FISCAL NOTE
SENATE, No. 3410
STATE OF NEW JERSEY
218th LEGISLATURE
DATED: JUNE 13, 2019
SUMMARY
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Synopsis: |
Establishes Gateway Development Commission |
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Type of Impact: |
Possible increase in State costs, and possible reduction in local revenue. |
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Agencies Affected: |
New Jersey Transit, Department of Transportation, Local Governments. |
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Fiscal Impact |
Year 1 |
Year 2 |
Year 3 |
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State Cost |
No Immediate Impact |
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Office of Legislative Services Estimate |
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Fiscal Impact |
Year 1 |
Year 2 |
Year 3 |
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State Cost |
Indeterminate |
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Local Revenue |
Indeterminate |
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· The Office of Legislative Services (OLS) does not concur with the Executive estimate that there will be no immediate impact. The Gateway Development Commission (GDC) is empowered under the bill to impose tolls, fees, and charges on users of the projects that they construct, broad property tax exemptions that they can extend to their contractors, and to exercise the State’s eminent domain powers through the Commissioner of Transportation, provided that the GDC pays for eminent domain taking. These powers do not immediately require a State expenditure or reduce any tax revenues, but will potentially result in State expenditures if construction of the Gateway Program advances as potentially provided for under the bill through eminent domain actions, tolls and fees on NJ Transit as a user of the Gateway Program, and from the envisioned State contributions of New Jersey towards the cost of the Gateway Program to the GDC. Local revenue losses can eventually be realized as the GDC acquires land for the project that may or may not have otherwise been subject to property taxation.
· Gateway Program projects are currently stalled due to public opposition from the President and a failure of the projects to have received federal grants through the federal Capital Investment Grant program, and failure to receive federal environmental and permitting approvals that are necessary to advance construction of the projects. The projects that the GDC is empowered to facilitate cannot advance without these approvals, and subsequently, the State and GDC cannot incur costs to advance those projects or acquire land to construct the project until those obstacles are overcome, despite the powers granted to the new bi-state entity through this bill.
· If not for this bill, the Gateway Program projects would likely be advanced and constructed through a combination of NJ Transit, Amtrak, the Port Authority and of New York and New Jersey and possibly New York entities whom are all partners in the development of these projects. It is not clear to what extent establishing the GDC as a bi-state entity and empowering it to advance these projects will result in increased or decreased costs relative advancing these projects through the other entities, or to what extent there may be overlap in the function of this entity relative to Amtrak and NJ Transit who currently own nearly all of the rail infrastructure and operate rail service along the Northeast Corridor between Newark Penn Station and New York Penn Station.
BILL DESCRIPTION
This bill establishes in conjunction with the State of New York, the Gateway Development Commission (commission). The commission is a new bi-state entity that is created to, in part, facilitate the completion of passenger rail transportation projects known as the Gateway Program (project) and to coordinate cooperation among various entities.
Commission actions may be taken and motions and resolutions adopted by unanimous affirmative vote of the commissioners. The commission is authorized to request the assistance and services of certain employees and agents to carry out its duties and to employ professional, technical, and clerical staff and consultants. The commission is to adopt bylaws, rules, and regulations concerning the right of the public to be present at meetings of the commission and to obtain records of the activities of the commission. The bill includes provisions detailing the duties and powers of the commission
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.
The bill includes a provision whereby New Jersey and New York consent to suits, actions, or proceedings against the commission except in certain situations as described in the bill. The bill provides that the commission is immune from liability in New Jersey in the same manner that the State is immune under the provisions of the “New Jersey Tort Claims Act” and the “New Jersey Contractual Liability Act.”
The commission is to dissolve following a joint determination by the governors of New Jersey and New York that the project has been completed or should be transferred to another agency, instrumentality, or entity. The commission is not to dissolve unless any debt incurred for project purposes has been repaid or arrangements have been made to ensure full repayment without impairment of creditworthiness, and Amtrak is not unduly prejudiced by the dissolution.
