TRENTON – Legislation Assemblymen Gary S. Schaer (D-Passaic) and Fred Scalera (D-Essex) sponsored to enhance the protections and oversight surrounding public investments in private redevelopment projects today received final legislative approvals and was sent to the Governor’s desk.
The final Assembly vote was 64-11 with one abstention.
Schaer and Scalera crafted the bill (A-2650) following the collapse of the EnCap Mixed-Use Redevelopment Project, which squandered more than $300 million in public money from the state and Bergen County in an attempt to remediate abandoned municipal landfills in the Meadowlands.
“EnCap’s catastrophic failure highlighted the near-total absence of internal oversight in the way the state provides public money for private redevelopment,” Schaer said. “The breakdown of checks and balances that precipitated EnCap’s collapse must never happen again.”
Scalera echoed that Bergen County "learned an expensive lesson that it cannot rely on an honor system of handshakes, winks and nods when it comes to multi-million dollar redevelopment deals. This boondoggle could have been stopped at the very first sign of trouble had these reforms been in place sooner.”
Scalera and Schaer credited Senator Paul Sarlo (D-Bergen) for helping to move the measure through the Senate and positioning it for the final Senate vote. The vote is the culmination of more than one year of work and discussions among multiple parties affected by the EnCap disaster to ensure a balanced approach and response.
“Today’s vote is the result of months of hard work behind the scenes to open eyes and minds to the need for this kind of oversight,” Sarlo said. He is also sponsoring legislation based on EnCap’s collapse. “It’s a victory for the tax payers of New Jersey. This shouldn’t be the last word on enacting safeguards to prevent the ghosts of EnCap from manifesting somewhere else in New Jersey.”
As chairman of the Senate Regulatory Oversight Committee, Sarlo co-chaired a March 2008 joint hearing with the Senate Environment Committee that looked into EnCap after the release of a scathing report from the state Office of the Inspector General.
Schaer and Scalera also thanked Senators Bob Gordon and Loretta Weinberg (both D-Bergen) for being the measure’s co-prime sponsors in the Senate.
The Inspector General faulted the company for over-representing its environmental remediation experience and indicating that it had access to millions of dollars in private funding. The report also cited a lack of coordination and communication between public entities even after concerns about the project’s viability surfaced that allowed the company to change its story and apply for various state and county loans and grants, cobbling together more then $300 million.
The Schaer/Scalera bill would require businesses receiving any combination of grants, loans, or other financial assistance in excess of $50 million from single or multiple public entities to help fund a redevelopment or environmental remediation project to file annual, independently audited financial statements with the state Treasurer and each entity from which it has secured financing.
The measure also would stipulate the following for any qualifying contract:
· The private business spend a minimum of $1 for every $5 received in public funds;
· The public entity reserve 10 percent of the total funds approved to be disbursed upon the successful completion of the project;
· The private business submit payment of a performance bond, the amount of which would be tied to the project costs attributable to the publically funded improvements.
Failure to comply with the financial statement reporting deadlines would result in an increase in the amount of public money kept in escrow. Any business that knowingly fails to submit a financial statement or purposefully misrepresents the businesses finances would be required to refund the full amount of the public financial assistance.
A nonpartisan Office of Legislative Services analysis said the measure would “effectively function as an insurance policy for governmental entities.”
“We can never again allow the public’s trust to be undermined in such a way,” said Scalera. “We must make certain that part of the EnCap project’s legacy includes the preventative measure and proactive protections that will secure future public-private redevelopment partnerships.”
“Quite simply, the public cannot afford to finance another EnCap-style debacle,” said Schaer. “Putting these protections in place will help ensure that the mistakes made with EnCap cannot and will not be repeated.”
