September 30, 2014
Hon. Kim Guadagno
Department of State
PO Box 001
Trenton, NJ 08625
Re: League Recommendations
Dear Lt. Governor Guadagno:
Thank you for the opportunity to submit testimony to the Commission. Our comments below relate to a number of recommendations we believe will streamline the procurement and other administrative processes for New Jersey municipalities.
1. Inspection/Registration of Multi-Family Dwellings—Maintain Local Authority
The Red Tape Review Commission February 2012 Report included a recommendation regarding “Multiple Dwelling Inspection.” Subsequently legislation was introduced, but has not advanced, which would prohibit municipal registration and/or inspections and of multi-family dwellings.
The League respectfully disagrees with this recommendation and asks that the Commission not entertain it further. Since the introduction of this legislation, many municipalities have gone on the record in opposition, indicating that their registration and inspection programs are integral parts of housing maintenance, redevelopment and quality-of-life initiatives. In particular, urban municipalities have expressed concerns over these legislative efforts. Further, it is the League’s contention that such a prohibition would not reduce red tape, but rather it would create additional administrative expense on the part of the municipalities.
2. Affordable Housing Reform
The Red Tape Review Commission April 2010 Report included a recommendation, “…that the Legislative and Executive Branches continue efforts to arrive at a more effective affordable housing policy that is less burdensome for municipalities and taxpayers.”
In January 2011 legislation, opposed by the League, advanced to the Governor’s desk regarding affordable housing and was conditionally vetoed by the Governor. On September 26, 2013, the New Jersey Supreme Court decision In re Adoption of N.J.A.C. 5:96 & 5:97 by N.J. Council on Affordable Housing, 215 N.J. 578 (2013) invalidated the round three regulations adopted by the Council on Affordable Housing (COAH) in 2008 and charged COAH with the responsibility of adopting a third iteration of round three regulations. The Court also invited the Legislature and the Governor, as clearly and fervently as it could, to devise a new approach to affordable housing in our State and promised to show deference to any new legislative pronouncement.
It is anticipated that new COAH regulations will be adopted at its October board meeting and effective upon publication in the November 17 New Jersey Register. Municipalities will then have to on or about May 15 to
submit plans to COAH, plans which will costly and time-consuming to municipalities. It is further anticipated that certain affordable housing stakeholders will initiate a legal challenge to the validity of the regulations, creating further uncertainty.
Therefore, the League asks that this Commission again call for the Legislature and Administration to act on affordable housing reform.
3. Unfunded Mandates
The Red Tape Review Commission April 2010 Report included a recommendation to, “Provide for new and expanded powers to combat unfunded mandates…” While we acknowledge some progress, including the passage of a law expanding the criteria for who can undertake a challenge to the Council on Local Mandates, local governments continue to be challenged with unfunded mandates. Therefore, the League asks that the Commission encourage the Legislature to take a more preemptive, pro-active role in relieving the burden imposed on local governments by mandates that need to be repealed or relaxed.
4. Civil Service Reform
The Red Tape Review Commission April 2010 Report included a recommendation regarding civil service and for a municipal opt-out.
The reality of a 2% property tax levy cap compels local governments to reexamine any and all administrative costs, and to explore interlocal service agreements. Consensus among local elected officials is that the single greatest obstacle to sharing of services remains byzantine civil service regulations. The League has previously provided this Commission with background on this issue and respectfully requests that the Commission reiterate your recommendation for a municipal opt-out of Civil Service.
5. Local Public Contracts Law
We would like to reiterate our concerns with the procurement laws and we thank the Red Tape Review Commission and their staff for subsequent meetings on this important issue.
By way of general background, the Local Public Contracting Law (LPCL) and corresponding regulations have been enacted to protect public tax dollars by increasing competition while eliminating non-competitive practices and enhancing public integrity. In New Jersey the public contracts laws date back to 1917 with a major revision in 1971.
In 2000, the LPCL was amended to make the procurement process more understandable for vendors, provide administrative efficiency balanced with added accountability, and encourage professionalism and sound practices. However, not surprisingly, as the years have passed, conflicting amendments to the LPCL and related laws have made the procurement process overly burdensome.
a. Pay-to-Play Laws (N.J.S.A. 19:44A-20.4 et seq.)
New Jersey’s Pay-to-Play overlays another set of bidding requirements on top of the LPCL . When N.J.S.A. 19:44A-20.4 was enacted the LPCL bid threshold was $17,500. Therefore, the pay-to-play threshold became $17,500. What was not considered was that pursuant to N.J.S.A. 40A:11-3 (c) the LPCL bid threshold increases every 5 years in direct proportion to the rise or fall of the index rate and rounded to the nearest $1,000.
