaths and examine witnesses; require the production of any books and papers deemed relevant or material to an investigation; examine, copy, or remove GDC documents or records; interview officers and employees of the GDC; monitor the implementation of any inspector general recommendations; and perform any other functions that are necessary or appropriate.

      All meetings of the GDC are required to be open to the public and members of the news media, except for when the GDC meets in executive session.  The bill provides for specific exceptions to the requirement that the meeting be open to the public.  Meeting agendas are required to be made available to the public at least 72 hours before a meeting and public notice of the time and place of the meeting is required to be provided to media outlets and conspicuously posted in designated areas and on the GDC’s website at least five days before the meeting.  The public is reserved at least 30 minutes at each board meeting to speak on any topic on an agenda, or a reasonable amount of time in order to allow any persons in attendance an opportunity to comment on any topic on the agenda.  The GDC is required to keep reasonably comprehensible minutes of all meetings and to make those minutes available on its website within two weeks from the date of the meeting.  The bill subjects the GDC to the New York freedom of information law for requests filed in New York and to the New Jersey open public records law for requests filed in New Jersey.  The GDC is authorized to appear before a committee of the legislative houses of each state upon request from that house’s presiding officer.  Each legislative house is entitled to request two such appearances in each calendar year.  The bill authorizes each legislative house to request the attendance of any named officer of the GDC.

 

Duties of the GDC

 

      The duties of the GDC are to: (1) make appropriate application for, and act as a coordinating, distributing, or recipient agency for funding and authorizations necessary or appropriate to facilitate the Gateway Program; (2) cooperate with various entities to facilitate the Gateway Program; (3) adopt bylaws and make appropriate orders to carry out and discharge its powers, duties, and functions; (4) expend funds and hold and prudently invest funds; (5) recommend appropriate federal, state, and local government legislation and agency administrative action pertaining to the Gateway Program; (6) prepare a report with details on the progress on GDC activities; and (7) take any other action as may be necessary or appropriate to further the purposes of the GDC.

 

Powers of the GDC

 

      The powers of the GDC are to: (1) facilitate the Gateway Program through contracts and agreements and other documents and instruments, provided that the GDC complies with workers compensation, prevailing wage, and other labor laws in each respective state; (2) sue and be sued; (3) accept and expend funds; (4) acquire property, including by condemnation, and manage that property and develop undeveloped property necessary or appropriate to facilitate the Gateway Program; (5) make, procure, enter into, execute, and deliver contracts; (6) make applications for and accept funding, permits, authorizations, and approvals as may be necessary to facilitate the Gateway Program; (7) enter into agreements with a public or private entity or entities to facilitate the Gateway Program and for use of the Project, provided that any tolls, fees, rates, charges, or rentals imposed do not conflict with federal law, the laws of the state of New Jersey and the state of New York, or the limitation on the GDC’s tolling powers provided in section 4 of the bill; (8) adopt its own public procurement rules and guidelines, in accordance with provisions in the bill; (9) dispose of property in accordance with the provisions in the bill; (10) issue or guarantee bonds, notes, or other evidence of indebtedness, enter into loan agreements and otherwise borrow funds, or incur indebtedness; (11) acquire and hold securities for investment purposes; (12) appoint officers and employees; (13) obtain insurance; (14) cooperate with governmental entities or private entities; (15) indemnify individuals and entities to the extent required to facilitate the Gateway Program; (16) establish or acquire subsidiaries as required to facilitate the Gateway Program; (17) utilize the existing labor force in the states and foster labor harmony in allowing for adoption of efficient labor work rules and practices during construction of the Gateway Program; and (18) exercise all other powers as may be necessary or appropriate.

 

Exemption from taxes, local laws

 

      The commission is not required to pay any taxes or assessments levied by either state or local government of either state on any property used for the facilitation of the project or any income or revenue from facilitation of the project.  The commission is authorized to enter into a voluntary agreement with any local government to pay, in lieu of taxes, an annual sum for any real property acquired and owned by the commission and to provide a rental payment by any person occupying any portion of the real property.  However, the voluntary agreement is not to provide for payment of an amount in excess of the amount last paid as taxes upon the real property prior to the time the commission acquired the real property.

      The commission is required to conform to the construction, maintenance, and health and fire protection requirements of the state or local government where the project is located in so far as the commission finds it practicable to do so.  The commission is also required to submit copies of plans and specifications for buildings and structures to the appropriate state and local government officials and is to receive their comments and suggestions. However, the commission is to make the final determination as to which of those comments and suggestions to accept.

 

Financial reporting and audit and financial statements

 

      The bill requires the GDC to publish a comprehensive annual financial report to be submitted annually to the governors and state legislatures within 120 days of the end of the GDC’s fiscal year.  The annual report is required to include an introductory section, a financial section, and a corporate information section.

