SENATE EDUCATION COMMITTEE

STATEMENT TO

SENATE, No. 586

STATE OF NEW JERSEY

DATED: MAY 2, 1996

      The Senate Education Committee reports favorably Senate Bill No. 586. 

      This bill establishes additional procedures and criteria for the approval of a lease purchase agreement for public school facilities. Under the bill, before the approval of a lease purchase agreement in excess of five years: (1) the Commissioner of Education would need to determine that present educational facilities are less than 80 percent adequate, the new educational facilities to be acquired will be fully utilized within 10 years, and under existing statutes there is no more economical alternative method of providing the new educational facilities; and (2) the Local Finance Board in the Department of Community Affairs would need to determine that the amounts to be expended will not materially impair the credit of any municipality comprised within the district or substantially reduce its ability, during the ensuing 10 years, to pay punctually capital lease obligations and the principal and interest of its debts, or supply essential public improvements and services. These criteria presently apply to the review process conducted in connection with the issuance of bonds for educational facilities. In addition, the board of education would be required to demonstrate to the commissioner that it has unsuccessfully attempted to obtain voter approval of the proposed capital project by submission of the question of the capital project and the method of financing to the voters at a regular or special school election.

      The bill permits a board of education to purchase the leased premises at any time during the lease period without penalty and prohibits prepayment or capitalization of rent.

      A final requirement is for a board of education to hold two public hearings on the proposed lease purchase agreement and to proceed with the agreement only upon an affirmative vote of two-thirds of the members of the board.