The LPCL bid threshold has increased while the Pay-to-Play threshold remains the same. As a result, there are now times, when a local unit could solicit quotes for a particular good or service but because of the $17,500 Pay-to-Play threshold there must be formal action by the governing body in the award of the quotation. We recommend that the Pay-to-Play threshold be amended to mirror the Local Public Contracts Law. In addition, we recommend that any future changes to the Pay-to-Play law not be done in a vacuum but consideration be given to the LPCL.
b. Business Registration Certification (N.J.S.A. 52:32-44)
The Business Registration Certification (BRC) is a program, administered by the Division of Revenue, which directly impacts the LPCL. N.J.S.A. 52:32-44 requires that all business organizations that do business with a local contracting agency are required to be registered with the State and provide proof of that registration to the local unit before the award of contract. According to Local Finance Notice 2004-17, the purpose is “to ensure that all businesses and their subsidiaries receiving government contracts pay appropriate sales and use and other taxes.” A BRC must be on file when 15% of the contracting unit’s bid threshold, in the aggregate, is paid to a vendor. We recommend that the BRC threshold be amended to align with the LPCL threshold.
c. Prevailing Wage (N.J.S.A. 34:11-56.25 et seq.)
The Prevailing Wage Act is a law that requires the payment of minimum rates of pay to laborers, craftsmen and apprentices employed on public works projects. Covered workers must receive the appropriate craft prevailing wage rate as determined by the Labor Department’s Commissioner. Prevailing wage rates are wage rates based on the collective bargaining agreements established for a particular craft or trade in the locality in which the public work is performed. In New Jersey, these rates vary by county and by the type of work performed.
Public works projects subject to the Act are those funded in whole or in part with the funds of a public body. Pursuant to N.J.S.A. 34:11-56.26 (11), contracts awarded directly by municipal government must be valued at $14,187 or more to be covered by the Act. For all other public entities, including counties, municipal utility authorities, boards of education and the State, the threshold is $2,000. We recommend that the Prevailing Wage threshold be the same as the local contracting unit’s bid threshold.
d. Public Works Contractor Registration Act (N.J.S.A. 34:11-56.48 et seq.)
The Public Works Contractor Registration Act is a Department of Labor and Workforce Development law that directly impacts the Local Public Contracts Law. N.J.S.A. 34:11-56.48 requires that all contractors, subcontractors and sub-subcontractors register with the Department of Labor prior to bidding or engaging on certain public works contracts that exceed the prevailing wage threshold. According to N.J.S.A. 34:11-56.50, public works projects are any construction, reconstruction, demolition, alteration, repair or maintenance of a public building regularly open to and used by the general public or a public institution. As noted above, the threshold for Prevailing Wage Act as $14,187 for any public work paid with municipal funds and $2,000 for any public work paid with other than municipal funds. Therefore, in addition to complying with the Prevailing Wage Act, a contractor demolishing a public building would also have to have a Public Works Contractor Registration. We recommend that the Public Works Contractor Registration
Act threshold be amended to align with the LPCL threshold.
e. Project Labor Agreements (N.J.S.A. 52:38-1 et seq.)
As the League has stated previously, on numerous occasions, Project Labor Agreements are anti-competitive and restricts normal bidding procedures. The result is public project contracts are limited to union only contracts. This can inflate the cost of public contracts. The practical effect of Project Labor Agreements is to shut out non-union competition thereby reducing the number of potential bidders. Consequently, local units are forced to accept higher bids from a limited pool of union-only contractors rather than being able to choose from all responsible bidders. We recommend that N.J.S.A. 52:38-1 et seq. be repealed.
f. Prompt Payment (N.J.S.A. 2A:30A-1 et seq.)
N.J.S.A. 2A:30A-1 et seq. establishes timing standards for the payment of bills by both public and private sector organizations for a wide range of construction-related contractors. It affects construction-related contracts of all local units - municipalities, schools, counties, fire districts, local authorities, etc. The law intends to ensure that contractors submitting bills for completed work are paid on a timely, established schedule, and that the full chain of subcontractors receive timely payment from their hiring contractor. When payments are not made
pursuant to the schedule, the law allows contractors to receive interest on the outstanding balance and, under certain circumstances, to halt work without being subject to breach of contract clauses.
N.J.S.A. 2A:30A-2a requires that the payment be made within 30 calendar dates of receipt of the bill, except if an alternate procedure is defined in the bid specifications and contract documents. We have found that the 30 calendar days is too short a time period to properly process the paperwork. We recommend that the Prompt Payment deadline be extended to 45 calendar days to allow for enough time to process the payment.
g. Creation of a Review Board
We recommend the creation of a Commission to have oversight over public procurement laws and regulations. There are many laws that impact the LPCL. Unfortunately, when these laws were drafted or amended consideration was not given to the LPCL or any other procurement law. The Commission should be given the responsibility to review any bill, joint resolution or concurrent resolution introduced in either Senate or Assembly which establishes or modifies public contracting or bidding in this State. Such a review shall include, but not be limited to, an analysis of the bill's or resolution's impact on the LCPL, Public School Contracts Law, and/or County College Contracting Law, any comments upon or recommendations concerning the legislation, and any alternatives to the legislation which the commission may wish to suggest. Therefore, we recommend a Local Public Contracts Law Review Commission be established with representatives from the public and private sectors who have practical experience with New Jersey local public contracting laws.
Thank you for your consideration of our concerns.
Very Truly Yours,
William G. Dressel, Jr.
c: The Red Tape Review Commission