A2581

ASSEMBLY, No. 2581

STATE OF NEW JERSEY

INTRODUCED DECEMBER 16, 1996

By Assemblymen DORIA, ROBERTS, and

Assemblywoman Cruz-Perez

An Act establishing the Educational Facilities Loan and Grant Program, supplementing Title 18A of the New Jersey Statutes and amending N.J.S.18A:72A-1 and N.J.S.18A:72A-5.

BE IT ENACTED by the Senate and General Assembly of the State of New Jersey:

1. (New section) This act shall be known and may be cited as the "Educational Facilities Loan and Grant Program of 1996."

2. (New section) The Legislature finds and declares that in order to provide a thorough and efficient system of education to the school age residents of the State of New Jersey, it is necessary to construct and maintain adequate capital facilities; that it is necessary to provide for the renovation, repair, conversion, alteration and construction of school buildings in the State in order to provide safe and adequate public school buildings and other capital facilities; that the limitations on the availability of school districts to borrow the necessary amounts and to borrow at reasonable rates has impaired the ability of school districts to go forward with financing necessary to complete repairs, renovations, alterations, conversions and construction of school buildings and other capital facilities; that the lack of adequate buildings and facilities has seriously impeded the ability of school districts to provide a thorough and efficient system of education to all pupils as required by the State constitution; and that the State cannot ignore its obligation to remedy conditions which jeopardize the health, safety and general welfare of our school age children.

3. (New section) As used in this act:

"Authority" means the New Jersey Educational Facilities Authority established pursuant to N.J.S.18A:72A-1 et seq.;

"Bonds" means bonds, notes or other obligations issued by the authority pursuant to the provisions of this act;

"Commissioner" means the Commissioner of the Department of Education;

"Consolidated school district" means a school district established pursuant to N.J.S.18A:8-25 et seq.;

"Contract" means the contract between the Treasurer and the authority authorized by Section 5 of this act;

"Cost or costs" means the expenses incurred in connection with: the renovation, repair, alteration, construction, or conversion of any school building or any other project; the acquisition and development of any real or personal property for use in connection with any project, including any rights or interest therein; the procurement of engineering, inspection, planning, legal, financial or other professional services; the costs of issuance of bonds issued for the project; the administrative, organizational, operating or other expenses incident to the financing, completion and placing into service of projects; capitalized interest on the bonds for the project; and reimbursement to any fund of the State of moneys which may have been transferred or advanced therefrom to any fund created by this act, or of any moneys which may have been expended therefrom for or in connection with any project;

"Department" means the Department of Education;

"Loan and grant fund" means the fund established by the authority from which costs of the projects are to be paid, which shall be designated the Educational Facilities Public School Loan and Grant Fund;

"Project" means any work which is necessary for the construction, renovation, repair, alteration or conversion of a public school building by the school district;

"Public school" means a school under collegiate grade, which is operated by a school district;

"School building" means any structure, building, or facility used wholly or in part for academic purposes by a school district;

"School district" means any local or regional school district established pursuant to chapter 8 or chapter 13 of Title 18A of the New Jersey Statutes and any county special services or county vocational school districts established pursuant to chapter 46 or chapter 54 of Title 18 of the New Jersey Statutes;

"Special needs school district" means a school district as defined pursuant to section 3 of P.L.1990, c.52 (C.18A:7D-3);

"Treasurer" means the Treasurer of the State of New Jersey;

"Trust fund" means the fund established by the authority from which the payment of bonds is to be made, which shall be designated the Educational Facilities Public School Trust Fund.

4. (New Section) a. The authority shall establish and maintain the loan and grant fund into which shall be deposited: (1) amounts payable from the proceeds of the bonds; (2) any moneys that shall be received by the authority from the prepayment of principal on loans made from the loan and grant fund; and (3) any other moneys which the authority determines to deposit therein.

b. The authority may use the moneys in the loan and grant fund to finance the total costs of any project, in accordance with the criteria set forth in this section, for the purpose of providing loans and grants to school districts, to finance the renovation, repair or other alteration of existing school buildings, the construction of new school buildings or the conversion of existing school buildings to other instructional purposes.

c. Upon application by a school district for a loan and grant, the application shall be forwarded to the commissioner and the commissioner is authorized and empowered to determine whether the renovations, repairs, alterations, conversion or construction are for purposes necessary to provide a thorough and efficient system of education in the State. If the commissioner determines that such work is necessary, the commissioner shall certify that the school district is eligible for a loan and grant pursuant to this section to finance the renovation, repair, alteration, conversion or construction described in the application.

