discussion · 2019. 5. 2. · title: discussion

Department of Community Affairs FY 2019-2020

Discussion Points

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1. In May 2016, the State enacted the “Municipal Stabilization and Recovery Act,” P.L.2016, c.4 (C.52:27BBBB-1 et al.) (“act”), which granted the State broad authority to oversee and manage the fiscal conditions of certain municipalities deemed in need of stabilization and recovery. Specifically, the act allowed the Director of the Division of Local Government Services to assume responsibility for the management of the day-to-day operations of Atlantic City. Under the act, State oversight of Atlantic City would expire upon the earlier of: (1) the first day of the 61st month following the commencement of oversight; or (2) such time as the city is no longer deemed to be in need of stabilization and recovery. In February 2018, Governor Murphy named Jim Johnson as special counsel to review the ongoing State oversight of Atlantic City and provide recommendations for returning the Atlantic City to local control. In September 2018, Mr. Johnson submitted a report to the Governor, entitled “Atlantic City: Building a Foundation for Shared Prosperity,” which set forth numerous recommendations, including: (1) building the capacity of Atlantic City government through employee training and technological advancements; (2) diversifying the economic base of Atlantic City, while supporting the casino and gaming industry; and (3) supporting the city’s community by encouraging pathways to success for young residents, increasing collaboration with civic associations, and addressing challenges and amenities that directly affect residents’ quality of life. The State established two entities, the Coordinating Council and the Executive Council, to implement the recommendations of Mr. Johnson. Established pursuant to Executive Order No. 46, the Coordinating Council serves to coordinate State agency initiatives that address the challenges of Atlantic City. The Coordinating Council is chaired by the Lieutenant Governor and consists of the directors of 19 State agencies. In contrast, the Executive Council supports collaboration among public, private, and non-profit organizations located in Atlantic City and consists exclusively of local stakeholders involved in the city’s revitalization efforts. As the department is aware, the State oversight of Atlantic City is intended to ensure the financial stability and long-term self-sufficiency of the city’s fiscal operations. In response to a Fiscal Year 2019 OLS Discussion Point, the department stated that “[l]ong-term self-sufficiency requires a multi-pronged approach that includes: (a) continued fiscal discipline; (b) decreasing the percentage of property in the City that is tax exempt and increasing the total value of ratables; (c) taking steps to expand economic development in the City, including a sustained focus on employment opportunities for the residents of the City; (d) attracting new residents; and (e) addressing public health issues in the community.”

Question: Please evaluate Atlantic City’s current fiscal situation. How has Atlantic City’s financial stability improved since Fiscal Year 2018? What specific actions did the department take in Fiscal Year 2019 to improve the long-term self-sufficiency of Atlantic City? What factors currently present the greatest challenge to the financial stability of Atlantic City? What specific actions did the Coordinating Council and Executive Council, respectively, take in Fiscal Year 2019 to address these challenges?

Question: What actions have been taken to date to decrease the percentage of tax-exempt property and increase the total value of taxable property in the city? How many property tax assessment appeals are currently filed against Atlantic City? What is the anticipated amount of tax appeal liabilities?


Discussion Points (Cont’d)

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Question: How many full-time and part-time employees, respectively, does the department dedicate at present to the oversight of Atlantic City? How many full-time and part-time employees, respectively, were hired in Fiscal Year 2019 to support these operations? Does the department anticipate hiring additional personnel in Fiscal Year 2020 to support these operations?

While Atlantic City continues to make strides toward financial stability, it is not yet set on firm financial ground. This can be noted by considering the recent reports of the rating agencies that opine on municipal finances. For example, in November of 2018 Moody’s upgraded Atlantic City’s credit rating from Caa3 positive to B2 positive, the result of all the time and effort the State has put into righting the fiscal ship of Atlantic City. However, this past February, when a property tax appeal for the Hard Rock property was announced, despite the fact that this was known beforehand, Moody’s released a report with a “slight credit negative” pronouncement. Underlying this pronouncement is the primary concern about the declining ratable property tax base in the City, and in fact, this budget year has seen an additional decline in the ratable base of approximately $340 million. Accounting for this decline the current non-casino ratable property tax base is pegged at $2.526 billion. Of the $340 million decline in this year’s ratables, a significant portion, $225 million, was from the Hard Rock appeal, the settlement of which has been spread out over four (4) years to minimize year-to-year impact. So, despite this year’s experience, the Department believes the City is nearing the end of the overall decline in the ratable property tax base. With specific regard to addressing the concern of the City’s property tax base, earlier in April 2019 the City received responses to an RFP for a city-wide property tax revaluation, exclusive of the casino properties as they are currently covered under the PILOT. The City expects to award the vendor contract at its upcoming May Council meeting with a goal of completing the property tax revaluation by early 2020. It is a challenging task, but one that is being made a priority. The expectation is that this revaluation will set a floor for property tax values in the City and significantly reduce the success of property tax appeals going forward. This will be a significant step towards stabilizing Atlantic City municipal finances. Additionally, since the last City property revaluation was conducted in 2008 the intent is not to allow so much time to pass between revaluation cycles. This too will lend itself towards stability. Furthermore, the City and the State recognize that there are too many city properties that are not currently on the property tax rolls. As of the present period, largely due to in-rem foreclosures, the City owns through foreclosure approximately 244 properties, both residential and commercial. Besides the obvious impact on the property tax base, these properties are often in poor condition, which contributes to the perception of blight in Atlantic City, which is a perceptual barrier to investment in Atlantic City’s future. Addressing the City’s declining property tax base is both key to the City’s ongoing financial stability and one of the top priorities of the City and State managers. In addition to the property tax revaluation, the City is actively preparing to move the properties it owns and controls back into the hands of private owners, which will place the properties back into the ratable base. Acknowledging that this matter must be handled prudently and ethically, the City is accelerating planned auctioning of city-owned/controlled properties. These actions are being taken in the context of a global planning approach that is being shaped by the City’s new Planning and Development Director, Ms. Barbara Wooley-Dillon, who was hired by the City this past January. A recent public forum on the sale of city-owned properties was held at the Atlantic City Convention Center and over 1,000 people interested in potentially acquiring these properties attended the forum. The Department, along with NJHMFA and local stakeholders, is promoting Atlantic City



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home ownership opportunities for present renters and by non-resident employees of the casinos. Additionally, there has been a notable uptick in interest in Atlantic City development opportunities. A number of casinos are contemplating substantial additional project investments. The opening of the Stockton University Gateway Atlantic City campus and South Jersey Industries corporate offices has created substantial positive buzz in the southern section of the City. Furthermore, the number of pending property tax appeal settlements has declined by approximately 60%, with 110 in the current queue, amounting to approximately $3.8 million in liabilities, of which the entire amount is held in reserve. The Department believes these are signs that point to a growing positive outlook for the City’s financial and communal well-being. Despite the noted decline in the City’s ratable base, its proposed budget shows no increase in the property tax levy, which is a positive for city residents. The City’s overall budget declined year-to-year by $32 million, totaling $201.5 million for 2019. Savings in personnel and health insurance costs, along with continued prudent management of city finances allowed the City to absorb the loss of revenue from the decline in the property tax base and still make investments in its human resources. Part of the proposed budget includes an increase in compensation for the non-uniformed rank-and-file employees of the City. This is the first increase in compensation in years and helps address the morale and stability of the City’s workforce. Through continued, aggressive management of costs, the City will look to invest savings into needed capital projects that impact quality of life issues for residents and visitors alike. Longer term, like most cities, the overall economic cycle will probably have the greatest future impact on the City’s fiscal condition. These macro-economic factors affect property valuations, unemployment, and investment levels, all of which are relevant to Atlantic City’s continued recovery. However, Atlantic City’s recovery can reasonably be said to be rising from the bottom, so even in the event of a recessional turn in the state and national economy, any negative impact, while unwelcome, will be far less precipitous than the economic circumstances that precipitated the enactment of the Municipal Stabilization and Recovery Act (“MSRA”). Additionally, as noted in the Johnson report, “Atlantic City: Building a Foundation for Shared Prosperity,” the City is “diversifying the economic base of Atlantic City, while supporting the casino and gaming industry.” The City and State, in coordination with the County of Atlantic, are working to engage city residents in the growing aeronautics industry that is emerging out of the Atlantic City Airport region – referred to as the Aviation Innovation Hub. Already a home to renewable wind energy systems, the City is pursuing continued an expansion of this industry within city boundaries. Later this spring a powerful new data center will begin operation from the Atlantic City Convention Center serving both Atlantic City’s casinos as well as international clients emphasizing the City’s focus on becoming a 21st century technology hub. Additionally, this fall AtlanticCare will be breaking ground in the city on a new $38 million health services and education complex that not only provides the public health services identified as needs by the Johnson report, but also catalyzes the City’s emphasis on “eds and meds” economic development. The Johnson report also identified the need to build capacity amongst city government and to break down the silos of work and communication that may exist across the entire spectrum of Atlantic City; residents to the City, to City businesses and non-profits, to the County, and to the State. Improving coordination will strengthen Atlantic City and will continue to positively impact its resiliency. There are several examples of these endeavors: All city employees and elected officials have been retrained on public ethics. Currently 20 senior city employees are participating in a city-sponsored Certified Public Manager program run by Rutgers. Interest in this program is so great an additional class is being prepared for next year. Through a funding agreement with the



