Bill Text: NJ A1655 | 2012-2013 | Regular Session | Introduced
Bill Title: Requires Local Finance Board approval for proposed loan agreements between local authorities and for-profit entities.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2012-01-10 - Introduced, Referred to Assembly Housing and Local Government Committee [A1655 Detail]
Download: New_Jersey-2012-A1655-Introduced.html
STATE OF NEW JERSEY
215th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2012 SESSION
Sponsored by:
Assemblyman GORDON M. JOHNSON
District 37 (Bergen)
Assemblywoman VALERIE VAINIERI HUTTLE
District 37 (Bergen)
SYNOPSIS
Requires Local Finance Board approval for proposed loan agreements between local authorities and for-profit entities.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel
An Act concerning certain local authority loans and supplementing P.L.1983, c.313 (C.40A:5A-1 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. An agreement by an authority, as defined in section 3 of P.L.1983, c.313 (C.40A:5A-3), to lend money or its credit to a for-profit entity at below-market interest rates, or for terms in excess of market terms available to similarly situated entities, shall not be effective until that agreement has been submitted by the authority to the Local Finance Board and approved by that board.
b. Except as provided under subsection d. of this section, within 45 days after receipt, the Local Finance Board shall examine every proposed agreement submitted pursuant to subsection a. of this section. No proposed agreement shall be approved by the board unless it is able to determine the following:
(1) The primary purpose for the below-market interest rate, extended market-term or loan of credit is to help the for-profit entity to accomplish a public purpose. A proposed loan shall not meet the requirements of this paragraph if its primary purpose is for the convenience of a for-profit entity that would otherwise be able to obtain a market-rate loan through a commercial bank or other financial institution.
(2) The proposed loan is a reasonable means to help a for-profit borrower to accomplish a public purpose that it has agreed to perform for the authority.
(3) The authority will maintain sufficient control over the proposed loan to ensure that it is used to accomplish the public purpose that the for-profit entity agreed to perform.
For the purposes of paragraph (3) of this subsection, "sufficient control" shall include the following contractual requirements: the borrower shall submit an annual independent audit to the authority tracking the use of the loan proceeds; all documents associated with the loan or necessary to understand how the loan proceeds are being used shall be considered government records under section 1 of P.L.1995, c.23 (C.47:1A-1.1); and the governing body of the authority may terminate a loan and make it immediately due and payable upon a determination that the loan proceeds are not being used primarily to accomplish the public purpose that the borrower agreed to perform for the authority.
c. Following its review of a proposed loan pursuant to subsection b. of this section, the Local Finance Board may approve the loan, approve the loan with changes, or disapprove the loan. Any determination to approve a loan with changes or to disapprove a loan shall be accompanied by a statement indicating which criteria of subsection c. of this section that the proposed loan failed to meet.
d. The 45-day review period may be extended for an additional period, not to exceed 15 days, by resolution of the Local Finance Board if it requires more investigation in order to make its determination.
2. This act shall take effect immediately and shall be applicable to all loan agreements between an authority and a for-profit entity executed after the effective date of this act.
STATEMENT
This bill would require an authority that is created by a county, a municipality, or both, to submit proposed loan agreements to the Local Finance Board for review when the borrower is a for-profit entity. Under paragraph 2 of Section III, Article VIII of the New Jersey Constitution, counties and municipalities are prohibited from giving "any money or property, or loan its money or credit, to or in aid of any individual, association or corporation, . . . ." This prohibition has been held by the courts not to apply when the donation or loan is made primarily in furtherance of a public purpose. This bill attempts to ensure that the primary public purpose requirement is met with respect to loans to for-profit entities by requiring that the terms of the loan be reviewed by the Local Finance Board so that a determination can be made that (1) the primary purpose for the below-market interest rate, extended market-term or credit guarantee is to help the for-profit entity to accomplish a public purpose, (2) the proposed loan is a reasonable means to help a for-profit borrower to accomplish a public purpose that it has agreed to perform for the authority, and (3) the authority will maintain sufficient control over the proposed loan to ensure that it is used to accomplish the public purpose that the for-profit entity agreed to perform. The Local Finance Board is required to issue its determination either approving the loan, disapproving the loan, or approving the loan with changes within 45 days of submission of a proposed loan agreement. The 45-day review period may be extended for an additional period, not to exceed 15 days, by resolution of the Local Finance Board, when it requires additional investigation to make its determination.