d. Upon certification, the commissioner shall waive the holding of a referendum or the requirement for approval by a board of school estimate pursuant to subsection (d) of N.J.S.18A:20-4.2 or N.J.S.18A:24-5 et seq., as the case may be, or the requirement for approval of the project by a capital projects control board pursuant to P.L.1991, c.139 (C.18A:7A-46.1 et seq.), as appropriate, and the school district may, upon receiving the certification and waiver, apply to the authority for a loan and grant pursuant to this section. The terms of the loan and the repayment schedule shall be established by the authority. The repayments in the amount of the loan to the authority by the school district shall be treated as net debt service by the school district for school aid purposes. In addition to the amount of taxes determined by the legal voters of the school district at the annual school election, the secretary of the board of education shall certify the amount required for the repayment of the interest and principal of the loan in the same manner required for interest and debt redemption charges pursuant to N.J.S.18A:22-33, and the amount so certified shall be included in the taxes assessed, levied and collected in the municipality or municipalities comprising the school district for such purposes.

e. The authority, in consultation with the commissioner shall, in determining whether to grant approval of any loan and grant application pursuant to this section, take into consideration the severity of the need for the particular project, the ability of the school district to begin and complete the project in an expeditious manner, the ability of the school district to proceed with the funding of the balance of the funds for the project, and the extent to which the approval of the project contributes to the equable distribution of monies in the loan and grant fund.

f. The balance of the moneys needed for a project for which an application for a loan and grant is made pursuant to this section may be funded by the school district by: (1) the issuance of bonds, or other borrowing, excluding lease-purchase agreements, pursuant to the provisions of subsection (d) of N.J.S.18A:20-4.2, N.J.S.18A:24-5 et seq., or P.L.1991, c.139 (C.18A:7A-46.1 et seq.), as appropriate; except that the commissioner shall waive the holding of a referendum or the requirement for approval by a board of school estimate pursuant to subsection (d) of N.J.S.18A:20-4.2 or N.J.S.18A:24-5 et seq., as the case may be, or the requirement for approval of the project by a capital projects control board pursuant to P.L.1991, c.139 (C.18A:7A-46.1 et seq.), as appropriate; and (2) any other lawful source.

g. Any school district shall be eligible to receive additional loans and grants pursuant to this section even if the district has received a previous loan and grant; provided that the additional loans and grants are in conformity with the selection criteria established pursuant to this section.

h. In determining the amount of the loan and the amount of the grant to be provided in connection with an application by a school district, the authority shall apply the following criteria:

(1) With respect to a special needs school district, the amount of the approved financial assistance shall be apportioned ninety percent (90%) as a grant and ten percent (10%) as a loan;

(2) With respect to a consolidated school district, the amount of approved financial assistance shall be apportioned sixty percent (60%) as a grant and forty percent (40%) as a loan; and

(3) With respect to any other school district, the amount of approved financial assistance shall be apportioned twenty-five percent (25%) as a grant and seventy-five percent (75%) as a loan.

i. Of the total amount available in the loan and grant fund, not more than fifteen percent (15%) of the funds shall be available for school districts other than special needs school districts and consolidated school districts. In addition, not less than fifty percent (50%) of the total shall be available for special needs school districts and not less than thirty-five percent (35%) shall be available for consolidated school districts.

j. The repayment of the principal and interest on the loans, other than prepayments of principal, shall be paid to the authority and shall be deposited in accordance with the provisions of the contract.

5. (New Section) The authority shall establish and maintain the trust fund to which shall be credited the amount to be paid pursuant to a contract between the treasurer and the authority, which contract shall provide for the payment in each year of the principal of and interest on the bonds; provided, that the payments shall be subject to and dependent upon appropriations being made from time to time by the Legislature.

