N.J. Admin. Code § 17:49-6.5

Current through Register Vol. 56, No. 23, December 2, 2024

Section 17:49-6.5 - Project review

(a) A local government unit shall provide the Office of Public Finance the following items for review of a public-private partnership project in an application format prescribed by the Office of Public Finance:

1. A full description of the proposed public-private partnership project;

2. A copy of the proposed public-private partnership agreement between the local government unit and the private entity, including any supporting documents such as the development agreement, any relevant contracts and leases, and all information obtained by, and findings of, the local government unit, as well as a redacted copy of all materials for purposes of providing any public document as required under the Open Public Records Act;

3. A proposed public-private partnership agreement between the local government unit and the private entity, including the following minimum criteria:

i. An agreement term length clearly defined to include the estimated construction and operational period, as needed;

ii. A complete description of the public-private partnership project to be developed and the functions and responsibilities to be performed by the local government unit and the private entity;

iii. Terms regarding the planning, acquisition, financing, development, design, construction, reconstruction, rehabilitation, replacement, improvement, maintenance, management, operation, repair, leasing, and ownership of the public-private partnership project;

iv. A provision allowing express permission of the public entity, and State and local officials, to inspect project-related assets or property; such provision shall include any specific limitations, particular requirements or allowances related to such review. Examples of limitations, particular requirements or allowances may include, but are not limited to, any notice requirements, time constraints, or review restrictions;

v. The roles and responsibilities of the parties for the duration of the agreement;

vi. Requirements for bonds or other forms of security in amounts acceptable to the local government unit;

vii. Standards and rights of parties relating to payments by the local government unit to the private entity if payments are part of the project;

viii. Requirements for any payment by the private entity of any 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 project;

ix. Standards for construction and maintenance of the project;

x. Standards for allocation of costs of development, including allocation of liability for cost overruns;

xi. Performance criteria and incentives, if any;

xii. Risk mitigation plans and responsibilities at all project stages, including at project development, construction, operations, and maintenance, for both the private entity and local government unit;

xiii. The rights that the local government unit and the private entity may have, if any, to revenue generated as a result of the agreement, and any standards for allocation of such revenue between the parties;

xiv. A maximum rate of return to the private entity and a provision for the distribution of excess earnings to the local government unit or to the private party for debt reduction;

xv. The minimum quality standards, technical requirements, and/or performance criteria applicable to the public-private partnership project, including key performance indicators, reporting requirements, incentives, cure periods, standards of performance or metrics, including performance points systems, monitoring rights of the local government unit, and penalties for failure to achieve these standards;

xvi. A maintenance plan for the full life cycle of the public-private partnership project;

xvii. A hand-back plan that includes requirements regarding return of the facility in a state of good repair and standards for determining such state of repair;

xviii. Any compensation and/or revenue structure of the private entity related to the project coming into the private entity, including the extent to which, and terms upon which, the private entity may charge fees to individuals and entities for the use of the public-private partnership project, as well as a full payment schedule (if applicable);

xix. Rights and remedies, including, but not limited to, compensatory, liquidated or other types of damages, and dispute resolution procedures available or applicable in the event of nonperformance or breach of contract, up to and including, material default;

xx. Procedures for notice and cure of default;

xxi. Insurance requirements for any project to be operated by the private entity;

xxii. Grounds for termination of the public-private partnership agreement by the local government unit and the financial impact of that termination;

xxiii. Grounds for termination of the public-private partnership agreement by the private entity and the financial impact of that termination;

xxiv. Procedures for amending the public-private partnership agreement;

xxv. Provisions for the termination of the public-private partnership agreement and the disposition of the public-private partnership facility upon termination;

xxvi. Identification of funding sources to be used to fully fund the capital, operation, maintenance, and other expenses under the public-private partnership agreement;

xxvii. The nature of the local government and private entity's property interest including the acquisition of any property, of which the local government unit shall retain full ownership of the land upon which the project is located;

xxviii. An articulation of the legal relationship and requirements of the parties involved, including the rights and responsibilities of the parties, as to design elements, technologies, techniques, methods, information, or intellectual property contained in an agreement;

xxix. Details on distribution of costs between the private entity and local government unit, including costs of retaining independent experts to review, analyze, and advise the local government unit with respect to the proposal; and any stipends authorized for work completed, which shall not exceed 0.5 percent of the project total; and

xxx. When applicable, a provision in the agreement establishing that the private entity will not take any action or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from gross income of the interest on any Outstanding Tax-Exempt Bonds under Section 103 of the Internal Revenue Code (Code). The provision shall also establish that the applicant will not directly or indirectly use or permit the use of any proceeds of any Outstanding Tax-Exempt Bonds or take or omit to take any action that would cause any Outstanding Tax-Exempt Bond to be an "arbitrage bond" within the meaning of Section 148(a) of the Code.

