Public Private Partnerships – P3s

As of February 10, 2019, municipalities are permitted to enter into public-private partnership (P3) agreements with a private entity to assume full financial and administrative responsibility for a project of or for the benefit of the local unit. P.L. 2018, c. 90 permits public-private partnership agreements with municipalities, counties, school districts, county colleges, state colleges, New Jersey Institute of Technology, and the State for roads, infrastructure and buildings. The law outlines a public process for P3 agreements and requires State review and approval process.

A P3 is a contractual agreement between a public agency and a private entity that allows for greater private sector participation in the delivery and financing of a project. P3’s are not privatization, as the public agency retains ownership of the assets.

The new law permits a P3 agreement for development, construction, reconstruction, repair, alteration, improvement, extension, operation, and maintenance of any building, local or county road, vertical structure, or facility constructed or acquired by a local government unit and to operate local government functions, including any infrastructure or facility used or to be used by the public or in support of a public purpose or activity.  The law also allows for a P3 agreement for a lease of a revenue-producing public building, road, structure, infrastructure, or facility in exchange for up-front or structured financing by the private entity for the project.

Any public-private partnership project, while not subject to the Local Public Contracts Law, will be subject to the Local Bond Law and will require a Project Labor Agreement and be subject to prevailing wages.

The law outlines two distinct methods in which a public agency may consider a P3 contract.  Either the municipality solicits proposals or qualifications from at least two private entities or receives an unsolicited proposal. For solicitation of proposals, the municipality must advertise at least 45 days on their website and at least one or more newspapers with statewide circulation.  The request for proposals must include relevant technical submissions, documents, and evaluation criteria. The State Treasurer, through rulemaking, will establish the minimum standards of the evaluation criteria.

For unsolicited proposals, if the municipality determines that the proposals meet the standards required by law, they must publish a notice of the receipt of the proposal on their website and in at least one or more newspapers with statewide circulation as well a notice at their next scheduled public meeting and to the State Treasurer. To qualify the unsolicited proposal must at a minimum include a description of the project, the estimated construction and life-cycle costs, a timeline for development, proposed plan of financing, including projected revenues, public or private debt, equity investment, description of how the project meets needs identified in existing plans, the permits and approvals needed to develop the project from local, state and federal agencies and a projected schedule for obtaining such permits and approvals, a statement of risks, liabilities and responsibilities to be assumed by the private entity.

Prior to submitting any proposal to the State Treasurer for review and approval, all projects must have a public hearing. The public hearing notice must prominently state the purpose and nature of the proposed project.  The notice must be no less than 14 days prior to the public hearing and be published on the municipal website and at least once in one or more newspapers with statewide circulation. At the public hearing the municipality must find that the project is in the best interest of the public by finding (i) it will cost less than the public sector option, or if it costs more there are factors that warrant the additional expense; (ii) there is a public need for the project and the project is consistent with existing long-term plans; (iii) there are specific significant benefits to the project; (iv) there are specific significant benefits to using the public-private partnership instead of other options including No-Build; (v) the private development will result in timely and efficient development and operation; and (vi) the risks, liabilities and responsibilities transferred to the private entity provide sufficient benefits to warrant not using other means of procurement.

After the proposal or proposals have been received, and any public notification period has expired, the public agency must rank the proposals in order of preference. In ranking the proposals, the public agency must rely upon, at the minimum, the evaluation criteria established by the State Treasurer.  In addition, the public agency may consider factors that include, but may not be limited to, professional qualifications, general business terms, innovative engineering, architectural services, or cost-reduction terms, finance plans, and the need for local government funds to deliver the project and discharge the agreement.

Please note that the public agency may require, upon receipt of one or more proposals, that the private entity assumes responsibility for all costs incurred by the local government unit before execution of the public-private partnership agreement, including costs of retaining independent experts to review, analyze, and advise the local government unit with respect to the proposal.

The League supported this new law as it provides a unique option for municipalities looking to develop, construct, repair, alter, improve, or maintain any public building, road or another municipal facility while providing appropriate oversight.

For more information please see recent NJ Municipalities magazine articles providing greater details on P3 generally (February) and Municipalities and P3 (March).

Contact: Lori Buckelew, Senior Legislative Analyst, lbuckelew@njlm.org , 609-695-3481, x112.