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CRDA, an Atlantic City Initiatives Project Office (“ACIPO”), conceptualized in the Johnson report, came to life in January of this year. The ACIPO published an Implementation Plan on April 23, 2019 as a means of creating a record of accountability for the efforts promoted by the Johnson report. Another outgrowth of the Johnson report is the Atlantic City Executive Council, which has been meeting monthly since last fall. Interest in the AC Executive Council has grown, and participation remains strong. Input from the stakeholders that make up the AC Executive Council shaped the ACIPO’s Implementation Plan. The Atlantic City Coordinating Council, created by Executive Order #46, has met multiple times and through its existence has broken down communication barriers between Executive Branch departments so that the State resources that each department is already investing in Atlantic City, or that has resources that potentially can be invested in Atlantic City, are being coordinated and leveraged at greater levels than before. Examples of that can be seen vividly in coordinated work between DCA and DOE; DOT; DEP; DOL; Treasury; OIT; CRDA, and DOH on such matters as re-siting the Atlantic City syringe exchange; addressing remaining infrastructure damage from Superstorm Sandy; road paving and maintenance; guidance on re-building the City’s technology infrastructure; funding of the ACIPO and the Neighborhood Community Officer Program which enhances community policing in the City; and environmental sustainability projects. DCA has committed and continues to commit significant human and intellectual resources to the State’s management of Atlantic City. With the advent of the Murphy/Oliver Administration in 2018, Designee status was transferred from an outside entity to DCA. In addition to the human resources committed to Atlantic City during that first year, as noted, 2019 saw the creation of the ACIPO. The ACIPO is staffed by three full-time DCA employees assigned to the Department’s management of Atlantic City matters. The funding for these three positions, as well as the basic expenses of their office, are provided via a MOU between DCA and the CRDA. The CRDA has pledged to fund ACIPO’s basic expenses for three (3) years. As the State’s involvement with Atlantic City evolves, the Department eliminated one full-time department position that had been involved in the research and production of the Johnson report. During the first quarter of 2019 the City hired a new Planning and Development Director and a new CFO. As the City builds its own capacity, DCA’s contribution of personnel will be adjusted as needed. 2. Sections 1 through 8 and section 10 of P.L.2016, c.5 (C.52:27BBBB-18 et seq.) comprise the “Casino Property Tax Stabilization Act” (“act”). The act provides that, beginning in Calendar Year 2017, and for the next succeeding nine years, casino gaming properties located in Atlantic City are exempt from ad valorem taxation on real property. During this ten-year period, the owners of casino gaming properties are instead required to make annual payments in lieu of taxes (“PILOTs”). The total PILOTs received by Atlantic City are based on the total amount of casino gaming revenues generated in each year. The PILOT obligation for each casino gaming property owner is determined according to a formula, implemented by the Local Finance Board, which accounts for gaming revenues, the number of hotel rooms, and the square feet of floor space at each property.

The act also requires Atlantic City to allocate an unspecified portion of the PILOT receipts to Atlantic County and the Atlantic City School District. In response to a Fiscal Year 2019 OLS Discussion Point, the department reported that the Calendar Year 2018 distributions had yet to be



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determined, as the matter was subject to ongoing litigation. However, the department also noted that the litigation had been settled in principle, and that “[u]nder the draft settlement agreement, Atlantic County, in return for a greater allocation of casino PILOT payments, will provide cost-saving services to the City.” In May 2018, the parties reportedly finalized the settlement agreement.

Question: Please provide a report showing the distribution of PILOTs among casino gaming properties for Calendar Year 2018, including the geographic footprint (expressed in acres), number of hotel guest rooms, and gross gaming revenues, for each casino property, respectively. Based on 2018 assessed property values, if casinos were not tax-exempt, what percentage of the city’s property tax base would they comprise?

Question: What proportion of the Calendar Year 2018 PILOTs were distributed to Atlantic City, Atlantic County, and the Atlantic City School District, respectively? What additional services will Atlantic County provide for Atlantic City as a result of the settlement agreement? Will any other provisions of the settlement agreement have a fiscal impact on Atlantic City? If so, please explain. Please provide a report showing the

scheduled annual distributions of PILOTs to Atlantic County and the Atlantic City School District from Calendar Year 2019 to Calendar Year 2026.

Below are two charts detailing PILOT financial characteristics, by multiple quarters, based on the requested variables, geographic footprint in acres, number of hotel guest rooms and Gross Gaming Revenue (“GGR”). Please note that the numbers for the first half of the year are different than the second half because of the addition of the Hard Rock property mid-2018. It is estimated that in 2018 that all casinos would make up 52% of the City’s property tax base were they not tax-exempt due to inclusion in the PILOT.

First and Second Quarter 2018

Hotel PILOT

Property

Acre

s % Rooms % 2017 GGR % Market Share

Bally's 20.9

8 11% 1,251 10%

$ 211,024,548 8% 9%

Borgata 45.6

2 23% 2,767 22%

$ 803,827,649 30% 25%

Caesars 13.9

5 7% 1,141 9%

$ 368,151,889 14% 10%

Golden Nugget

14.21 7%

716 6%

$ 288,128,188 11% 8%

Harrah's 46.8

4 24% 2,587 20%

$ 363,705,687 14% 19%

Resorts 19.5

5 10% 942 7%

$ 233,461,048 9% 9%

Revel (Ocean) 19.2

8 10% 1,399 11% $ - 0% 7%



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Tropicana 14.1

1 7% 2,047 16%

$ 390,940,502 15% 13%

Category Total

194.

5

100

%

12,850

100

%

$

2,659,239,511

100

% 100%

The PILOT amount for calendar year 2018 was $130 million. Of that amount, Atlantic County received $15,600,000; the Atlantic City Board of Education received $44,200,000; and the City of Atlantic City received $70,200,000. As part of the PILOT settlement Atlantic County agreed to provide Atlantic City with $2 million in shared services. That obligation is being met by a combination of County provided public health services and an offset of monthly trash tipping fees that the City would ordinarily pay to the County. The County’s share of the PILOT is fixed at 13.5%. The Atlantic City School District’s need is a function of its annual budget, which is subject to change and therefore difficult to project beyond the current year. If the School District’s funding need increases in future years, and that funding need is met by funding from the PILOT, the increase will come out of the City’s portion of the PILOT. The design of the PILOT and its subsequent financial impact on the parties to it is a function of Gross Gaming Revenue (“GGR”). Under the Casino Property Tax Stabilization Act (“CPTSA”), the PILOT payment increases by either 2% per year or a higher amount if the GGR crosses certain “tiers”, the most pertinent of which are:

$120 million PILOT Tier – Prior Year GGR from $2.2 billion to $2.6 billion

$130 million PILOT Tier – Prior Year GGR from $2.6 billion to $3.0 billion

$150 million PILOT Tier – Prior Year GGR from $3.0 billion to $3.4 billion The PILOT amount has already increased from $120 million to $130 million because GGR crossed the $2.6 billion mark in 2017. The next GGR threshold is the $3 billion mark. GGR in 2018 was approximately $2.86 billion. With the reported increases in monthly GGR for the first quarter 2019 the prospect of crossing the $3 billion GGR threshold seems likely. The path of GGR is subject to economic variables. The chart below provides projections out through 2021. Assuming 6% growth in 2019 and 3% growth for 2020, projected GGR would remain in the $3.0 to $3.4

Hotel PILOT

Property Acres % Rooms % 2017 GGR % Market Share

Bally's 20.98 9.35% 1,251 8.44% 211,024,548$ 7.94% 8.58%

Borgata 45.62 20.33% 2,767 18.67% 803,827,649 30.23% 23.08%

Caesars 13.95 6.22% 1,141 7.70% 368,151,889 13.84% 9.25%

Golden Nugget 14.21 6.33% 716 4.83% 288,128,188 10.83% 7.33%

Hard Rock 29.82 13.29% 1,972 13.30% - 0.00% 8.87%

Harrah's 46.84 20.88% 2,587 17.45% 363,705,687 13.68% 17.34%

Ocean Resort 19.28 8.59% 1,399 9.44% - 0.00% 6.01%

Resorts 19.55 8.71% 942 6.36% 233,461,048 8.78% 7.95%

Tropicana 14.11 6.29% 2,047 13.81% 390,940,502 14.70% 11.60%

Category Total 224.36 100.00% 14,822 100.00% 2,659,239,511$ 100.00% 100.00%

Third and Fourth Quarter 2018



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billion revenue tier for 2021. This would result in a $20 million increase in the PILOT for 2020, to $152.6 million, and 2% increase in the PILOT payment for 2021, to $155.7 million.

Atlantic City Casino Industry Projected PILOT Payments

For the Three Years ending December 31, 2021 ($ in Millions)

Calendar Year

Projected GGR

Applied to PILOT Year

PILOT Payment

2018 2019 2020

$2,860 $3,030 $3,121

2019 2020 2021

$132.6 $152.6 $155.7

For charting purposes, assuming flat GGR beyond 2020, following is a potential schedule of PILOT payments to Atlantic County.

3. Section 4 of the “Casino Property Tax Stabilization Act,” P.L.2016, c.5 (C.52:27BBBB-21) requires the owners of casino gaming properties to also make separate payments, in addition to PILOTs, to the State totaling $110 million in Calendar Years 2015 to 2023. The amount owed by each casino gaming property is based on the property’s proportion of gross gaming revenue for the prior year, as determined by the Local Finance Board in consultation with the Division of Gaming Enforcement in the Department of Law and Public Safety. The State is required to remit these separate payments to Atlantic City for the purposes of supporting the municipal budget. The statute requires these payments to total $5 million in Calendar Year 2019.

Earned Year GGR Applied Year Pilot Amt County %

2018 2,860$

2019 3,032$ 2019 132.6$ 17.90$

2020 3,123$ 2020 152.6$ 20.60$

2021 3,123$ 2021 155.7$ 21.01$

2022 3,123$ 2022 158.8$ 21.43$

2023 3,123$ 2023 161.9$ 21.86$

2024 3,123$ 2024 165.2$ 22.30$

2025 3,123$ 2025 168.5$ 22.75$

2026 3,123$ 2026 171.9$ 23.20$

all figures in millions



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Question: Please provide a report showing the allocation of separate payments among casino gaming property owners for Calendar Year 2019.