4. A project agreement, including the following terms and conditions:

i. Ensure each worker employed in the construction, rehabilitation, or building maintenance services of facilities by a private entity that has entered into a public-private partnership agreement with a local government unit be paid not less than the prevailing wage rate for the worker's craft or trade as determined by the Commissioner of Labor and Workforce Development pursuant to P.L. 1963, c. 150 (N.J.S.A. 34:11-56.25et seq.) and P.L. 2005, c. 379 (N.J.S.A. 34:11-56.58et seq.);

ii. Guarantee that any building construction projects under a public-private partnership agreement contain a project labor agreement. The project labor agreement shall be subject to N.J.S.A. 52:38-1et seq., and shall be in a manner that, to the greatest extent possible, enhances employment opportunities for individuals residing in the county of the project's location;

iii. Ensure the general contractor, construction manager, design-build team, or subcontractor for a construction project be registered pursuant to N.J.S.A. 34:11-56.48et seq., and be classified by the Division of Property Management and Construction, or shall be pre-qualified by the Department of Transportation, New Jersey Transit, or the New Jersey Turnpike Authority, as appropriate, to perform work on a Public-Private Partnership project;

iv. When practicable, adhere to the Leadership in Energy and Environmental Design Green Building Rating System as adopted by the United States Green Building Council, the Green Globes Program adopted by the Green Building Initiative, or a comparable nationally recognized, accepted, and appropriate sustainable development rating system and the green building manual prepared by the Commissioner of Community Affairs pursuant to section 1 of P.L. 2007, c. 132 (N.J.S.A. 52:27D-130.6);

v. Ensure that the general contractor, construction manager, or design-build contractor post a performance bond to ensure the completion of the project and a payment bond guaranteeing prompt payment of moneys due in accordance with and conforming to the requirements of N.J.S.A. 2A:44-143et seq.;

vi. Where a project is less than $ 50 million, include a requirement that precludes contractors from engaging in the project if the contractor has contributed to the private entity's financing of the project in an amount of more than 10 percent of the project's financing costs;

vii. Where appropriate, include a requirement that work performed under the agreement are subject to the provisions of the Construction Industry Independent Contractor Act, P.L. 2007, c. 114 (N.J.S.A. 34:20-1et seq.); and

viii. In the event that a private entity assumes full financial and administrative responsibility for a project, a stipulation that the private entity shall not be subject to the procurement and contracting requirements of statutes applicable to the local government unit at which the project is completed, including, but not limited to, the Local Public Contracts Law, P.L. 1971, c. 198 (N.J.S.A. 40A:11-1et seq.);

5. The estimated costs, including development and operating costs, as well as financial documentation for the project showing the underlying financial models and assumptions that determined the estimated costs. The financial documentation shall include:

i. At least three different projected estimated costs showing scenarios in which materially different economic circumstances are assumed and an explanation for how the estimated costs were determined based on the three scenarios, including a net present value analysis for each of the scenarios; and

ii. A long-range maintenance plan and a long-range maintenance bond specifying the expenditures that qualify as an appropriate investment in maintenance;

6. A completed Initial Screening Tool, including any changes to the project made in response to the results of the self-assessment;

7. A completed project analysis, including any supporting documents, as well as documentation of the qualification of any experts retained to perform any aspect of the project analysis;

8. A timetable for completion of the construction of the project, including all pre-development and development phases;

9. All relevant engineering and architectural plans, drawings, and schematics;

10. An analysis of all available funding options for the project, including an analysis of the financial viability and advisability of such project, along with evidence of the public benefit in advancing the project as a public-private partnership;

11. A performance monitoring plan for the agreement. The performance monitoring plan will provide details on how the local government unit will monitor the performance of the private entity for the full term of the agreement. This plan shall identify the required skills and resources for monitoring performance, specify schedules for periodic monitoring, and specify the requirements for the preparation and issuance of reports and/or updates to support performance monitoring, and specify any applicable metrics for monitoring performance, including the use of possible performance-points systems, the use of possible performance-points systems, and any performance bonuses or reductions based upon the early or late completion and delivery of a project;

12. A record of the public hearing held, including any public comments received and responses to public comments;

13. A resolution by the local government unit's governing body of its intent to enter into a public-private partnership agreement pursuant to this section;

14. A list of all experts retained, including information on expert qualification and industry experience;

15. An affirmation that any proposed procurement contains all necessary elements, based upon minimum contract standards outlined in this section; and

16. When applicable, an opinion of Bond Counsel, defined as an opinion signed by an attorney or firm of attorneys in good standing in the field of law related to municipal bonds, that such project will not adversely affect the tax-exempt status of any Outstanding Bonds.