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Bill Requiring the Release of the Bidders’ List Advances

correct size blogOn Thursday the State Senate will be considering S-2947, which would require municipalities, counties and local authorities to release the names, upon request, of all parties who have received bid documents prior to the bid opening once three or more bid packets have been received by parties.  The release of the bidders’ list would have to be made available in a timely manner in accordance with the Open Public Records Act.  In addition, municipalities will have the option to post the list on their websites.  However, failure to release this information would prohibit a municipality from accepting the bids and require the re-advertisement for bids. The League strongly opposes S-2947.

First and foremost, we are concerned that the release of the bidders’ names prior to the receipt of bids could lead to collusion and bid rigging.  We agree with the Appellate Division’s decision in O’Neill Electric Co., Inc. v. the Board of Chosen Freeholders of the County of Warren, 297 N.J. Super. 473 (App. Div. 1997).  In that case, the Appellate Division stated that “access to a bidders list facilitates collusive or bid-rigging arrangements and that withholding disclosure makes this more difficult.”  Id. at 480.  The Court went on to say that bid-rigging is an “extremely serious problem which costs the public enormous sums of money.  The relatively insignificant interest of plaintiff and amici in obtaining bidders lists cannot overcome the grave danger to the public resulting from a failure to keep the door tightly closed to potential corruption in public bidding.”  Id.  We are concerned that potential bidders may be dissuaded from bidding on a project based on the bidders who have picked up bid specifications or may change their pricing based on who the competition is on the project versus what competitive bid price for the project.

Second, we are concerned that the bill as drafted requires a municipality to create and maintain a new record.  Presently, the Local Public Contracts Law does not require a municipality to create or maintain such a record.  In fact, the only reason a bidders’ list is maintained is to create a centralized list in case there are addenda to specifications for bids or proposals.  A municipality does not have to create a centralized list, if it so choose, it could collect the business cards of potential bidders or use the information on checks submitted to pay for the bid packets.

Finally, we are concerned with the benchmark of “three or more bids” before the release of the bidders’ list.  We believe that this arbitrary benchmark will lead to costly litigation.  For example, if a person only requests a copy of the bidders’ list but at that time only two bid packets have been released and twenty minutes later a third person obtains a bid packet, the legislation is unclear as to the municipality’s obligation to the person who first requested the list.   There are a number of other scenarios that we could cite that make this provision problematic.

Contractors have long argued that release of the bidders’ list may force contractors to “sharpen their pencils.” We question why can’t these “pencils be sharpened” regardless of the number of bidders or who is bidding on the project.  Shouldn’t potentially responsible bidders be submitting their lowest prices in all their bids?

Subcontractors have longed argued that the release of the bidders’ list before submission of the bids would provide them with an opportunity to solicit potential bidders to work with them on the project. While we do not disagree that subcontractors benefit from knowing who is bidding on a project we strongly question if a general contractor is going to hire a subcontractor for a government contract based on a “cold call”.  In our experience we have found that general contractors tend to have a long-standing relationship with the subcontractors that they use for public contracts. The release of the bidders’ list after the submission of bids provides the subcontractors the opportunity to develop those relationships with the general contractor.

We firmly believe that the public bidding process should be open and competitive.  The names of bidders are routinely released after a bid opening.  We are troubled with releasing the list prior to a bid opening because it has the potential to limit competition, which can drive up costs for taxpayers and create an environment that could possibly lead to bid rigging and collusion.

Contact: Lori Buckelew, Sr. Legislative Analyst, lbuckelew@njslom.org, 609-695-3481 x112.

Senate to Vote on Bill Giving Control of Vegetation Management in ROW to Utilities

correct size blogFebruary 1 Update:  We are pleased to report that this bill was held and not voted on by the State Senate on January 31.    We will continue to advise of developments. 

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On Thursday (January 31), the Senate is scheduled to vote on S-2505, known as the, “Vegetation Management Response Act.”   S-2505  would provide electric utility companies completely unfettered authority to clear, move, cut, or destroy any dangerous vegetation. While we appreciate the sponsors’ intentions and appreciate amendments which now require notice of vegetation management work be made to municipal governments and property owners, the League remains opposed to this bill.

The approach taken in this legislation is unnecessarily broad and overreaching, and removes local governments’ ability to plan and manage vegetation in the right-of-way. While S-2505 seemingly limits what vegetation a public utility can address to only “dangerous vegetation,” that term is unnecessarily broad to the point of near total inclusion of all vegetation.