      The GDC is required to prepare financial statements on an annual basis in accordance with generally accepted accounting principles and the accounting standards issued by the governmental accounting standards board.  The bill requires the financial statements to be audited by an independent firm of certified public accountants and establishes requirements concerning the financial audit.

 

Debt issuance, capital plan, and operating budget

 

      The GDC is required to issue debt in accordance with the applicable laws governing the GDC and covenants with bondholders.  At least 60 days prior to an intended issuance, the GDC is required to submit a statement of intent to the governor and legislature of each state.

      The GDC is required to adopt a ten-year capital plan no later than January 30, 2020 and publish an annual report on the status of the capital program.  The GDC is required to make the capital plan available to the public prior to its adoption.  Major capital projects are required to be monitored by external engineering consultants.

      The GDC is required to prepare a detailed annual operating budget beginning with the fiscal year commencing after enactment.  A preliminary annual operating budget and the subsequent final annual operating budget are each required to be made publicly available each fiscal year.

 

Contracting

 

      The bill establishes requirements for contracts for the GDC, which include requirements for specifications, grounds for cancellation of a contract, disqualification to contract with the GDC, removal or disqualification of public contractors by petition, a statement of non-collusion to be included in bids and proposals, and requirements concerning minority-owned and women-owned businesses and New York and New Jersey business enterprises.  The bill also authorizes each state’s comptroller to examine the accounts and books of the GDC.

 

Subsidiaries

 

      No less than 60 days prior to the formation of a subsidiary, the GDC is required to provide notice to the governor of each state and certain members of each state’s legislatures.  The creation of a subsidiary corporation is subject to approval by the board.

      Within 60 days of the effective date of the bill, and on or before the first day of January of each year annually thereafter, any subsidiary corporation, in cooperation with the GDC, is required to provide to the governor and legislature of each state a report on the subsidiary corporation containing information required under the bill.

      Sixty days prior to the issuance of any debt by the subsidiary, or the GDC on behalf of the subsidiary, the GDC is required to provide notice to the same individuals required to receive notice for the formation of a subsidiary.

 

Property disposition

 

      The bill provides certain requirements for the disposition of property owned by the GDC.  Any sale of real property is to be undertaken and conducted pursuant to the provisions of the existing laws governing the sale of real property in the state in which the real property is located and by approval of the board.

      The GDC is not permitted to dispose of real property unless an appraisal of the value of the real property has been made by an independent appraiser and the appraisal is included in the record of the transaction.

      The GDC is not permitted to sell, lease, or otherwise alienate property for less than fair market value unless: the transferee is a government entity or other public entity and the terms and conditions of the transfer require that the ownership and use of the real property will remain with the government or any other public entity; or the purpose of the transfer is within the purpose, mission, or governing statute of the GDC and a written determination is made by the board that there is no reasonable alternative to the proposed below-market transfer that would achieve the same purpose, prior to board approval of the transfer.

      The bill requires the board to adopt rules and regulations concerning disposition, acquisition, and transfer of real property or any interest in real property which, at a minimum, includes a requirement that certain information be made available to the board at the meeting where approval is scheduled.

      Not less than 10 days in advance of any meeting of the board at which the board is to consider an action to authorize the sale of real property, the chief executive officer is required to provide public notice of the proposed action along with relevant material terms and provisions of the sale by posting the information on the GDC's website.

      The chief executive officer may authorize or arrange for contracts for the sale of personal property owned by the GDC upon terms and conditions as the chief executive officer deems proper and execute the contract on behalf of the GDC where the value of the personal property is not in excess of $1,000,000; provided, however, that personal property valued at more than $250,000 is not to be sold under the authority of the chief executive officer other than to the highest bidder after public advertisement.  Where the value of the personal property is in excess of $1,000,000, the sale of the property is dependent on authorization by the board.

 

Consent to suit

 

      The state of New York and state of New Jersey consent to suits, actions, or proceedings against the GDC except as specifically provided in the bill.  The consent does not apply to: (1) causes of action accruing before the effective date of the bill; (2) causes of action arising out of any contract entered into or assumed by or assigned to the GDC before the effective date of the bill; (3) civil suits, actions, or proceedings for the recovery of statutory penalties; and (4) suits, actions, or proceedings for judgments, orders, or decrees restraining, enjoining, or preventing the GDC from committing or continuing to commit any acts, except for suits brought by each state’s Attorney General.