2019 Separate State Payment Allocation

Based on Gross Gaming Revenue for Calendar Year 2018

2018 Gross Gaming

GGR

2019 Separate

Revenue (GGR)

Market Share

State Payment

Bally's

$ 191,892,872

7%

$ 350,000

Borgata

$ 771,434,567

27%

$ 1,350,000

Caesars

$ 327,028,293

11%

$ 550,000

Golden Nugget

$ 327,943,538

11%

$ 550,000

Hard Rock*

$ 166,746,896

6%

$ 300,000

Harrah's

$ 332,988,031

12%

$ 600,000

Ocean Resort*

$ 101,129,531

4%

$ 200,000

Resorts

$ 259,986,769

9%

$ 450,000

Tropicana

$ 380,371,712

13%

$ 650,000

Total

$ 2,859,522,209

100%

$ 5,000,000

* only in operation for part of 2018 Notes: Gross Gaming Revenue (GGR) reflects Casino Gross Revenue plus Internet Gross Revenue

GGR Market Share column may not foot due to rounding.

4. Section 9 of P.L.2016, c.5 (C.52:27BBBB-25) reallocates certain casino investment alternative tax (“IAT”) receipts collected by the Casino Reinvestment Development Authority (“CRDA”) to Atlantic City for paying debt service on municipal bonds. IAT revenues that are pledged to support the following purposes are retained by CRDA and not reallocated to the city: (1)



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bonds issued by the CRDA; (2) bonds issued to refund those CRDA bonds; or (3) other contractual obligations incurred by the CRDA prior to the effective date of the act. The IAT revenues that are reallocated to Atlantic City may be withheld by the State Treasurer for principal and interest payments on debt issued under the “Municipal Qualified Bond Act,” P.L.1976, c.38 (C.40A:3-1 et seq.). The reallocation of certain IAT revenues to Atlantic City will continue until December 31, 2026. In response to a Fiscal Year 2019 OLS Discussion Point, the department reported that approximately $13.8 million in IAT revenue was reallocated to Atlantic City in Calendar Year 2017; approximately $8.8 million in IAT revenue was received by CRDA in that year. The department also noted that the amount of IAT revenue that is reallocated to Atlantic City in Calendar Year 2018 through 2026 would depend on the level of gross gaming revenue in each prior year. In addition, the department provided the following table, which includes a qualified projection of the annual inflow of IAT revenues to Atlantic City from 2018 to 2026.

Budget Year Inflow of IATs to Atlantic City

2018 $6,700,000

2019 $16,000,000

2020 $13,900,000

2021 $11,200,000

2022 $39,600,000

2023 $39,600,000

2024 $39,600,000

2025 $39,600,000

2026 $39,600,000

Question: What amount of IAT revenue was received by Atlantic City and the Casino Reinvestment Development Authority, respectively, in Calendar Year 2018? What

amounts are anticipated to be received by each entity in Calendar Year 2019? Has the department revised its projected annual distribution of IAT revenue to Atlantic City in each calendar year after 2018? If not, please provide an updated projection of the amounts of IAT revenue that would be reallocated to the city in each calendar year through 2026.

In 2018, the City received approximately $9.67 million in IAT’s. As noted below that number is expected to rise to $13.9 million in 2019. However, built into the PILOT is a crediting mechanism that is designed to hold these substitute casino property tax payments at 2015 levels through 2021. Though an increase in GGR requires that the casinos make larger PILOT payments, the increase in payment is offset by a larger credit that is paid for with IAT’s. With the anticipated growth in GGR, this feature of the PILOT is anticipated to result in the elimination of IAT’s received by the City in 2020 and 2021, creating a net loss of revenue to the City in those years – see chart below. Atlantic City Casino Industry Forecasted IAT Distribution Summary For the Three Years ending December 31, 2021 ($ in Millions)



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2019 2020 2021

Projected Total IATs* IAT Credits to Casinos Pledged IATs to CRDA Remaining IATs (Shortfall) IATs to Atlantic City

$39.7 (23.1) (2.7) $ 13.9 $ 13.9

$42.4 (43.1) (1.5) ($ 2.2) $ 0.0

$43.7 (46.1) (1.6) ($ 4.0) $ 0.0

*projected growth Under CPSTA any shortfall in IAT’s used for crediting purposes – see 2020 and 2021 – are rolled into future years and will have to be drawn from subsequent IAT pools reducing IAT cashflow to the City. From 2022 to 2026 the crediting mechanism lapses and the balance of IAT’s are slated to accrue to the City, net of the roll forward of any IAT shortfall. Pledged IAT’s to CRDA are projected to average $1 million/year 2022-2026, which are paid prior to the City receiving any available IAT’s. 5. The Division of Local Government Services (“division”) provides assistance to local governments and authorities in developing and strengthening managerial, planning, and financial competence. Most notably, the division oversees and monitors compliance with local finance laws, administers State Aid programs, assists fiscally distressed municipalities with financial and managerial support, and assists local governments and schools with procurement regulation. The division also assists with shared service efforts, administers certification programs for officials (e.g., municipal clerks, financial officers, tax collectors, etc.), and oversees local government deferred compensation programs and length of service award programs to volunteer fire and rescue organizations. In Fiscal Year 1988, the division employed 104 full-time employees. However, due to attrition, layoffs, and retirements, the number of full-time division employees has declined over the years. The department stated in response to a Fiscal Year 2019 Discussion Point that an evaluation was ongoing concerning the “adequacy of the division’s staffing in light of the goals of the new administration,” and that additional personnel may be hired to assist the oversight of Atlantic City, provide technical support to municipalities, and support the use of the “Financial Automation Submission & Tracking” system.

Question: Is the current staffing plan of the Division of Local Government Services sufficient to meet the statutory responsibilities of the division? Has the department completed its evaluation concerning the adequacy of the division’s staffing? If so, please provide the conclusions of this evaluation. How many new full-time and part-time employees were hired to the division in Fiscal Year 2019, and to which areas of responsibility were these employees assigned? Does the department anticipate hiring additional staff in Fiscal Year 2020?

DLGS’s staffing plan and table of organization is being revised to reflect its renewed focus on community services and outreach, and to allow DLGS to perform core statutory responsibilities that have been outsourced in recent years.



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To this end, the Division has hired a procurement expert, and is seeking an experienced risk manager and a trainee analyst to expand the newly formed Local Assistance Bureau’s shared services team’s portfolio and is in the process of backfilling several assistive functions including OPRA, the Length of Service Awards Program, Deferred Compensation, and the GovConnect communications platform. DLGS is also seeking experienced municipal clerks and public works professionals to serve as community service officers. These individuals will enable the Division to resume internal performance of all statutory obligations in the certification unit, including licensing and educational functions, while providing support to localities in need of technical assistance regarding these licensed positions. We are also hiring two registered municipal auditors to replace recent resignations and retirees to provide timely, thorough budget review and certification for all local units. This configuration will reduce the Division’s dependence on consultants while expanding DCA’s ability to provide accessible consulting to local units. DLGS maintains a full complement of Transitional Aid program participant advisors and operational subject matter experts, including three full-time employees and five part-time employees. 6. In Fiscal Year 2012, the Transitional Aid to Localities program (“Transitional Aid”) replaced various other State discretionary municipal government financial assistance programs, namely Extraordinary Aid, Special Municipal Aid, and Trenton Capital City Aid. Transitional Aid is awarded to municipalities deemed to be in serious fiscal distress to support immediate budgetary needs and regain financial stability. Municipalities that receive Transitional Aid are required to enter into a memorandum of understanding (“MOU”) with the State, under which the State may impose certain conditions on the distribution of aid. According to Local Finance Notice 2018-21, certain municipalities that agreed not to apply for Transitional Aid in Fiscal Year 2019, and the next two budget years, may be eligible for an early termination of the MOU. The proposed Fiscal Year 2020 Budget recommends $104.563 million in funding for Transitional Aid, an increase of $4.22 million from the Executive’s anticipated adjusted appropriation of $100.34 million in Fiscal Year 2019. The Fiscal Year 2019 Appropriations Act provided $101.994 million in funding for Transitional Aid; however, this funding was reduced by $7.431 million due to budget language which used the monies to fund a corresponding increase in Consolidated Municipal Property Tax Relief Aid for the City of Newark. Additionally, the proposed Fiscal Year 2020 Budget assumes the additional appropriation of $5.777 million for Transitional Aid in Fiscal Year 2019. The OLS notes that this funding is contingent upon the enactment of a supplemental appropriation prior to the end of the current fiscal year. According to information provided to the OLS by the Department of the Treasury, the additional appropriation is needed to support a shortfall in Transitional Aid funding. The OLS also notes that the State enacted a supplemental appropriation of $4.698 million in Fiscal Year 2018 to address a shortfall in Transitional Aid funding. According to the “Individual Certifications of Municipal State Aid,” which are available on the department’s internet website, the following municipalities will receive Transitional Aid in Calendar Year 2018/Fiscal Year 2019, as of April 4, 2019: Atlantic City, $3.9 million; Camden, $22.3 million; Nutley, $4.1 million; Paterson, $33 million; Penns Grove, $0.45 million; Salem, $1.4 million; Seaside Heights, $1.19 million; Trenton, $6 million; and Union City, $20 million. These awards total $92.34 million. Accordingly, the OLS assumes that the purported shortfall in Fiscal Year 2019 Transitional Aid funding results from additional awards of Transitional Aid not yet announced.



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Question: Please identify the amount of funding applied for and awarded to each municipality that received Transitional Aid in Calendar Year 2018 and Fiscal Year 2019. Please identify each municipality that has notified the division of its intention to apply for Transitional Aid in Calendar Year 2019 and the amount of funding requested by each municipality. Have any municipalities that received Transitional Aid in Fiscal Year 2018 or Fiscal Year 2019 been granted early termination of the MOU?