(b) Upon receipt of a complete proposed project:

1. Within 14 days of receipt of a complete project application, the Office of Public Finance shall convene a project review committee, which will consist of, at a minimum, representatives from the Economic Development Authority, the Division of Property Management and Construction within the Department of the Treasury, the Division of Local Government Services within the Department of Community Affairs, and, as appropriate, the Department of Transportation, for projects where a transportation component is included or the transportation infrastructure is impacted.

2. The project shall be added to the project report maintained by the Office of Public Finance.

3. The Office of Public Finance shall assign a project to a public-private partnership advisor for review and analysis of the project.

i. The public-private partnership advisor's review shall include a value for money analysis to determine whether a project provides more benefit to its user and the local government unit when delivered through a public-private partnership delivery process than when delivered through a traditional method; a review of the financial strength of the private entity and a risk assessment of the project.

ii. The public-private partnership advisor shall provide a report on the project to the Project Review Committee within 45 days of project assignment; such time limit shall be extended at the discretion of the Office of Public Finance.

4. An application shall be reviewed for completeness upon receipt by the Office of Public Finance. An application shall not be processed for review, or reviewed, until all submission requirements have been satisfied.

5. The Director of the Division of Local Government Services shall determine if a project is subject to review by the Local Finance Board or whether enhanced review is required by the Division of Local Government Services. If a project is subject to review and approval, such approval is required prior to progressing through the procurement process. Project approvals shall be held in abeyance pending review by the Division of Local Government Services or the Local Finance Board, as appropriate.

6. The project review committee shall assess the viability of the project as well as the advisability of the project for the local government unit. This review shall be informed by the work of the public-private partnership advisor, and include, at a minimum:

i. All technical aspects of the proposal, including proposed project scope, innovative use of technology, engineering and design, and operation and maintenance of the project.

ii. All financial aspects of each proposal including financing to be provided by the private partner, any external source of financing, and any fiscal obligations of the local government unit for the project as proposed.

7. The review shall include, but is not limited to, a review of the following:

i. The feasibility of the project's design, construction, and operation;

ii. The local government unit's assumptions regarding the project's scope, benefits, risks, and the cost of the public sector option, and whether such assumptions were fully and reasonably developed;

iii. The sufficiency of the experience and qualifications of the private entity;

iv. The soundness of the financial plan, within the context of the local government unit;

v. The adequacy of the long-range maintenance plan to protect the investment; and

vi. The validity of the local government unit's determination that the project is in the best interest of the public, including an evaluation of the local government unit's determination that:

(1) The development and operation of the project will cost less than the public sector option, or if it costs more, there are factors

that warrant the additional expense;

(2) There is a public need for the project and the project is consistent with existing long-term plans;

(3) There are specific significant benefits to the project;

(4) There are specific significant benefits to using the public-private partnership instead of other options including No-Build;

(5) The private development will result in timely and efficient development and operation; and

(6) The risks, liabilities, and responsibilities transferred to the private entity provide sufficient benefits to warrant not using other means of procurement.

8. Members of the project review committee may request additional information as needed to make a complete assessment of the project.

9. The review and recommendation by the project review committee shall be provided to the State Treasurer within 90 days of assignment of the project proposal; however, the time for review may be extended if the applicant has yet to supply information requested by the committee. The committee's recommendation letter to the State Treasurer, as to approval or disapproval, shall also include any conditions or requirements as the committee deems necessary.

10. The State Treasurer may waive minor errors, omissions, or irregularities in an application and reserves the right to determine that such an act is minor in nature.

11. The State Treasurer may also condition any approval upon specific stipulations as outlined in the approval letter.

12. Within seven days of the completion of a review by the State Treasurer, the Office of Public Finance shall notify the local government unit of the finding of the State Treasurer in writing.

13. Any time frame prescribed under these rules may be extended or modified by the Office of Public Finance, within the Department of the Treasury, as necessary to ensure a complete review of a project.

14. No public-private partnership agreement shall be executed until a project has been approved by the State Treasurer.

15. In the event that a project materially deviates from the approved project parameters, the local government unit shall immediately notify the Office of Public Finance of the change and seek approval of the material change.

16. A signed copy of the agreement and any post agreement documents, with appropriate redaction, shall be provided to the Office of Public Finance.

N.J. Admin. Code § 17:49-6.5

Adopted by 52 N.J.R. 898(a), effective 4/20/2020