6. (New Section) a. Except as may be otherwise expressly provided in this act, the authority may from time to time issue its bonds in any principal amounts as in the judgment of the authority shall be necessary to provide sufficient funds to pay the costs of the projects, including the payment, funding or refunding of the principal of, or interest or redemption premiums on, any bonds, notes or other obligations issued by it, whether the bonds or the interest or redemption premiums thereon to be funded or refunded have or have not become due, the establishment or increase of reserves or other funds to secure or to pay the bonds or interest thereon and all other costs or expenses of the authority incident to and necessary to carry out its purposes and powers under this act.

b. Whether or not the bonds of the authority are of a form and character as to be negotiable instruments under the terms of Title 12A of the New Jersey Statutes, the bonds are made negotiable instruments with the meaning of and for the purposes of Title 12A, subject only to the provisions of the bonds for registration.

c. Bonds of the authority shall be authorized by a resolution or resolutions of the authority and may be issued in one or more series and shall bear any date or dates, mature at any time or times, bear interest at any rate or rates of interest per annum, be in any denomination or denominations, be in any form, either coupon, registered or book entry, carry any conversion or registration privileges, have any rank or priority, be executed in any manner, be payable in any coin or currency of the United States which at the time of payment is legal tender for the payment of public and private debts, at any place or places within or without the State, and be subject to any terms of redemption by the authority or the holders thereof, with or without premium, as the resolution or resolutions may provide. A resolution of the authority authorizing the issuance of bonds may provide that the bonds be secured by a trust indenture between the authority and a trustee, vesting in the trustee any property, rights, powers and duties in trust consistent with the provisions of this act as the authority may determine. All bonds of the authority shall be sold at such price or prices and in such manner at the public or private sale as the authority shall determine.

d. Bonds of the authority may be issued under the provisions of this act without obtaining the consent of any department, division, board, bureau or agency of the State, and without any other proceedings or the happening of any other conditions or things, other than those consents, proceedings, conditions or things which are specifically required by this act.

e. Bonds of the authority issued under the provisions of this act shall not be debt or liability of the State or of any political subdivision thereof other than the authority and shall not create or constitute any indebtedness, liability or obligation of the State or any political subdivision, but all the bonds, unless funded or refunded by bonds, shall be payable solely from revenues or funds pledged or available for their payment as authorized in this act. Each bond shall contain on its face a statement to the effect that the authority is obligated to pay the principal thereof or the interest thereon only from its revenues, receipts or funds pledged or available for their payment as authorized in this act and that neither the State, nor any political subdivision thereof, is obligated to pay the principal or interest and that neither the faith and credit nor the taxing power of the State, or any political subdivision thereof, is pledged to the payment of the principal of or the interest on the bonds.

f. The aggregate principal amount of bonds shall not exceed $500,000,000. In computing the foregoing limitations, there shall be excluded all the bonds for which there shall be deposited in an escrow fund (1) the entire amount necessary to pay at maturity or upon redemption the principal, premium, if any, and interest due or to become due or to such date of maturity or redemption date for such bonds or (2) an amount, the principal of and interest on which, when invested, shall be sufficient to pay at maturity or upon redemption the principal, premium, if any, and interest due or to become due to such date of maturity or redemption date for such bonds.

7. (New section) a. To ensure the continued operation and solvency of the authority, the authority may require that if a school district fails or is unable to pay to the authority in full when due any obligations of the school district to repay principal of and interest on the loan to the authority, an amount sufficient to satisfy the deficiency shall be paid by the treasurer to the authority from any State aid payable to the school district.

b. If the authority requires, and there has been a failure or inability by a school district to pay its obligations to the authority remaining uncured for a period of 30 days, the chairman of the authority shall certify to the treasurer, with written notice to the fiscal officer of the school district and to the Legislature, the amount remaining unpaid, and the treasurer shall pay that amount to the authority, or if the right to receive those payments has been pledged or assigned to a trustee for benefit of the holders of bonds, to that trustee, out of the State aid payable to the school district, until the amount so certified is paid.

c. The amount paid over to the authority shall be deducted from the corresponding appropriation or apportionment of State aid payable to the school district and shall not obligate the State or make, nor entitle the school district to receive, any additional appropriation or apportionment.

8. (New section) The commissioner or director of the Division of Local Government Services, in the Department of Community Affairs, as appropriate, is authorized, for those school districts issuing bonds pursuant to this act, to waive the requirement imposed pursuant to N.J.S.18A:24-46 or N.J.S.40A:2-29, as the case may be, that school districts issue bonds at not less than par value.