Question: Please justify the additional appropriation of $5.777 million for Transitional Aid in Fiscal Year 2019. Please explain why Transitional Aid experienced funding shortfalls in Fiscal Year 2018 and Fiscal Year 2019, respectively. What procedure does the department employ to ensure that the award of Transitional Aid does not exceed the program’s funding authority? If none, what actions will be taken in Fiscal Year 2020

to address this issue?

In Fiscal Year 2012, the Transitional Aid to Localities program replaced Extraordinary Aid, Special Municipal Aid, and Trenton Capital City Aid as the State’s only discretionary municipal government financial assistance program. Transitional aid is awarded to help municipalities, which are deemed to be in serious fiscal distress meet immediate budgetary needs and regain financial stability. Municipalities that receive Transitional Aid are required to enter a memorandum of understanding with the State, under which the State may impose certain conditions on the distribution of aid. Budget language permits the Director of the Division of Local Government Services (DLGS) to transfer a portion of a municipality’s Transitional Aid (TA) from the prior fiscal year to its allocation of Consolidated Municipal Property Tax Relief Aid (CMPTRA). The department has noted that this authority increases investor confidence in municipal bonds and grants the director flexibility to provide increased formula aid to municipalities, which despite having implemented cost reduction measures, continue to experience large structural imbalances. Through Fiscal Year 2019, twelve municipalities receive a portion of Transitional Aid as CMPTRA, as follows: (1) Asbury Park, $6 million; (2) Atlantic City, $35 million; (3) Beverly City, $280,000; (4) Camden City, $54.5 million; (5) Chesilhurst Borough, $150,000; (6) Harrison Town, $1.656 million; (7) Lawnside Borough, $550,000; (8) Maurice River Township, $265,000; (9) Newark City, $17.4 million; (10) Penns Grove Borough, $590,000; (11) Trenton City, $14.86 million; and (12) Union City, $9 million. According to the Calendar Year 2018/Fiscal Year 2019 Certification of State Aid released by the DLGS, no municipality is scheduled to receive a portion of Transitional Aid as CMPTRA in Fiscal Year 2020. Nor is any municipality eligible for early termination from the Transitional Aid Program. No additional FY2019 Transitional Aid is required at this time because the State will provide Trenton with a cash flow loan in lieu of supplemental Transitional Aid to support its budgetary and cash flow needs pending passage of the Capital City Aid bill, which will stabilize Trenton’s finances thereby reducing and eventually eliminating Trenton’s dependence on discretionary aid to support its basic operating budget.



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The DLGS posted a Local Finance Notice concerning the application requirements and deadlines for the distribution of Transitional Aid to calendar year municipalities on April 24. Municipalities intending to apply for CY19 Transitional Aid must notify DLGS by May 3, 2019. The Department has not posted the aid allocation for state fiscal year municipalities in Fiscal Year 2019. The amount of Transitional Aid funding applied for and awarded in SFY2019 is as follows:

Municipality Request Award

Atlantic City $3,900,000 $3,900,000

Nutley $5,000,000 $4,100,000

Penns Grove $481,000 $450,000

Salem $1,445,000 $1,400,000

Seaside Heights $1,190,000 $1,190,000

Camden $23,237,816 $22,300,000

Paterson $40,000,000 *$33,000,000

Trenton $25,000,000 **$6,000,000

Union City $20,000,000 $20,000,000

*$4 million of Paterson’s award is contingent upon benchmarks related to its SHBP transition ($2 million) and sewer rates ($2 million). **Trenton’s award is supplemented by a $10 million cash flow loan to address a persistent structural gap while the Legislature considers Capital City Aid legislation. 7. Under the “Local Budget Law,” N.J.S.40A:4-1 et seq., the Director of the Division of Local Government Services (“director”) is required to examine the annual budget of each municipality in the State, with certain exceptions. Pursuant to N.J.S.40A:4-77, the director’s budget examination is required to include a determination of whether all estimates of revenue in the municipality’s budget are reasonable, accurate, and correctly stated. The “Local Budget Law” further empowers the director to disapprove a proposed municipal budget or make corrections to items of municipal revenue (N.J.S.40A:4-80 and N.J.S.40A:4-86). In December 2018, news reports indicated that the City of Paterson may face a revenue shortfall in its Fiscal Year 2019 budget. The revenue shortfall arose after the city, which anticipated $40 million of Transitional Aid in its adopted budget, was reportedly informed of its $29 million award of Transitional Aid. During the period between Fiscal Year 2016 and 2018, the City of Paterson received $25.25 million, $25.25 million, and $27 million, respectively, in Transitional Aid. According to Local Finance Notice 2018-21, “Transitional Aid Application Process,” which was published in September 2018, the department advised municipalities currently operating under a Transitional Aid Memorandum of Understanding that “funding will likely decrease from last year.”



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According to news reports, the State agreed shortly thereafter to award Paterson additional Transitional Aid (totaling $33 million, as noted above) in order to address the revenue shortfall, provided that the city implement several reforms to its municipal sewer system, including: (1) updating the method for calculating sewer bills; (2) establishing a municipal sewer utility; and (3) issuing an additional $3 million in one-time sewer bills.

Question: Did the Division of Local Government Services inform the City of Paterson during its budget examination that anticipating $40 million from Transitional Aid was unreasonable? If so, how did the city respond? If not, why not? Has the City of Peterson implemented each of the proposed reforms? If so, what impact will the updated method for calculating sewer bills have on sewer user revenue and residential and

commercial property owners, respectively? As early as July 2018, DLGS staff notified the City of Paterson that it must prepare a budget that reflected no additional state aid. DLGS also prepared a list of revenue increasing and expense reduction strategies to assist Paterson in meeting this requirement. Paterson has worked in close coordination with DLGS staff to implement many of these recommendations, including a hiring freeze, comprehensive sewer reforms, transitioning to the State Health Benefits Plan (SHBP), revising fees for services, sale of properties not needed for public purposes, suspending non-essential capital authorizations, eliminating non-essential overtime, exploring shared services, restoring the municipal levy, and making strategic cuts in departmental budgets. These measures have yielded impressive savings, including approximately $20 million from the SHBP conversion through budget savings and cost avoidance. Paterson continues to work toward implementing several additional recommendations. By embracing these measures, and aggressively pursuing policy and operational reforms, Paterson has taken great strides toward comprehensive fiscal recovery. To assist Paterson in addressing its documented revenue shortfall during this transitional period, DLGS authorized $4 million in supplemental Transitional Aid, contingent upon Paterson meeting benchmarks related to its SHBP transition ($2 million) and sewer rates ($2 million). These benchmarks have been met. Paterson’s new sewer rates have been structured based on a base rate plus a volumetric charge beginning July 1, 2019 (FY20). The previous rate structure was a per unit fee that had not been increased since 2015. According to the sewer study completed by Raftelis, this resulted in the current fund unnecessarily subsidizing the sewer operation by about $6 million annually plus sewer debt service. This meant that tax paying sewer customers were subsidizing the sewer rates to the benefit of institutional, non-taxpaying sewer customers. Paterson’s sewer reforms created a more equitable fee structure that is expected to cover the full cost of the newly formed self-liquidating sewer utility, and generate substantially increased revenues, with only modest increases to residential customers. Current projections indicate a majority of residential customers will experience an increase of less than $50 dollars. 8. In March 2016, the Division of Local Government Services (“division”) announced the creation of the “Financial Automation Submission & Tracking” (“FAST”) initiative, through which the division established an automated system to record, submit, and store local government financial data. Beginning in Fiscal Year 2019, the division required State Fiscal Year municipalities



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to submit annual debt statements, annual financial statements, and budget documents using the FAST system. Municipalities operating on a calendar fiscal year will also be required to submit budget documents and other financial statements through FAST in Calendar Year 2019. According to Local Finance Notice 2018-28, the division expects to expand the FAST platform to include the submission of all county budgets in Calendar Year 2020.

In response to a Fiscal Year 2019 OLS Discussion Point, the department indicated that one employee hired in Fiscal Year 2018 was partially assigned to oversee the FAST initiative. The department also stated that “[t]he implementation of FAST, regardless of any expansion, will require on-going maintenance which will impact the FY2020 budget.”

Question: Please provide an update regarding the division’s progress towards implementing the FAST initiative. Does the division intend to make each municipality’s FAST submissions available to the public? If so, how and when will this financial data be made available to the public? Please explain how the on-going maintenance of the FAST system is expected to impact the Fiscal Year 2020 budget.

DLGS continues to make progress on the implementation of the FAST Solution, which is currently accepting Annual Debt Statements, Supplemental Debt Statements, and Annual Financial Statements. Municipalities will enter adopted budgets through the FAST portal this calendar year. This year, the Division successfully updated Annual Debt and Supplemental Debt Statements. Aside from minor enhancements to support linear linkage of multiple Supplemental Debt Statements, no further enhancements of these modules are expected. The most significant component of FAST released in CY2019 was an enhanced Annual Financial Statement. This module altered the reporting document to employ the Division’s extensive Financial Chart of Accounts (FCOA) to streamline the report and improve transparency. Enhancements to FAST Annual Debt Statements (ADS) for reporting year 2018 included the access of equalized valuations and school debt data points for the user’s availability when completing these financial reports. In prior years, these data were available separately. The Division added an alert feature for DLGS and users when the amount of debt exceeds the maximum threshold of 3.5%. Data entry errors were not automatically caught. That weakness has been addressed. Validation of municipal compliance with Division standards is an essential component of FAST. The system can currently validate Local Exam Qualification, Proper Signature Certification, and Balance Sheet accuracy. Upcoming releases include the Audit and Budget modules. The Audit module will require Registered Municipal Auditors to validate balance sheets reported from the submission of the units’ Annual Financial Statements. This requirement will ensure amounts used in current year Annual Financial Statements begin with audited ending balances from the prior year. Adopted Budgets will be available for entry during CY19. Enhancements designed to track the budget life-cycle from introduction through amendment and adoption, ensuring a transparent record of each municipality’s budget, are being evaluated for release prior to the CY20 budget introduction deadline.



