LEGISLATIVE FISCAL ESTIMATE TO

[First Reprint]

ASSEMBLY, No. 2724

STATE OF NEW JERSEY

DATED: DECEMBER 23, 1997

      Assembly Bill No. 2724 (1R) of 1997, the "Brownfields Redevelopment Act," is primarily designed to revise current State laws and regulations and to create incentives to promote and facilitate the cleanup and reuse of the State's contaminated sites. The bill particularly addresses New Jersey's older industrial sites, often referred to as “brownfields.” Many of these sites are either abandoned or underutilized and are often contaminated with hazardous substances that need to be remediated to some degree before meaningful redevelopment can be implemented.

      The bill contains the following provisions that may have significant fiscal impacts on the State Budget or other public entities: First, the Department of Environmental Protection (DEP) is directed to investigate and determine the extent of contamination in the State's aquifers for the purpose of determining the appropriate method of remedial action needed to address that contamination. This data would be then made public through its inclusion in the State's Geographic Information System. The bill appropriates $5.0 million from the 1996 Environmental Cleanup Fund, which is funded from bond monies approved in November, 1996 (P.L.1996, c.70).

      Second, the bill provides financial incentives in the form of 25 percent matching grants from the Hazardous Discharge Site Remediation Fund, as administered by the New Jersey Economic Development Authority (EDA), to support persons who propose to use an innovative technology for a remedial action.

      Third, the bill provides new time limits to the DEP for the issuance and adoption of several reports and regulations required under P.L.1993, c.139 that deal with liability, risk assessment, remediation standards, technical rules, and large contaminated area regulations.

      Fourth, the bill changes the law that generally provides that public entities are not liable for existing contamination on land they acquire through actions such as a tax lien or foreclosure. Under this law, however, a public entity may still be liable for knowingly and voluntarily acquiring contaminated property, even if for a public purpose such as redevelopment. The bill amends the law to limit public entity liability for contaminated property that is acquired by any means, with the exception of those entities that are engaged in a timely remediation or redevelopment process. Fifth, the bill authorizes the DEP to seek treble damages under the "Spill Compensation and Control Act" from a responsible party who has refused to clean up and remove a hazardous discharge. Normally in such cases, monies from the Spill Fund are used to finance these cleanups.

      Sixth, the bill provides that cleanup and removal costs assessed by the DEP under the Spill Compensation and Control Act are not to include administrative indirect costs unless the costs are being assessed in a cost recovery action. Seventh, under the Environmental Opportunity Zone Act (P.L.1995, c.413), the provision that allowed for certain tax benefits when a site is redeveloped for industrial or commercial purposes would be expanded to include such redevelopment for residential or other productive uses.

      Eighth, the bill provides that where new taxes are to be realized from the redevelopment of a brownfields site, the Commissioner of the Department of Commerce and Economic Development (DCED) can enter into a redevelopment agreement with the site developer to reimburse the developer for up to 75 percent of the costs of the remediation. Reimbursement funding would be derived from the dedication of half of the sales tax collected from new businesses developed on these sites.

      Finally, the bill creates a Brownfields Redevelopment Task Force to update an inventory of brownsfield sites and to coordinate brownfields redevelopment policy. The task force would be staffed by the Department of the Treasury's Office of State Planning.

      The Office of Legislative Services (OLS) estimates that the matching grant program proposed by the bill will have no fiscal impact on the State budget or the General Fund, since it will be financed by monies already contained in the Hazardous Discharge Site Remediation Fund. Most of these funds are derived from previously appropriated bond funds, loan repayments, and other non-State funding sources.

      Likewise, the $5.0 million appropriation for the DEP aquifer study is also supported by bonds and thus will not affect the State budget until debt service payments for these funds are initiated sometime in the future. It should be noted that in addition to alleviating some of the costs for persons performing brownfields remediations, the generation of data from this study may also help to lower the costs for State-funded site remediations.

      Regarding the proposed amendment to limit public entity liability for contaminated property that is acquired by any means, the OLS estimates that municipalities, counties and public improvement authorities will benefit from this provision by enabling them to acquire more brownfields property without the threat of such liabilities or potential lawsuits.

      The OLS contends that the exclusion of administrative indirect costs that are currently assessed under the "Spill Compensation and Control Act" will have the effect of lowering the fees assessed by the DEP to review a remediation, thereby lowering the cost for a person to perform a remediation. Conversely, the General Fund will receive less revenue from this source, thereby requiring a greater proportion of State funds to support DEP staff operations in this area. Estimates of potential revenue loss cannot be ascertained at this time.

      Concerning the reimbursement of sales tax revenues that would be realized from the redevelopment of a brownfields site, the potential net tax gain from such projects cannot be estimated since the DCED commissioner is given broad discretion in deciding the terms and conditions of such agreements. Although similar legislation was enacted last year (P.L.1996, c.124) that provided for remediation cost reimbursement to developers of landfills, no comparative tax revenue data have yet been generated.

      The OLS estimates that any costs incurred by the Brownfields Redevelopment Task Force can probably be covered by the $225,000 appropriation contained in the Office of State Planning's FY 1998 Budget for this purpose (under "Brownfields Site Inventory Project"). Last, if the department is unable to meet the bill's deadlines to complete the reports and regulations required under P.L.1993, c.139, it may be due to reductions-in-force and staff reassignments resulting from budget cutbacks during FY 1994, FY 1995 and FY 1996. Additional funding for consultant or other outside professional assistance may therefore be needed to complete these tasks.

      This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

This fiscal estimate has been prepared pursuant to P.L.1980, c.67.