The bill requires the New Jersey Commissioner of Transportation to acquire, by eminent domain, certain property interests located in the State which are necessary or appropriate for the construction, reconstruction, development, redevelopment, use, occupancy, operation, and maintenance of passenger rail transportation facilities and ancillary facilities between Newark Penn Station and the State’s Hudson River boundary line. The acquisition of property interests is to be contingent upon an agreement with the Gateway Development Commission and the Gateway Development Commission agreeing to pay the costs to acquire the property interests.
FISCAL ANALYSIS
EXECUTIVE BRANCH
The Executive Branch analysis notes that there is no immediate fiscal impact to New Jersey Transit resulting from the establishment of the Gateway Development Commission and its powers. The analysis further notes that aside from establishing the Gateway Development Commission, the proposed legislation largely establishes the rules, regulations, and powers of the Commission.
OFFICE OF LEGISLATIVE SERVICES
The OLS does not concur with the Executive Branch estimate that the bill will have no immediate fiscal impact. It is the case that this bill establishes and provides powers to the GDC, and that this bi-state agreement does not actually provide a direct source of funding required for the GDC to execute its mission of facilitating the Gateway Program. The future allocation of this funding will have a fiscal impact on the State in the form of increased State costs in whatever amount of funding New Jersey provides towards the Gateway Program as its “local share” of the cost of the program, with contributions from the State of New York and federal grants making up the remaining costs of the project. Those costs would occur regardless of whether the GDC exists as a means of constructing the Gateway Program.
It will be necessary for these primary funding contributions to be made before the GDC can exercise the powers granted to it that would likely have a fiscal impact on the State. The GDC cannot exercise eminent domain powers to acquire land necessary for the project, until it has resources to reimburse the State. The exemption of the GDC from State and local taxes on property that the GDC owns, which it will realize both for itself and entities hired by the GDC to work on the Gateway Program will require the acquisition of land and the start of construction. The power granted to the GDC to impose tolls and fees on users of the Gateway Program, will require the construction of new rail tunnels, or at least a full funding agreement to begin construction so that payment agreement can be reached with the future users of the tunnels.
While the Executive Branch analysis finds that these powers will not have an immediate fiscal impact, both States have made it clear that construction of the Gateway Program is a priority and the creation of the GDC is intended to accelerate construction. Once federal permission is granted to advance the projects, The Port Authority of New York and New Jersey has already allocated $1.9 billion in its 10 year capital program in support of the Gateway Program that will presumably be available to the GDC to advance the project, and the New Jersey Economic Development Authority has issued $600 million in bonds for the advancement of the Portal Bridge, a component project of the Gateway Program. The States of New York and New Jersey have also agreed in principal to provide for 50% of the total project costs if the federal government provides for the remaining 50% either through federal grants or contributions from Amtrak. Planning documents for the Gateway Program in 2017, had projected that construction could have commenced by the beginning of 2019, so it is not clear that construction cannot begin quickly if a political consensus is reached to advance the project.
Upon enactment of this bill, the GDC would presumably be eligible to take over the Portal Bridge project and/or the Hudson Tunnel project if the current project sponsors agree to turn over the projects. If federal approvals are granted, which are currently pending, the GDC could be able to advance both projects relatively quickly, using previously committed funds to begin acquiring land and entering into toll or fee agreements so that the agency can bond against those future funds to acquire capital to further construction. It is not clear when this could happen, but under an ideal scenario it could be in less than three years, and could quickly result in eminent domain proceedings by the State, and depending upon whether that land was previously held by private entities, will make that land exempt from property taxation, lowering local revenues. Then through toll or fee agreements, the agency could begin accepting payments from Amtrak and New Jersey Transit based on future use of the Gateway Program, which would all depend upon the structure of the agreements.
As result, the OLS finds that this bill does not directly require any State costs or reductions in revenue over the next three years; however due to the nature of the powers granted to the GDC, it is likely that eventually there will be a realization of both State costs and reduced local revenues. The timing and magnitude of those State costs and local revenue impacts are indeterminate, and will depend both on federal action and the nature of future actions and agreements by the States of New York and New Jersey, as well as the federal government and transportation agencies that are partners in the development of the Gateway Program.
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Section: |
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Analyst: |
Principal Fiscal Analyst |
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Approved: |
Frank W. Haines III Legislative Budget and Finance Officer |
This fiscal note has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).