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County and Fire District budgets are scheduled for SFY20. Authority budgets will be entered through FAST in CFY21. The Department’s commitment to a user-friendly experience has produced a product that is efficient, cost-effective, and transparent. DLGS has provided additional training and guidance to help users navigate the system and has made system enhancements to address constituent concerns. To assist with data entry and adoption issues identified during municipalities’ submission of Annual Financial Statements this spring, Division staff are offering comprehensive, hands-on workshops across New Jersey to assist professionals in navigating the portal and certifying and submitting their documents. An experienced certified professional now oversees the FAST program’s development, as well as its internal and public adoption. The Division is also developing a public portal, so each municipality’s FAST submissions are available to the public, searchable, extractable, and comparable within the portal. A prototype open data portal has already been created and can be reviewed. It will be released this summer. This functionality was developed in-house by DCA IT and will be enhanced over time with no impact on the FY20 budget. The FAST Public Portal is expected to become a vital data-driven assessment and problem-solving tool. Because FAST has been stable and experienced a low support demand, the Division will switch from unlimited support with the current support vendor to an as-needed per-hour basis during FY20. This is expected to reduce ongoing support costs by approximately two thirds. 9. The Governor’s proposed Fiscal Year 2020 Budget recommends $3 million in funding to create the Office of Homelessness Prevention (“office”) within the Department of Community Affairs (“DCA”). According to the Fiscal Year 2020 Budget in Brief (page 21), the office would “implement comprehensive policies to reduce homelessness and expand access to the continuum of housing options.” In his Budget Message, the Governor also stated that the office would “act as a hub for more strategic and coordinated efforts, where we use data and analytics to create and implement solutions to address people’s housing needs — especially among our veterans — from prevention, to emergencies, to permanency.” Currently, the DCA and Department of Human Services (“DHS”) share responsibilities with regard to administering programs that assist persons who experience or are at risk of experiencing homelessness. For example, the Homelessness Prevention Program (“HPP”) administered by the DCA provides financial assistance to lower-income tenants in imminent danger of eviction due to temporary, unavoidable financial problems. Similarly, the DHS also administers Social Services for the Homeless (“SSH”), which provides assistance to State residents who are at risk of homelessness but do not qualify for certain forms of welfare assistance. The proposed Fiscal Year 2020 Budget recommends continued funding of $4.360 million and $14.216 million for the HPP and SSH programs, respectively.

Question: Please describe the specific services, programs, and initiatives that will be administered by the Office of Homelessness Prevention in Fiscal Year 2020. Please provide a spending plan and organization chart for the office, and indicate the number of



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full-time and part-time employees, respectively, that will staff the office. Does the department anticipate or recommend assuming any responsibilities currently held by other State agencies with regard to providing homelessness prevention and assistance services? If so, please explain.

The main tasks that the Office of Homelessness Prevention will undertake in FY2020 will be to assess the resources and data on homelessness in the state, and to use this information to develop an action plan. The Office will work with both a task force and an interagency working group to accomplish this. We do anticipate transferring the Homelessness Management Information System (HMIS) to DCA within the year. While the HMIS is a central location for data on people who are homeless, many other state and local entities collect data that, when cross-referenced with HMIS data, will provide a more detailed picture of the ways in which homelessness is experienced in NJ, as well as the ways in which people who are homeless or at risk interact with other systems. DCA will conduct deeper and broader analyses of the data upon transfer. The Office of Homelessness Prevention will then undertake the data-driven recommendations for policy and procedural initiatives that will address homelessness more effectively and more efficiently. In addition to DCA and DHS’ programs that are specifically targeted to people who are homeless, several other state agencies provide resources that may not be specifically targeted to people who are homeless but that are used by people who are at risk of homelessness. The creation of a crosswalk of the various resources and services available at every level to assist people who are homeless or at risk will allow the Office of Homelessness Prevention to make informed recommendations. In the first year, the Office of Homelessness Prevention will also facilitate the meetings of the New Jersey Homelessness Prevention Task Force, as well as convene meetings of external stakeholders including state and municipal officials, providers, philanthropic funders and people who have experienced homelessness, to inform the development of the action plan and policy recommendations. In the second half of FY2020, the Office will also recommend the launch of small pilots, based on the expanded data analysis and examination of national best and emerging practices, to improve existing programs and address service gaps. Aside from the transfer of HMIS, DCA does not anticipate assuming any responsibilities regarding homelessness assistance currently administered by other state agencies in FY2020. DCA anticipates that the Office will be initially staffed by 3 FTEs: The Director of the Office of Homelessness Prevention, the Program Manager, and the Data Manager, to be hired in the first quarter of FY2020. As the Office completes its planning during FY2020, DCA anticipates that the administrative need for this office will grow to potentially include additional staff. The Office will also engage a consultant with national experience and reach in the field of homelessness prevention to guide the first year of work, as well as additional consultant(s) to assist in the development of data collection and data sharing plans. FY2020 Spending Plan

Expense Q1 Q2 Q3 Q4

Personnel $75,000 $150,000 $150,000 $150,000

Administrative $50,000 $150,000 $150,000 $150,000



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Data and Consulting

$500,000 $500,000 $500,000

We anticipate allocating the balance of these funds to support the small pilots mentioned above. Organizational Chart

Director

Program Manager Data Manager

10. The Governor’s proposed Fiscal Year 2020 Budget recommends $200,000 in funding for the Local Assistance Bureau (“LAB”), which would be a new unit established within the Division of Local Government Services (“division”). According to the Fiscal Year 2020 Budget in Brief (page 21), the proposed LAB reflects the Governor’s “commitment to achieving property tax savings through innovative shared services and consolidation efforts.” Specifically, the LAB would provide support to municipalities and counties by facilitating shared service agreements and municipal consolidations, developing best practice reports, and overseeing the Transitional Aid program. The Budget in Brief also indicates that the LAB would build on the work of the Governor’s Shared Services Czars who were appointed in May 2018 to promote multi-municipality agreements.

Question: How many full-time and part-time employees, respectively, will be assigned to the Local Assistance Bureau? How many of these employees will be

responsible for: (1) facilitating shared service agreements and municipal consolidations; (2) developing best practice reports; and (3) overseeing the Transitional Aid program, respectively?

Question: Please describe the actions taken by the Shared Services Czars to promote shared service agreements and municipal consolidations, respectively, in Fiscal Year 2019. Which new shared service agreements and consolidations can be directly attributed to the efforts of the Shared Service Czars? What savings resulted from those

new agreements and consolidations? How will the Local Assistance Bureau build on these efforts in Fiscal Year 2020?

The Division is building capacity for shared services and consolidation assistance and restoring its technical assistance programs. The Division must also resume fulfilling certain statutory obligations related to review of procurement and contracts and the certification of licensed local officers, including creation of the tests we administer to licensed officials. These duties have been outsourced to the regulated community in recent years. To meet these critical needs, the Division is establishing the Local Assistance Bureau (LAB). The LAB will consolidate the Distressed Cities Program, Transitional Aid, Shared Services, and other key assistive functions. The LAB will provide consulting services and support to local units. Staff assigned to the LAB will possess expertise in challenging areas of local government management and planning. The LAB will provide on-site and remote consulting to localities seeking assistance, as well as continue to provide technical assistance and guidance to local units already under state oversight. This will save money at the state and local level by providing services through the Division that previously required retention of costly consultants. The LAB will also issue reports to advise towns on best practices and innovations worthy of state-wide emulation. New certification



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program fees and web-based municipal governance courses developed and delivered through the LAB are anticipated to yield new revenue to support LAB activities. The LAB will include the Division’s Transitional Aid Program expert technical advisors, who will be assigned to assist with shared services studies in their areas of special expertise, and five full-time staff, consisting of three current staff, an additional technical expert to be hired in FY20, and an administrative analyst trainee to support the Bureau’s research, reporting, and outreach functions. The Bureau is designed to maximize cross-training and teamwork with all staff available to perform the various shared service, educational, and transitional aid functions on an as-needed basis. Each municipal assignment will be overseen by a designated lead technical advisor, each of whom will report to the Bureau Chief on that project. Sharing local services is not a new concept in New Jersey, but it is being pursued with renewed vigor in this time of universal fiscal constraint. The Shared Services Czars have travelled the state publicizing and implementing the administration’s Shared Services program. Municipalities and counties have embraced this call to action. Multiple municipalities have embraced DPW consolidation and municipal court sharing, and several others are considering sharing police and fire services. To facilitate their efforts, and to identify opportunities for new shared services ventures across the State, the Division has established a data collection and review process with the Shared Services Czars to better assess viable shared services proposals, and target Division resources to shepherd promising proposals through the process and to completion – the ultimate execution of a shared services agreement. A shared services portal has been established for municipalities to make initial contact with the State. The czars and Division staff meet with interested communities and collect detailed information that culminates in the completion of a Division document inventory related to the proposed shared service arrangement. That inventory helps the Division’s staff conduct an initial assessment that is presented to the administration and governing body so that they can make an informed decision before moving forward with creation of a comprehensive study report, and implementation of the agreement, with Division support. The Division of Local Government Services is currently employing its team of local government fiscal and operational experts and its vast shared services database to assist in 14 shared services projects across New Jersey. If implemented, these agreements will achieve savings and generate increased value for each dollar spent, while assuring smooth transitions and responsible continuation of services. The state’s free consulting services save towns tens of thousands of dollars during the investigation and implementation of each agreement. One proposed shared services arrangement will save the communities involved more than $1 million. Others will avoid massive capital expenditures that would otherwise be required in the near future, while yielding salary and insurance savings. The state is helping each community craft its agreements to maximize savings and minimize local discomfort, providing fair, consistent, and judicious analysis that promotes efficiency, effectiveness, and performance.