As defined within the bill, “dangerous vegetation” would include any “vegetation growing in, near, or adjacent to the electric public utility’s right of way, and the electric distribution and transmission system…which may fall into, touch, affect, or otherwise interfere with an electrical distribution line.” This would seemingly include any vegetation on either public or private property and gives public utilities sole discretion to determine what meets the criteria of “dangerous vegetation.” The utility is also under no requirement to receive any input from the public before the utility can unilaterally choose to clear, move, cut, and destroy to remove or replace the vegetation.

We need your assistance to ensure that state legislators hear the concerns of municipal leaders. We are asking that you please contact your state representatives to let them hear your concerns with allowing electric utilities to have total control of the vegetation in your municipal rights-of-way. Your legislator’s contact information can be found using the state’s website which breaks this information down by municipality.

Contact: Frank Marshall, Esq., League Staff Attorney, FMarshall@njslom.org or 609-695- 3481 x 137.

Bill Seeks to Impose Examination and Certification Requirements on Zoning Officers and Land Use Board Administrators

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correct size blogIn late November of last year, Assemblywoman Vainieri Huttle introduced A-4725 which has been referred to the Assembly State and Local Government Committee but not yet scheduled for a hearing.  This bill would establish an examination and certification program for zoning officers and land use board administrators and would create additional State oversight of the profession.  This bill is similar to those introduced in the past (A-2116 in 2006 and A-3462 in 2008) which the League opposed.

While the League endorses continuing education for appointed and elected officials, we have concerns that new requirements proposed in A-4725 are unnecessary, bureaucratic and infringe on local discretion.  We also believe that the bill may impede efforts to deliver this function via an interlocal service agreement.

The League is in discussion with the sponsor and other interested stakeholders in an effort to find common ground on amendments to address our concerns.  However, until appropriate amendments are made we must remain opposed to A-4725.

Among other things, A-4725 would do the following:

  • Provide the DCA with authority to review and possibly disallow municipal shared service agreements pertaining to zoning officers and land use board administrators,
  • Require the Department of Community Affairs (“DCA”) to establish a certification program for zoning officers and land use board administrators,
  • Prohibit anyone from being appointed, reappointed, or continuing employment as a zoning officer or land use board administrator unless that person holds a certificate issued by the DCA,
  • Make obtaining a certificate from the DCA a condition of employment for zoning officers and land use board administrators,
  • Require anyone seeking a certificate to be a zoning officer and/or land use board administrator to:
    • Be at least 21 years of age,
    • Have obtained a high school diploma or equivalent,
    • Have completed at least two years of education at a college of recognized standing (with possible exceptions based on experience),
    • Have completed the course of study in planning and zoning administration and enforcement developed by the DCA (40 hours for initial certification and 20 hours every 3 years for renewal),
    • Pay a $50 fee to the State.
  • Define land use board administrator to include the administrative secretary of a municipal planning board and zoning board of adjustment.

To be clear, A-4725 does not directly require municipalities to expend funds to cover costs associated with certification and continued education of zoning officers and land use board administrators, however, the practical reality is that this cost will be borne, one way or another, by municipalities.  The certification and continued education requirements as a condition of employment virtually insures this.  Working under a 2% levy cap means that every additional dollar municipalities are required to spend must be taken away from other necessary services.

Contacts:

Michael Cerra, Assistant Executive Director, MCerra@njslom.org or 609-695-3481 x 120.

Frank Marshall, League Staff Attorney, FMarshall@njslom.org or 609-695-3481 x 137.

Court Rules Evidence of Necessity Required for Use of Eminent Domain in Redevelopment

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correct size blogRecently, the Appellate Division issued a ruling in Borough of Glassboro v. Grossman, et al. interpreting key provisions of the Local Redevelopment and Housing Law.  More specifically this published decision examined N.J.S.A. 40A:12A-8(c) which authorizes a municipality or a redevelopment agency to acquire by condemnation lands or buildings which are “necessary for the redevelopment project.”  The question before the court was what shows, if any, of necessity, must a condemning authority make in order to take property within a redevelopment zone?

Ultimately, the court ruled that whenever an attempted condemnation by a municipality or redeveloper is challenged, the condemning authority must articulate a definitive need for the property.  Further, the condemning authority claiming a need for the property must justify its need through supporting proof, the court finding it is not enough to establish necessity simply by stating it.

While acknowledging that evidential possibilities are open-ended, the court provided an illustrative list of ways that necessity could be proven through discrete facts or data, including; reports from a planner, engineer, or traffic consultant; architectural plans or drawings; or a market study or economic forecast.