9. (New section) The authority, in consultation with the commissioner, shall establish the rules and regulations governing the making of loans and grants and their use including, but not limited to, procedures for the submission of loan and grant requests, standards for the evaluation of application requests, provisions implementing priority systems for projects, reporting requirements of the recipient of any loans or grant concerning the progress and the expenditure of funds, and limitations, restrictions or requirements concerning the use of loan or grant funds as the authority shall prescribe; provided that the rules and regulations shall be in compliance with the terms and provisions of this act relating to the making of or eligibility for loans or grants for projects generally or for any particular type or class of projects. Any rules or regulations so adopted shall not be subject to the provisions or requirements of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), except that any rules and regulations so adopted shall be filed with the Secretary of State and shall provide for the prompt publication of the rules and regulations after the filing of same.

10. N.J.S.18A:72A-1 is amended to read as follows:

18A:72A-1. It is hereby declared that a serious public emergency exists affecting and threatening the welfare, comfort, health, safety and prosperity of the people of the state and resulting from the fact that financial resources are lacking with which to construct required dormitory and other educational facilities at public and private institutions of higher education and to provide for public school facility projects; that it is essential that this and future generations of youth be given the fullest opportunity to learn and to develop their intellectual and mental capacities; that it is essential that institutions for higher education and local boards of education within the state be provided with appropriate additional means to assist such youth in achieving the required levels of learning and development of their intellectual and mental capacities; that it is essential that all resources of the state be employed in order to meet the tremendous demand for higher educational opportunities and public school facilities; that all institutions of higher education in the state, both public and private, and all public school facilities are an integral part of the total educational effort in the state for providing prekindergarten through higher educational opportunities, and that it is the purpose of this chapter to provide a measure of assistance and an alternative method to enable institutions of higher education and local boards of education in the state to provide the facilities which are sorely needed to accomplish the purposes of this chapter, all to the public benefit and good, to the extent and manner provided herein.

(cf: N.J.S.18A:72A-1)

11. N.J.S.18A:72A-5 is amended to read as follows:

18A:72A-5. The authority shall have power:

(a) To adopt bylaws for the regulation of its affairs and the conduct of its business;

(b) To adopt and have an official common seal and alter the same at pleasure;

(d) To sue and be sued in its own name, and plead and be impleaded;

(e) To borrow money and to issue bonds and notes and other obligations of the authority and to provide for the rights of the holders thereof as provided in this chapter;

(f) To acquire, lease as lessee, hold and dispose of real and personal property or any interest therein, in the exercise of its powers and the performance of its duties under this chapter;

(g) To acquire in the name of the authority by purchase or otherwise, on such terms and conditions and in such manner as it may deem proper, or by the exercise of the power of eminent domain, any land or interest therein and other property which it may determine is reasonably necessary for any project, including any lands held by any county, municipality or other governmental subdivision of the State; and to hold and use the same and to sell, convey, lease or otherwise dispose of property so acquired, no longer necessary for the authority's purposes;

(h) To receive and accept, from any federal or other public agency or governmental entity, grants or loans for or in aid of the acquisition or construction of any project, and to receive and accept aid or contributions from any other source, of either money, property, labor or other things of value, to be held, used and applied only for the purposes for which such grants, loans and contributions may be made; (i) To prepare or cause to be prepared plans, specifications, designs and estimates of costs for the construction and equipment of projects for participating colleges under the provisions of this chapter, and from time to time to modify such plans, specifications, designs or estimates;

(j) By contract or contracts or by its own employees to construct, acquire, reconstruct, rehabilitate and improve, and furnish and equip, projects for participating colleges; however, in any contract or contracts undertaken by the authority for the construction, reconstruction, rehabilitation or improvement of any public college project where the cost of such work will exceed $25,000, the contracting agent shall advertise for and receive in the manner provided by law:

(1) separate bids for the following categories of work;

(a) the plumbing and gas fitting work;

(b) the heating and ventilating systems and equipment;

(d) the structural steel and ornamental iron work;

(e) all other work and materials required for the completion of the project, or

(2) bids for all work and materials required to complete the entire project if awarded as a single contract; or

(3) both (1) and (2) above.

All bids submitted shall set forth the names and license numbers of, and evidence of performance security from, all subcontractors to whom the bidder will subcontract the work described in the foregoing categories (1)(a) through (1)(e).