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11. The Fiscal Year 2020 Budget in Brief (page 21) states that the Division of Local Government Services (“division”) provided the Governor with suggestions concerning the transfer of the responsibility to provide certain government services from municipalities to counties. Except in the case of certain large cities, these suggestions would have counties assume the responsibility for providing 9-1-1 dispatch, public health, and road maintenance (e.g., snow removal) services. Moreover, newly proposed budget language authorizes the appropriation of up to $15 million to design and implement a voluntary county-based demonstration project to achieve efficiencies and future cost savings in the provision of services at the local level.

Question: How did the division formulate its recommendations that counties assume the responsibility of providing 9-1-1 dispatch, public health, and road maintenance from municipalities? Do its recommendations have the endorsement of any organization of county or municipal officials? Did the division consider and decide against recommending the transfer of any specific services or functions from municipalities to counties? Did the division conduct research on the devolution of county responsibilities to the municipal level? What did that research conclude about whether efficiencies and future cost savings could be achieved in that manner?

• Question: Please explain the process by which the division will design and

implement a voluntary county-based demonstration project. Please identify any county or municipality that has expressed interest in participating in such a project for any of the

three services recommended by the division. What forms of assistance would be provided to participating local units in Fiscal Year 2020, and in what amounts? Given the emphasis in the Budget in Brief on shifting services from the municipal to the county level, should the recommended language be revised to require that any project funded by the division achieve that specific result, in addition to achieving efficiencies and future cost savings in the provision of local services?

The Division’s preliminary recommendations were developed through research into successful NJ models, assessment of other states’ practices, and consideration of capital and staffing costs for various services obtained through our budget and shared services data. These recommendations will be refined as research continues to be undertaken by staff, including the Division’s research economist. During this process, the Division has begun, and will continue, to engage with experts in the field of service sharing. The Division is seeking realistic proposals that can be achieved across the state, being particularly mindful of divergent community characteristics in various regions of New Jersey. Final recommendations and a more detailed report will focus on services that can be treated relatively uniformly across all counties. At this time, the Division is not considering devolution in its research, as it was specifically charged with assessing consolidation of services at the county level and making recommendations in that regard.

12. The New Jersey Affordable Housing Trust Fund (“trust fund”) is a non-lapsing fund that subsidizes the construction and rehabilitation of affordable housing units in the State. The funds



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are distributed to regions of the State based on each region’s percentage of the State’s low- and moderate-income housing need. The trust fund is primarily supported by the revenues generated by a statutorily dedicated portion of the realty transfer fee; however, the trust fund may also receive: (1) monies transferred from municipal affordable housing trust funds; (2) monies appropriated by the Legislature; and (3) monies generated by the collection of non-residential development fees in certain municipalities. To increase the trust fund’s resources, the Governor’s proposed Fiscal Year 2020 Budget would end the longstanding practice of using the dedicated realty transfer fee receipts to support other housing-related State programs and provide an estimated $95 million to the trust fund. In Fiscal Year 2019, the State funded the following programs within the department using those dedicated realty transfer fee receipts: The Office of Local Planning Services, $1.36 million; affordable housing administration, $1.789 million; the Shelter Assistance program, $2.3 million; the Prevention of Homelessness program, $4.36 million; the Neighborhood Preservation program, $2.5 million; and the Main Street New Jersey program, $0.5 million. However, a language provision in the proposed Fiscal Year 2020 Budget would continue to appropriate an amount not less than $20 million from the trust fund to support the State Rental Assistance Program. The department, in conjunction with the New Jersey Housing and Mortgage Finance Agency (“NJHMFA”), also supports the construction of affordable housing through various other funding sources, including the federal National Housing Trust Fund, the federal HOME Investment Partnership program, the issuance of NJHMFA bonds, and the equity generated from federal Low-Income Housing Tax Credits (“LIHTCs”). In response to a Fiscal Year 2019 OLS Discussion Point, the department acknowledged that the reductions to the federal corporate business tax resulting from the enactment of the “Tax Cuts and Jobs Act” (Pub.L.155-97) had a detrimental impact on the value of LIHTCs, which could reduce the number of projects awarded through the program.

Question: Please indicate the amount of funding, by source, which will be available in Fiscal Year 2020 for affordable housing purposes, excluding Community Development Block Grant-Disaster Relief funds. How many affordable housing opportunities will be provided in Fiscal Year 2019, by funding source? What number of affordable housing units will be funded in Fiscal Year 2019 and Fiscal Year 2020, respectively, with State funds, NJHMFA funds, Low Income Housing Tax Credits, and all other sources respectively, excluding CDBG-DR funds?

Funding and unit estimates can be found in the chart below. It is estimated that a minimum of 6,700 affordable housing units will receive funding from DCA and HMFA-administered programs in FY2019. These estimates are based on budgeted funding for affordable housing programs.

2019 2020



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Dept./ Agency

Program Funding Source

Anticipated Funding Estimated Affordable Housing Units

Anticipated Funding Estimated Affordable Housing Units

HMFA HMFA 4% Low Income Housing Tax Credits

Federal 500,000,000 (tax-exempt bond capacity) *

3,100* 500,000,000 (tax-exempt bond capacity)*

3,100*

HMFA HMFA 9% Low Income Housing Tax Credits

Federal 24,000,000* 1,300* 24,000,000* 1,300*

HMFA

HMFA First-Time Homebuyer Mortgage Program (Single-family housing loans)

Proceeds from sale of Mortgage Revenue Bonds and Packaged Mortgage Loans, as needed

Varies 2,000* Varies 2,000*

DCA

HOME Production/Community Housing Development Organizations Program

Federal 5,114,000 21 4,800,000 20

DCA National Housing Trust Fund

Federal 7,700,000 31 6,968,067* 25

DCA Balanced Housing Production (Affordable Housing Trust Fund)**

State 4,000,000 15 70,303,000* 250-500**

*Data for calendar year, data not tracked by the fiscal year

**Balanced Housing projects are funded by dedicated Realty Transfer Fees. The numbers above assume that the fee will

generate $88M for the Affordable Housing Trust Fund. The actual amount of Balanced Housing funding available will depend on remaining receipts after the satisfaction of obligations to other housing-related programs supported by the Fund, such as the State Rental Assistance Program (SRAP). The low end of production for Balanced Housing is calculated at full subsidy of $300K per unit; the high end production anticipates matching funds and other leveraged resources.

Question: How much State revenue was generated by the non-residential development fee in Fiscal Year 2018 and Fiscal Year 2019, respectively?

In Fiscal Year 2018, the non-residential development fee generated $899,965; in Fiscal Year 2019 to date, $34,088.

Question: Please explain the effects of the federal tax changes on the LIHTC program during Fiscal Year 2019. What actions, if any, did the department and NJHMFA take to address the effects of the federal tax change on the value of LIHTCs?

NJHMFA finances multifamily affordable housing with bond proceeds realized from the sale of taxable and tax-exempt Housing Revenue Bonds coupled with the private equity generated from 9% and 4% federal Low Income Housing Tax Credits (LIHTC). NJHMFA receives $24 million annually in 9% tax credits, which generates private equity of approximately $230 million. The 9% credits will result in approximately 1,300 units in calendar years 2019 and 2020.



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In addition to the 9% program, NJHMFA also administers the 4% tax credit program. The 4% credits are issued in conjunction with tax exempt bonds. The availability of tax exempt bonds for housing development is limited by the amount of private activity bonds allocated by formula to the states. NJ receives approximately $1 billion in bond capacity. Of that amount, $500 million was allocated to HMFA in 2018 and in 2019. NJHMFA anticipates financing 3,100 multifamily rental units in calendar year 2019 and 3,100 multifamily rental units in calendar year 2020 with tax exempt bonds and 4% tax credits. In total, the 9% and 4% LIHTC are anticipated to finance 4,400 units in 2019 and 2020. An increase in construction costs coupled with the federal tax changes have negatively impacted LIHTC production. The most noticeable effect was the decrease in pricing paid by investors per credit, in particular for 9% projects. Pricing was volatile immediately after the 2016 election and continued a downward decline with the passage of the law in December 2017; however, in mid-2018, pricing per credit stabilized at an average of $.94 per credit (compared to $1.10 per credit pre-2016 election). Pricing of approximately $.94 is expected to continue throughout 2019. NJHMFA addressed the unanticipated drop in equity by allowing developers of 9% projects affected by the tax law changes to apply for additional tax credits. In March of 2018, NJHMFA awarded $500,000 in additional tax credits to 10 projects to offset the loss of $4.5M in equity. As a result of higher construction costs and the lack of subsidy sources, NJHMFA expects that tax credit applicants will request additional credits to cover construction costs and fill the financing gaps, thus continuing the decline in affordable multifamily production since the passage of federal tax reform. The Consolidated Appropriations Act of 2018 partially offset this decline by temporarily increasing each state’s 9% tax credit allocation by 12.5% in 2018, 2019, 2020, and 2021 (approximately $2.5M in additional credits each year) but unless extended, the allocation will revert to 2017 levels adjusted for inflation. Pricing for 4% tax credits was similarly impacted with a dramatic decline in pricing after tax reform and that has impacted production, particularly new construction. The 4% program will likely exclusively fund rehabilitation projects in 2019 and 2020. However, that is due primarily to a lack of subsidy sources, rather than the decrease in pricing. The financing gap for a new construction 4% project can be as high as 50% of the total development costs 13. The HOME Investment Partnership Program (“HOME”) is a block grant program administered by the United States Department of Housing and Urban Development (“HUD”) that provides grants to states and local jurisdictions to fund various affordable housing activities, including owner-occupied housing rehabilitation, homebuyer assistance, rental housing construction and rehabilitation, and tenant-based rental assistance. HOME is the largest federal block grant program provided to state and local governments designed exclusively to create affordable housing for low-income households. The Fiscal Year 2020 Budget projects the receipt of $6 million in Fiscal Year 2019 and Fiscal Year 2020, respectively, for this program.