Additionally, the court specifically rejected the argument that the condemning authority can satisfy the necessity requirement “by simply declaring that it wishes to stockpile a parcel for some possible future need in the redevelopment area.”  Ruling instead, that there must be a particular redevelopment project identified and tied to the proposed acquisition.  Perhaps recognizing that redevelopment projects take time and evolve over that period to include changes in plans, the court clarified that the particular project identified in the original acquisition can be changed after the acquisition occurs, so long as the original taking was justified and pursued in good faith.

You should review this ruling with your municipal attorney for more information on how it will impact your municipality’s potential and current redevelopment projects.

Contact: Frank Marshall, Esq., League Staff Attorney, FMarshall@njslom.org or 609-695-3481 x 137.

Changes to Beekeeping Rules

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correct size blogOn Monday, the State Department of Agriculture issued a Notice of Proposed Substantial Changes in connection with the previously proposed apiary rules issued this time last year.   As the name implies, there have been substantial changes made to the Department’s previously proposed rules.  Some of those changes include:

  • J.A.C. 2:24-7.2(a)1: Allowing for three colonies per each ¼ acre tract of land, regardless of local land use and zoning rules. Under the original proposal, the number of hives permitted varied based not just on the size of land but by use.
  • J.A.C. 2:24-7.2(d): Hives must be placed 10 feet from any property line and 20 feet away from any roadside, sidewalk, or path. The original proposed rules would have required hives be placed 25 feet from any roadside, sidewalk, or path.
  • J.A.C. 2:24-7.2(d): The proposed changes eliminate a requirement found in the original proposal that hives be situated at least 85 feet from any public place such as, playgrounds, sports fields, schools, or churches, along with the requirement that hive entrances face away from residential properties.
  • J.A.C. 2:24-7.3: The proposed changes include a more detailed process by which beekeepers can seek a waiver of colony density limitations.  A new mechanism has been created where previously granted waivers can be challenged by surrounding property owners.

We are still reviewing the proposed changes and anticipate submitting comments to the Department highlighting areas of concern and support.  Your municipality may wish to do the same.  All written comments are due to the Department no later than February 1, 2019.  For more information on how to submit comments please see the Department’s Notice of Proposed Substantial Change.

Contact: Frank Marshall, Esq., League Staff Attorney, FMarshall@njslom.com or 609-695-3481 x 137.

Cannabis Legalization in Committee on Monday

As you may be aware, a joint committee hearing will be held on Monday with the Senate Budget and Appropriations and the Assembly Appropriations Committee to consider legislation to legalize adult use of recreational marijuana.

The Committees will consider amendments to S-2703 and A-4497.   We anticipate that these amendments will be made available today.    In addition, the Committees will also consider legislation to expand medical marijuana.

The League, along with the New Jersey Conference of Mayors and the New Jersey Urban Mayors Association issued a coalition letter to the Governor and all members of the Legislature outlining our recommendations and concerns.

For more on the League’s position on this issue please see our September 12 letter available at www.njslom.org/ArchiveCenter/ViewFile/Item/756.

We anticipate that the amended bill will include the local optional excise tax of 2%. Based on our research and what we heard from local officials at the conference session last week that amount is insufficient. We continue to advocate that municipalities should have the option of instituting an up-to-5% local option excise tax.

Further, there are continued concerns about how the State will fund the costs borne by local governments associated not only with the judicial expungement process but other local costs. In addition, there are concerns over land use controls, management issues, and other issues of interest to local governments.

According to public press reports, there remains a difference of opinion between the Legislative sponsors and the Governor’s office over the state tax rate and the composition and function of the State’s regulatory oversight. Sponsors hope to post the bills for final votes by the end of the year.

Please take action and contact your Legislators as soon as possible on this time-sensitive issues.

Contact:   Mike Cerra, Assistant Executive Director
(609) 695-3481 x120. mcerra@njslom.org

CY 2019 Municipal Budget Cap Information

correct size blogThe Division of Local Government Services has issued Local Finance Notice 2018-27 regarding the CY 2019 Municipal and County Budget and Cap Information.

The 1977 budget cap law (which caps APPROPRIATIONS increases) requires the Director of Division of Local Government Services to promulgate the Cost of Living Adjustment (COLA). The COLA for CY 2019 budgets is calculated at 2.5%. The governing body may pass a COLA ordinance, increasing the appropriation cap base to 3.5%. Cap bank balances from 2017 and 2018 are available for use in 2019.

