New Jersey Expands P3 Opportunities
New Jersey has enacted legislation that greatly expands the pool of public agencies authorized to enter into public-private partnerships (P3s) for capital projects in the state, in order to address growing infrastructure needs. Only public colleges and universities were authorized to use P3s in New Jersey prior to Gov. Phil Murphy signing Senate Bill No. 865 (SB 865) on Aug. 14.
SB 865 authorizes local governments, school districts, public authorities and state and county colleges to enter into P3s for capital projects. The new law also allows for statewide road or highway P3 projects, as long as a project includes an expenditure of at least $10 million in public funds or any expenditure of solely private funds.
Projects proposed under SB 865 must be submitted to the New Jersey Economic Development Authority (NJEDA) for review and approval, and are also subject to review and approval by the state treasurer. NJEDA and the state treasurer's office will oversee New Jersey P3 projects. In accordance with the new law, NJEDA will post the status of each P3 project on its website.
SB 865 requires local public input and finance controls for any project proposed under the legislation as well as land use and financial approvals. The process begins when a public agency issues a Request for Proposals (RFP).
Solicitation, Procurement and Criteria
Under SB 865, a public entity, which may include a local government unit, school district, state government entity and state or county college, will issue an RFP with no more than a 45-day response period. The public entity must have qualifying proposals from at least at least two private entities in order to select one.
NJEDA will review all completed project applications and request additional information as needed. The application must include, among other things, a long-range maintenance plan and a long-range maintenance bond, and must specify the expenditures that qualify as an appropriate investment in maintenance.
The criteria for assessing the projects described in the application include: feasibility and design of the project; experience and qualifications of the private entity; soundness of the financial plan; adequacy of the required exhibits; adequacy of the long-range maintenance plan; evidence of a clear public benefit; and a resolution by the applicable public entity of its intent to enter into P3 agreement for the project.
The procurement process cannot begin until NJEDA approves the application.
After the proposals have been received, and any public notification period has expired, the applicable public entity will rank the proposals in order of preference. The public entity will consider professional qualifications, innovative engineering, architectural services, cost-reduction terms, finance plans and the need for public funds to deliver the project.
Following the procurement process, but before the public entity enters into a P3 agreement, the project and the resultant short list of private entities is submitted to NJEDA for final approval. NJEDA shall retain the right to revoke approval if it determines that the project has "substantially deviated" from the plan submitted, and retains the right to cancel a procurement after a short list of private entities is developed if deemed in the public interest to do so.
SB 865 establishes specific requirements for P3 agreements, including provisions that building construction projects contain a project labor agreement and affirming that the agreement and any work performed under it is subject to the provisions of the Construction Industry Independent Contractor Act. Each worker employed for the construction, rehabilitation, or building maintenance service of facilities by a private entity under a P3 agreement must be paid not less than the prevailing wage rate for such worker's craft or service in accordance with the New Jersey Prevailing Wage Act.
If the agreement includes the lease of a new project in exchange for upfront or structured financing by the private entity, the term of the lease may not be for a period greater than 30 years.
Reprinted with permission from Ballard Spahr LLP. To view the article in its entirety, go to JD Supra.
* (3) The general contractor, construction manager, or design-build team shall be required to post a performance bond to ensure 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.2A:44-143 et seq.
Steve T. Park, Esq., is the practice leader of Ballard Spahr's P3/Infrastructure Group. Steve advises issuers, underwriters, borrowers and purchasers in connection with the structuring, issuance, offering, placement, remarketing and restructuring of tax-exempt and taxable municipal securities and other debt instruments and derivatives. He serves as bond, borrower's and underwriter's counsel to various clients, including investment banking firms, higher education institutions, health care institutions, school districts and municipalities. Steve also advises clients in all phases of transportation, infrastructure and public-private partnership (P3) projects.
Jayne Mariotti Hebron, Esq., is a member of the Public Finance Department at Ballard Spahr. She represents clients in public-private partnership (P3) transactions involving transportation facilities, infrastructure and student housing. Her experience also includes representing issuers, investors, developers and trustees in Low Income Housing Tax Credit housing financing transactions. In addition, Jayne serves as bond, borrower's and underwriter's counsel to various clients, including higher education institutions, health care institutions, school districts and municipalities.