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HOME funds are allocated according to a formula in which 60 percent of the funds are awarded to “participating jurisdictions” (i.e., eligible local government units having populations above a certain threshold) and 40 percent are awarded to states to support areas not located with a participating jurisdiction. All states are automatically eligible for HOME funds, and each state annually receives either the amount of their formula allocation or $3 million, whichever is greater. The federal formula is based on the following criteria: the relative inadequacy of each jurisdiction’s housing supply; the incidence of poverty; fiscal distress; and other considerations. In 2018, the department was one of 28 recipients of HOME funds in New Jersey. In response to a Fiscal Year 2019 OLS Discussion Point, the department indicated that federal HOME funding is distributed as follows: 45 percent supports HOME tenant-based rental assistance, 45 percent supports the HOME Production program, and 10 percent supports administration costs. The Home Production Program is administered in accordance with federal regulations (24 C.F.R. Part 92) and the State regulations governing the Neighborhood Preservation Balanced Housing Program (N.J.A.C.5:43-1.1 et seq.). According to the department’s website, a portion of HOME funding is set aside for eligible projects conducted by certified nonprofit organizations (i.e., “Community Housing Development Organizations”). Projects financed through the Home Production Program are required to include rehabilitation, construction, or conversion of non-residential properties to residential use. Housing units created through the Home Production Program are required to be affordable to “low-income” households, defined as those households having an adjusted gross income below 80 percent of the area median income. Additionally, HOME financed housing units may be rented or sold to qualified households, as follows: (1) if a unit is for rent, the renter should pay no more than 35 percent of gross income for rents and utilities (or no more than 40 percent of gross income for households applying for age-restricted units); and (2) if a unit is for sale, the buyer should pay no more than 28 percent of monthly household income for mortgage principal, interest, taxes, insurance, and where applicable, condominium fees.

Question: How many housing units will be supported by Home Production Program funds in Fiscal Year 2019 and Fiscal Year 2020, respectively? What portion of Home Production Program funding is set aside for Community Housing Development Organizations in Fiscal Year 2019 and Fiscal Year 2020, respectively? What amount of HOME funds will support tenant-based rental assistance in Fiscal Year 2019 and Fiscal Year 2020, respectively? How many households will be provided HOME tenant-based assistance in Fiscal Year 2019 and Fiscal Year 2020, respectively? What percentage of HOME funding will be used to support tenant-based assistance, the Home Production Program, and administrative costs, respectively, in Fiscal Year 2020?

The HOME Production Program FY2019 and FY2020 funds will support 21 units in each year (for a total of 42 over two years). 15% of HOME Production Program funds are set aside in FY2019 and FY2020 for Community Housing Development Organizations (CHDOs), as required by the U.S. Department of Housing and Urban Development. In FY2019, DCA allocated $2,301,119 to tenant-based rental assistance which will support 193 households. In FY2020, DCA will allocate $2,229,079 to tenant-based rental assistance which will support 186 households.



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DCA’s HOME funding will be allocated as follows in FY2020:

14. The Internal Revenue Code of 1986 authorizes state and local government entities to issue tax-exempt private activity bonds (“private activity bonds”) for qualified purposes on behalf of private entities that issue the debt. Private activity bonds are issued to finance purposes that benefit private persons, but also serve a significant public benefit, such as affordable housing, student loans, and privately operated transportation facilities. A bond is classified as a private activity bond if: (1) more than 10 percent of its proceeds are used by a private entity; and (2) more than 10 percent of its debt service is backed by private resources. Interest on private activity bonds is generally taxable, except when the bond is used to finance a qualified purpose. In addition to restricting the types of private activities that may qualify for tax-exempt status (i.e., “qualified purposes”), Congress limits the aggregate principal balance that can be issued as private activity bonds in each state. The limit established for each state is known as the “volume cap.” The federal formula used to determine each state’s volume cap is set forth in Section 146 of the Internal Revenue Code. According to a recent report of the Federal Funds Information for States, New Jersey’s private activity bond volume cap in Calendar Year 2019 is $935.395 million, a decrease of $10.198 million from 2018. The report indicates that this reduction is the result of a loss in population in the State. The “New Jersey Bond Volume Cap Allocation Act,” P.L.1987, c.393 (C.49:2A-1 et seq.) authorizes the Governor to establish a procedure for allocating the State’s private activity bond volume cap. Section 4 of P.L.1987, c.393 (C.49:2A-4) requires the Governor to allocate the entire State volume cap to the Department of Treasury for reallocation by the State Treasurer to eligible State entities and local units. The State Treasurer is required to set the terms and conditions for receiving an allocation to issue private activity bonds. In response to a Fiscal Year 2019 OLS Discussion Point, the department indicated that the New Jersey Housing and Mortgage Finance Agency (“NJHMFA”) was allocated a total of $930 million in Calendar Year 2018 volume cap, consisting of $430 million in carry forward cap and $500 million of new cap. The department also reported that the NJHMFA requested an additional $205 million in volume cap, which would be used to support approximately 1,370 rental units.

Question: What amount of volume cap was allocated to the NJHMFA in Calendar Years 2018 and 2019, respectively? Did the NJHMFA request additional private activity bond financing capacity from the State Treasurer? If so, what amount of additional volume cap was requested and authorized, respectively?

Question: What was the total amount of private activity bonds issued in Calendar Year 2018; how many rental units and ownership units, respectively, were supported by the bond issuances? What amount of private activity bonds does the NJHMFA anticipate issuing in Calendar Year 2019; how many rental units and ownership units, respectively,

Tenant-Based Rental Assistance 46.00%

Production 29.00%

CHDO 15.00%

Administrative 10.00%



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will be supported? How much of the Calendar Year 2019 volume cap will be allocated to affordable housing developers? For what projects has the NJHMFA allocated its Calendar Year 2019 volume cap?

NJHMFA received volume cap allocations of $500 million in CY 2018 and another $500 million in CY 2019. NJHMFA did not request additional private activity bond financing capacity from the State Treasurer but did request, and received, authorization to carry forward the remaining 2018 volume cap amount of $389 million into 2019. NJHMFA carries forward volume cap to provide funding for projects in the development pipeline that have not yet received final commitment or closing. Multifamily developers are hesitant to develop plans for the development of affordable rental housing without the assurance that there will be sufficient volume cap to cover for the use of tax exempt financing. A long-term commitment of annual volume cap provides for a stable affordable housing development market. In calendar year 2018, NJHMFA issued $418,692,302 in private activity bonds to fund 3,034 multifamily rental units and 806 home ownership loans. As part of a refunding, HMFA issued an additional $370,860,000 in private activity bonds that did not require volume cap. In 2019, NJHMFA anticipates issuing $947,097,379 in private activity bonds for a total estimate of 4,991 multifamily units funded and 1,350 homeownership loans. As part of a refunding, HMFA issued an additional $121,970,000 in private activity bonds that did not require volume cap. Of the total $500 million in 2019 volume cap that NJHMFA received, HMFA expects to allocate approximately $365 million of CY 2019 volume cap to affordable housing multi-family developers and $135 million to fund first-time homeowner loans. The attached charts reflect all carryforward and new volume cap allocation for Calendar Years 2018 and 2019. The affordable housing projects to which NJHMFA has allocated its Calendar Year 2019 volume cap may be seen in the

attached. See Attachment 1. 15. The federal “Housing and Economic Recovery Act of 2008,” (Pub.L.110-289) established the National Housing Trust Fund (“HTF”), administered by the United States Department of Housing and Urban Development (“HUD”), to provide a permanent source of federal funds to support affordable housing. Federal law requires that the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage Association (“Fannie Mae”) set aside a portion of the unpaid principal balances on new mortgage purchases to be allocated for the HTF. The HTF funding is distributed to states based on a formula that weighs various factors concerning the supply of extremely low- and very low-income housing units. HTF funds are used to ensure the availability of rental housing and increase the homeownership rate for certain low-income families. According to HUD policy, HTF funds are required to benefit extremely low-income households, with not less than 80 percent of funding used for rental housing, not more than 10 percent of funding used for homeownership housing, and not more than 10 percent of funding used for administrative costs. The department received approximately $3.738 million, $5.599 million, and $7.727 million in HTF funds in Federal Fiscal Years 2016, 2017, and 2018, respectively. In response to a



27

Fiscal Year 2019 OLS Discussion Point, the department stated that HTF funding is used to support affordable housing projects that serve extremely low-income households (i.e., those earning 30 percent or less of the area median income) and households with special needs. In addition, the department stated that it provides a funding priority for projects located in “areas of high opportunity.” The department also reported that project-based housing vouchers will be committed to projects that receive HTF funding.

Question: Please explain how New Jersey’s allocation of HTF monies was distributed in State Fiscal Year 2019. Please indicate the grantee, awarded amount, and project description of each recipient of Federal Fiscal Year 2017 HTF funds. How does the department define an “area of high opportunity” for the purposes of HTF priority funding? Please list the municipality in which each project receiving HTF funding is located.

Question: Has the department updated its HTF Allocation Plan? If so, please provide an updated copy. When is the department required to commit and expend, respectively, the Federal Fiscal Year 2018 allocation of HFT funds? Has the department received any notification from HUD regarding its Federal Fiscal Year 2019 HTF allocation?

Please see the chart below showing the grantee, awarded amount, project and municipality for HTF funding:

Federal Fiscal Year Allocation

Grantee Awarded Amount

Project HTF Units

Total Units

Municipality

2017

The Sierra House, Inc.