      The GDC is declared immune from liability as if it were the state of New York, except to the extent such immunity is waived by the state of New York under the New York court of claims act. The bill further provides that the GDC is immune from liability in New Jersey as if it were the State of New Jersey for purposes of the “New Jersey Tort Claims Act” and “New Jersey Contractual Liability Act.”

 

State commitment

 

      The bill establishes an equal funding agreement between the State of New Jersey and the State of New York for Phase One of the Project.  Both states and the Port Authority of New York and New Jersey are to enter into a memorandum of understanding detailing the timing and source of funding for their commitment to Phase One of the Project, and if agreed to in an amendment to the memorandum, for Phase Two of the Project or portions thereof.

      For any toll or fee imposed on an instrumentality of either state, the revenue generated from that toll or fee is required to count toward that State’s share for purposes of any memorandum of understanding entered into under the bill.

 

State labor provisions

 

      The facilitation of any portion of the Project in each state is designated public work pursuant to each state’s respective labor laws and is accordingly subject to the respective provisions of each state’s laws applicable as such a designation.

 

Dissolution

 

      The bill contemplates the dissolution of the GDC and requires the GDC’s dissolution following a joint determination by the governor of each state that the Project has been completed and should be transferred to another agency, instrumentality, or entity.  Any dissolution would require that bonds and other securities incurred for the Gateway Program have been repaid or arrangements have been made to ensure full repayment, without impairment of credit worthiness and also that Amtrak not be unduly prejudiced by the dissolution.

 

Amendment to the agreement

 

      The bill provides that the states may amend, alter, supplement, or repeal the Gateway Commission Development Act through the enactment of law by one state concurred in through enactment of law in the other state.

 

Severability and construction

      The bill provides that provisions in the bill that are held invalid are severable from the reminder of the bill and that the bill is to be liberally construed to give effect to the bill’s purposes.

 

New Jersey commissioners

 

      The bill provides that the three commissioners from New Jersey are to be appointed as follows: one directly by the Governor, one by the Governor upon recommendation of the Speaker of the General Assembly (Speaker), and one by the Governor upon the recommendation of the Senate President.  The bill requires that the commissioners appointed upon recommendation of the Speaker and Senate President be appointed before the Governor’s direct appointment.  The bill requires that each commissioner be a resident voter of the State at the time of appointment and while serving as a commissioner.  An individual is prohibited from being appointed if the individual has not been a resident voter of the State for at least the two years immediately preceding appointment.

      All vacancies in the office of commissioner are to be filled in the same manner as the original appointment.  All commissioners are to hold office after the expiration of their term until their respective successors are appointed and qualified.  Each New Jersey commissioner may be removed from office through the adoption of articles of impeachment by the General Assembly which are delivered to the Senate and following a trial and vote by the Senate on those articles of impeachment.  The bill provides that the New Jersey co-chairperson is to be selected from the three New Jersey commissioners and determined by an affirmative vote of at least two New Jersey commissioners.

 

Condemnation power

 

      The bill provides that the power of eminent domain may be utilized for Gateway Program purposes by the Commissioner of Transportation, contingent upon the Commissioner of Transportation entering into an agreement addressing the acquisition with the GDC, providing for the GDC to pay for the cost of the condemnation.

 

Sunset provision

 

      The bill provides that it is to expire and be deemed repealed 15 years from the effective date of the enactment if federal funding that is necessary for purposes of facilitating Phase One of the Project has not been granted to the GDC.

 

FISCAL IMPACT:

      The GDC will be an independent entity, so the primary costs imposed on the GDC by the bill will not be borne directly by the State or any local government unit. The bill does provide for the State to enter into a memorandum of understanding (mou) in which the State pays for half of the non-federal share of costs for the construction of the Portal Bridge, new hudson tunnels, repair of the existing tunnels, and the hudson yards right-of-way preservation. These projects are likely to cost approximately $15 billion. Assuming half of that cost is covered by Amtrak and federal grants, that would leave $7.5 billion in State costs, and $3.75 billion for New Jersey’s share. That cost could be mitigated by contributions from the Port Authority of NY and NJ which count toward each state’s share on a 50:50 basis. The composition of the New Jersey share is unclear until the mou is executed. If the mou provides for tolls and changes to NJ Transit, then NJ Transit will have to pay those costs out of operating revenues, which could be realized as State costs due to NJ Transit’s reliance upon State operating subsidies, or require increased passenger fares on NJ Transit riders. Otherwise, the State would likely fund its share through the State capital program which would only impact the composition of already statutorily authorized capital expenditures.

      Additionally, the bill’s exemption of the GDC from property taxes for itself and its contractors is likely to reduce local property tax revenue, and the expansion of eminent domain power may also reduce local tax revenue while having a neutral impact on the State, since the GDC must pay for the State’s cost in exercising eminent domain powers.