Contracts shall be awarded to the lowest responsible bidder whose bid, conforming to the invitation for bids, will be the most advantageous to the authority;

(k) To determine the location and character of any project to be undertaken pursuant to the provisions of this chapter, and to construct, reconstruct, maintain, repair, operate, lease, as lessee or lessor, and regulate the same; to enter into contracts for any or all such purposes; to enter into contracts for the management and operation of a project, and to designate a participating college as its agent to determine the location and character of a project undertaken by such participating college under the provisions of this chapter and, as the agent of the authority, to construct, reconstruct, maintain, repair, operate, lease, as lessee or lessor, and regulate the same, and, as agent of the authority, to enter into contracts for any and all such purposes including contracts for the management and operation of such project;

(l) To establish rules and regulations for the use of a project or any portion thereof and to designate a participating college as its agent to establish rules and regulations for the use of a project undertaken by such participating college;

(m) Generally to fix and revise from time to time and to charge and collect rates, rents, fees and other charges for the use of and for the services furnished or to be furnished by a project or any portion thereof and to contract with holders of its bonds and with any other person, party, association, corporation or other body, public or private, in respect thereof;

(n) To enter into any and all agreements or contracts, execute any and all instruments, and do and perform any and all acts or things necessary, convenient or desirable for the purposes of the authority or to carry out any power expressly given in this chapter;

(o) To invest any moneys held in reserve or sinking funds, or any moneys not required for immediate use or disbursement, at the discretion of the authority, in such obligations as are authorized by law for the investment of trust funds in the custody of the State Treasurer;

(p) To enter into any lease relating to higher education equipment with a public or private institution of higher education pursuant to the provisions of P.L.1993, c.136 (C.18A:72A-40 et al.).

(q) To establish and maintain a loan and grant fund and a trust fund in order to provide loans and grants to public school districts pursuant to the provisions of P.L. , c. (C. )(now pending before the Legislature as this bill).

(cf: P.L.1993, c.136, s.4)

12. This act shall take effect immediately.

STATEMENT

This bill establishes the Educational Facilities Loan and Grant Program in the Educational Facilities Authority. Under the program, school districts would be eligible to receive loans and grants to finance the renovation, repair or other alteration of existing school buildings, the construction of new school buildings or the conversion of existing school buildings to other instructional purposes.

Upon application by a school district for a loan and grant, the application would be forwarded to the Commissioner of Education who is authorized and empowered to determine whether the renovations, repairs, alterations, conversion or construction are for purposes necessary to provide a thorough and efficient system of education in the State. If the commissioner determines that the work is necessary, the commissioner would certify that the school district is eligible for a loan and grant and would waive the holding of a referendum or the requirement for approval by a board of school estimate or for approval of the project by a capital projects control board. The terms of the loan and the repayment schedule would be established by the authority, and the repayments in the amount of the loan would be treated as net debt service by the school district for school aid purposes.

The authority, in consultation with the commissioner would, in determining whether to approve any loan and grant application, take into consideration the severity of the need for the particular project, the ability of the school district to begin and complete the project in an expeditious manner, the ability of the school district to proceed with the funding of the balance of the funds for the project, and the extent to which the approval of the project contributes to the equable distribution of monies in the loan and grant fund.

In determining the amount of the loan and grant to be provided, the authority would apply the following criteria:

(1) With respect to a special needs school district, the amount of the approved financial assistance would be apportioned ninety percent (90%) as a grant and ten percent (10%) as a loan;

(2) With respect to a consolidated school district, the amount of approved financial assistance would be apportioned sixty percent (60%) as a grant an forty percent (40%) as a loan; and

(3) With respect to any other school district, the amount of approved financial assistance would be apportioned twenty-five percent (25%) as a grant and seventy-five percent (75%) as a loan.

Of the total amount available in the loan and grant fund, not more than fifteen percent (15%) of the funds would be available for school districts other than special needs school districts and consolidated school districts. In addition, not less than fifty percent (50%) of the total would be available for special needs school districts and not less than thirty-five percent (35%) would be available for consolidated school districts.

The authority would also establish and maintain a trust fund to which would be credited the amount to be paid pursuant to a contract between the State treasurer and the authority, which contract would provide for the payment in each year of the principal of and interest on the bonds. Those payments would be subject to and dependent upon appropriations being made from time to time by the Legislature.

Bonds of the authority issued could not exceed $500,000,000 and would not be the debt or liability of the State or of any political subdivision thereof. The bonds would be payable solely from revenues or funds pledged or available for their payment by the authority.

Establishes the Educational Facilities Loan and Grant Program.