As you know, this is just one of the two caps that limit local budgets. This cap was designed to limit local SPENDING flexibility. It should not be confused with the 2 percent cap on the local LEVY, which limits local revenue raising authority.

If a governing body wants to increase its allowable appropriations percentage in its budget to 3.5%, the following steps must be taken:

1. After January 1st, and prior to introduction and approval of the budget, an ordinance must be introduced that details the following:

a. The new rate (increased percentage) to be adopted; and,
b. The additional amount of appropriations to be added by the increase.

2. The ordinance must be approved by a majority of the full membership of the governing body, published, and a public hearing held at least 10 days after the publication date. A certified copy of the introduced action must be filed with the Director of the Division of Local Government Services within 5 days of its introduction.

3. The governing body may take a final vote on the action any time after the public hearing and prior to adoption of the budget. Depending on the form of government, the chief executive may veto the action in accordance with local procedures.

4. The ordinance takes effect immediately upon passage, and a certified copy of the adopted action must be filed with the Director within 5 days.

5. Cap increase referendums are not permitted if this option is chosen.

In addition, the 1977 cap law includes a cap exception for Group Health Insurance. This exemption is limited to the amount appropriated that is over 4% of the previous expenditures but not exceeding the State Health Benefits percentage increase. Since the State Health Benefits increase for CY 2019 is 0%, there will be no 1977 cap or 2010 levy cap exception for Group Health Insurance for CY 2019.

The Division will issue the Levy Cap Workbook at a later date.

Contact: Lori Buckelew, Senior Legislative Analyst, lbuckelew@njslom.org, 609-695-3481 x112.

 

CY 2018/SFY 2019 Best Practices Checklist Issued

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correct size blogOn October 15, the Division of Local Government Services issued the CY 2018/SFY 2019 Best Practices Checklist.  Local Finance Notice 2018-26 provides guidance on this year’s process.  Calendar Year municipalities must submit their Best Practices checklist by Monday, November 12, 2018.  State Fiscal Year municipalities will have until Friday, April 5, 2019.

This year’s Best Practices Checklist consists of a total of 61 questions, 30 of which are new. The Division made an attempt to make the wording of various questions more concise and it has broken out compound questions into separate questions.  As a result, some questions require “yes” or “no” answers, while some are “yes”, “no”, or “not applicable”  and others “yes”, “no”, or “prospective.”  It is important to note that once the municipality’s Best Practices Checklist is transmitted to the Division, the worksheets cannot be amended and resubmitted, except if an appeal is made.

In addition, the 169 municipalities in the Opportunity Zones must answer an additional series of survey questions.  These questions are unscored.  The questions are aimed at gauging the needs, priorities and capacities of Opportunity Zones municipalities and to assist the State in helping these communities attract appropriate businesses, investments and development.

The minimum acceptable score is 46 out of 61.  Otherwise, a percentage of your final aid payment will be withheld as follows:

46-61 questions = 25% of final CMPTRA and ETR payment withheld

36-45 questions = 50% of final CMPTRA and ETR payment withheld

26-35 questions = 75% of final CMPTRA and ETR payment withheld

0-25 questions = 100% of final CMPTRA and ETR payment withheld

Failure to submit the Best Practices Checklist will result in a withholding of the full final aid payment. As in previous years, the completed Best Practices Checklist must be an agenda item for discussion at a municipal governing body meeting.  The Chief Administrative Officer, the Chief Financial Officer, and Municipal Clerk must certify the Best Practice Checklist.  The Division has requested that municipalities not wait for the Best Practices Checklist to be discussed at a governing body meeting but submit it once it has been completed.

Municipalities may submit appeals before the submission deadline, but after their Best Practices Checklist has been submitted to the Division.  The Division encourages that appeals be submitted in conjunction with the Best Practices Checklist submission.  Appeals to the Director must be submitted no later than the close of business Monday, November 12, 2018, for calendar year municipalities.

The League has reviewed the Best Practices Checklist and has a number of significant objections to the questions posed in this year’s list. Some of the questions are more survey like than an evaluation of best practices, are duplicative, increase costs to the municipalities or are simply inappropriate.

We are in the process of reaching out to the Division, the Commissioner and the Governor’s Office to raise our objections.  We will continue to keep you informed.

Contact:  Lori Buckelew, Sr. Legislative Analyst at 609-695-3481 x112,
lbuckelew@njslom.org