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Outline of Draft
“Financial Restructuring, Debt Reduction, and
Transportation Infrastructure Financing Act of 2008”
(posted 02-04-08)

1.         Legislative findings – these are designed to lay the legal groundwork for why it is appropriate to use toll revenues for transportation purposes beyond just the toll roads themselves and to use some of those revenues to pay down non-transportation State debt.

2.         Renames NJ Turnpike Authority the “New Jersey Capital Solutions Corporation” (CSC).

3.         Converts the Turnpike Authority board to the CSC board and changes composition:

            Current arrangement:

  • 8 members (DOT Comm’r, 5 advice and consent public members, 1 public member recommended by Senate Pres. and 1 by Speaker)
  • 5-year terms
  • Gov selects chair

            New arrangement:

  • 5 members (DOT Comm’r, Treasurer, add’l Exec. Branch designee selected by Gov., 1 public member recommended by Senate Pres. and 1 by Speaker)
  • 4-year terms
  • DOT Comm’r is chair

4.         No Gov. veto power over CSC’s actions.

5.         Transfers to CSC ownership and control of (1) Route 440 segment and (2) all of South Jersey Transportation Authority’s roadway assets (AC Expressway and AC-Brigantine Connector).

6.         Authorizes CSC to cause to be created two NJ non-profit corporations – the Public Benefit Corporation (PBC) and the Citizens’ Oversight Board (Citizens’ Board), which will be the sole “member” of the PBC.  (A “member” of a non-profit corporation is similar to a shareholder of a for-profit corporation.)

7.         Specifies PBC governance:

  • Initial directors to be named in Certificate of Incorporation.
  • On or before the “commencement date” (which is the date when the term of the concession begins), initial directors to be replaced/reconfirmed by directors recommended by Gov and elected by Citizens Board.
  • At first annual election of directors and thereafter, directors (to number between 10 and 15) are elected by Citizens’ Board upon nomination by PBC directors (this is standard process for non-profit boards)
  • Senior gov’t officials (elected and appointed at all levels) cannot be on PBC board.

8.         Specifies Citizens’ Board governance:

  • Initial directors to be named in Certificate of Incorporation.
  • On or before the “commencement date,” initial directors to be replaced/reconfirmed by directors recommended by Gov and elected by Citizens’ Board.
  • Board to consist of 15 directors appointed by Governor:  7 senior Exec. Branch officials and 8 from private sector with expertise or interest in toll road or transportation matters.

9.         Makes PBC responsible for expenses of Citizens’ Board.

10.       Authorizes CSC to enter into concession agreement with PBC.

11.       Mandates certain terms be included in concession agreement.  Key items are:

  • Concession can only become effective if minimum initial proceeds figures are achieved.
  • Term shall not exceed 75 years.  CSC may extend for no longer than 24 years.
  • PBC can use toll revenue and proceeds of debt secured by toll revenue only to pay its costs, expenses and payment obligations under the concession and to fund capital costs associated with “tranpsortation projects” (defined broadly to include transit).
  • Current employees will become PBC employees under same terms and conditions.
  • Current employees remain in PERS provided federal Labor Dept. approves State’s application for de minimis ruling.
  • Competitive contracting processes required for all procurements by PBC.
  • PBC must implement operations and maintenance standards that equal or exceed current levels.
  • PBC must deliver extensive periodic reports to CSC on a wide range of matters.  These reports become subject to OPRA upon receipt by CSC.
  • PBC must comply with corporate governance principles regarding financial controls and disclosure modeled on Sarbanes-Oxley.

12.       State pledges not to take action that will prevent PBC from collecting tolls in accordance with concession agreement and subject to statutory maximums.  Pledge to be included in concession agreement and in PBC contracts with its bondholders.  (This type of pledge of non-interference is also used with State authority debt.)

13.       Multiple provisions stating that none of the arrangements authorized in the bill create debts or liabilitiesof the State or any of its instrumentalities or subdivisions or of the taxpayers.

14.       Sets maximum toll rates – 50% increases in 2010, 2014, 2018, and 2022 plus annual inflationary increases applied every four years.  Inflationary increases have a floor of 2% and a ceiling of 5%.

15.       Establishes hierarchy of uses (and minimum amounts) for up-front payment from PBC to CSC (based on $32.6 billion model):

  • PBC retains $8 billion for debt service reserve and cap-ex.
  • Remainder (at least $21 billion, derived by subtracting $8 billion from the $32.6 billion and then building in a 10% allowance for market moves)) goes to CSC for the following uses only:
 
  • Retiring debt of Turnpike and SJTA (roadway related) – at least $5 billion
  • Covering CSC’s retained liabilities (principally enviro conditions) – at least $100 million
  • TTF debt – at least $7 billion
  • General fund debt – at least $7 billion
  • Treasurer has authority to allocate remaining $1-2 billion among the debt categories

16.       Specifies that up-front payment shall not be general revenue of the State.

17.       Requires concession agreement to include a schedule for or a method for determining future periodic payments to CSC.  Specifies and limits uses of future periodic payments to (1) paying or financing payments to TTF or (2) offsetting obligations to PBC (in event of discriminatory action by State against PBC, offset could be used instead of contractual penalty). 

18.       Requires PBC to enter contract with State Police for law enforcement services at a level necessary to ensure the safety and well being of the public and at least equal to current level.

 

 

 

 

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