$360,023 Sierra House Affordable Housing

2 2 East Orange

2017 Ocean, Inc. $673,271 Tuckers Walk 4 4 Tuckerton

2016/2017 LUA Homes, LLP $684,755 Broad Street Cottages

2 2 Newark

2017 Reformed Church of Highland Park Affordable Housing Corporation

$700,000 Highland Park Housing the Homeless

4 4 Highland Park



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2017 Coming Home of Middlesex County Inc.

$700,000 Homes for the Homeless and Re-Entry Population of Middlesex County

4 4 Woodbridge

DCA’s HTF Allocation Plan defines “area of high opportunity” based on the following criteria:

Low municipal poverty level

Municipality does not receive State Urban Aid

Accessible transportation located within one mile of project site

Low municipal labor force unemployment rate DCA has not updated the HTF Allocation Plan. DCA is required to commit its FFY18 allocation of HTF funds by September 12, 2020 and to expend the funds by September 12, 2025. DCA anticipates a FFY19 allocation of $6,968,067. 16. As authorized under Section 8 of the United States Housing Act of 1937 (42 U.S.C. s.1437f), the United States Department of Housing and Urban Development (“HUD”) funds and administers the Housing Choice Voucher (“HCV”) program. The HCV program provides rental assistance for eligible lower-income households and is often referred to as “Section 8.”

Under the HCV program, rental assistance is provided primarily through: (1) tenant-based vouchers, which provide rental subsidies to eligible households who secure housing on the private market; and (2) project-based vouchers, which provide rental subsidies to private property owners who dedicate certain rental units for eligible households. Federal law also permits local administrators of the HCV program to provide homeownership assistance to eligible first-time homebuyers. Housing Choice Vouchers are awarded and administered by State and local public housing authorities, which rely on HUD funding to support the costs of housing assistance payments and program administration. For the purposes of the HCV program, the department serves as the public housing authority for State residents not residing within the jurisdiction of a local public housing authority. Policies and procedures concerning the department’s administration of the HCV program are set forth in the “Housing Choice Voucher Program: Administrative Plan,” which is available on the website of the Division of Housing and Community Resources. From December 22, 2018, to January 25, 2019, the United States federal government experienced the longest government shutdown in national history. During this time, Congress failed to provide Federal Fiscal Year 2019 funding for several federal agencies, including HUD. As a result, State and local public housing authorities did not receive funding to support the HCV program during the 35-day federal government shutdown.



29

Question: Please provide a Fiscal Year 2019 and projected Fiscal Year 2020 spending plan for the HCV program, specifying administrative costs, tenant-based vouchers (number of vouchers and amount expended, by fiscal quarter), project-based vouchers (including number of projects, units per project, and amount expended, by fiscal quarter), and homeownership assistance (number of recipients and amount expended, by fiscal quarter).

Question: How did the federal government shutdown impact the provision of rental assistance through the HCV program? Please explain how the department financially supported the HCV program during the federal government shutdown. How long could the department have supported the provision of tenant-based and project-based assistance, respectively, without additional federal funding? Will the department take any actions to mitigate the effects of a future federal government shutdown on the HCV program? If so, please explain.

Please see below for SFY2019 and SFY2020 Spending Plans. Administrative costs average $1,688,352 per month.

FY2019 Spending Plan

Q1 Q2 Q3 Q4 Category Vouchers

or Recipients

Amount Expended

Vouchers or Recipients

Amount Expended


Amount Expended


Amount Expended

Total Amount Expended

Tenant-Based Vouchers

20,468 $55,574,128 20,711 $56,367,779 21,000 $57,299,013 21,070 $56,903,111 $226,144,031

Project-Based Vouchers

1,983 $1,478,961 2,054 $1,531,914 2,159 $1,610,225 2,159 $1,610,225 $6,231,325

Homeownership 264 $251,678 264 $253,227 265 $253,730 265 $253,730

$1,012,365

22,715 23,029 23,424 23,494 $233,387,721



30

FY2020 Spending Plan

Q1 Q2 Q3 Q4 Category Voucher

s or Recipients

Amount Expended


Amount Expended


Amount Expended


Amount Expended

Total Amount Expended

Tenant-Based Vouchers

21,096 $57,727,532

20,866 $57,313,541

20,746 $57,211,169

20,731 $57,207,826

$229,460,068

Project-Based Vouchers

2,200 $1,640,804

2,300 $1,715,386

2,400 $1,789,968

2,400 $1,789,968

$6,945,126

Homeownership

265

$235,730 295 $262,416 315 $280,206 330 $293,549 $1,071,901

23561

23461 23461 23461 $237,477,095

DCA’s Housing Choice Voucher Program was not affected by the federal shutdown – DCA made all rent payments on time. HUD advanced funds for two months to DCA based on previous months Housing Assistance Payment allocations. Due to DCA’s diligence in updating its voucher and fiscal records with HUD, DCA received sufficient disbursements to cover rent payments in a timely fashion during the shutdown. In addition, HUD authorized public housing authorities to access their HUD-held reserves if needed during the shutdown. DCA would have had sufficient funds to support the Housing Assistance Payment obligations through April 2019 without additional advance disbursements from HUD. To mitigate potential impacts from future shutdowns, DCA will continue to update its voucher and expenditure information through HUD’s system in a timely fashion. 17. P.L.2004, c.140 (C.52:27D-287.1 et al.) established the State Rental Assistance Program (“SRAP”) to provide tenant-based and project-based rental assistance grants to low-income households. The program is modeled on the federal Housing Choice Voucher program. Pursuant to N.J.A.C.5:42-1.1 et seq., tenant-based rental assistance grants are awarded through a lottery process to applicants who do not currently hold a Housing Choice Voucher. SRAP also offers project-based rental assistance to support the construction and rehabilitation of affordable housing units. State regulations also set forth the following requirements concerning the distribution of SRAP rental assistance: (1) not less than 35 percent of assistance grants are reserved for households on the SRAP waiting list; (2) not less than $7.5 million in grants is reserved for senior citizens aged 62 years or older; (3) not less than 22 percent of assistance grants are reserved for homeless families with children, graduates of transitional housing programs, and certain other households receiving temporary housing assistance (“homeless and at-risk households”); (4) not less than 17 percent of program funding is required to be in the form of project-based assistance; and (5) not less than 10 percent of SRAP vouchers are reserved for certain persons with disabilities (N.J.A.C.5:42-1.1). The proposed Fiscal Year 2020 Budget recommends an appropriation of $18.5 million for SRAP, which would be payable from the monies received by the department as revenue from the New Jersey Housing and Mortgage Finance Agency. A language provision in the proposed Fiscal



31

Year 2020 budget would also appropriate not less than $20 million in additional SRAP funding from the New Jersey Affordable Housing Trust Fund. The proposed budget also includes a language provision allowing the transfer of up to $2 million in SRAP funds to the Division of Mental Health and Addiction Services (“DMHAS”) in the Department of Human Services to assist clients supported by the housing assistance component of the federal Social Services Block Grant that was provided to New Jersey. In response to a Fiscal Year 2019 OLS Discussion Point, the department indicated that SRAP expenditures totaled $40,582,164 in Fiscal Year 2018. Additionally, the department anticipated $45,244,692 in total SRAP expenditures in Fiscal Year 2019, including approximately $36.9 million in tenant-based assistance (82 percent), $7.7 million in project-based assistance (17 percent), and $1.5 million in administrative costs (3 percent).

Question: Please provide an updated Fiscal Year 2019 spending plan and a projected Fiscal Year 2020 spending plan for the State Rental Assistance Program, specifying administrative costs, tenant-based vouchers (number and amount by fiscal quarter), and project-based vouchers (including number of projects, units per project, and amount by fiscal quarter). How much State funding will be available in Fiscal Year 2019 and Fiscal

Year 2020 for SRAP, and from what sources? How many households are currently on the SRAP waiting list?

Question: How many SRAP tenant-based vouchers and project-based vouchers, respectively, were provided in Fiscal Year 2019 to assist (1) households previously on the SRAP waiting list; (2) senior citizens; (3) homeless and at-risk households; and (4) persons with disabilities, respectively? What amount of SRAP assistance was expended in Fiscal

Year 2019 to assist each category of recipients? How many tenant-based and project-based vouchers, respectively, will be provided in Fiscal Year 2020 to assist each category of recipients, and in what amounts?

To date 52 tenant-based vouchers were issued to homeless households through the Housing First for People with Opioid Addictions Initiative. This figure is projected to increase to 120 households by June 30, 2019. In addition, 10 tenant-based vouchers were issued to veterans and 36 disabled households received project-based assistance. Please see the chart below for sources for SRAP:

Qtr 3 Qtr 4

Category

# of

Vouchers Amount # of Vouchers Amount

# of

Vouchers Amount # of Vouchers Amount

Projected

Spending

Tenant-Based 3,029 8,087,430$ 2,999 8,007,330$ 2,969 7,927,230$ 3,007 8,028,690$ 32,050,680$

Project-Based 939 1,890,207$ 939 1,890,207$ 975 1,962,675$ 975 1,962,675$ 7,705,764$ Attrition

(approximately 4%

per year) (30) (80,100)$ (30) (80,100)$ (30) (80,100)$ (30) (80,100)$ (320,400)$

Subtotal 3,938 9,897,537$ 3,908 9,817,437$ 3,914 9,809,805$ 3,952 9,911,265$ 39,436,044$

Administrative 375,000$ 375,000$ 375,000$ 375,000$ 1,500,000$

Total 3,938 10,272,537$ 3,908 10,192,437$ 3,914 10,184,805$ 3,952 10,286,265$ 40,936,044$

Quarter 4: An additional 68 Opioid vouchers w ill be added

Assumes $671 HAP for PBA and $890 HAP for TBRA

FY 2019 SRAP Spending Plan

Qtr 1 Qtr 2



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Fiscal 2019 Amount

Grant-in-Aid Appropriation

$ 18,500,000

Affordable Housing Trust Fund

$ 20,000,000

SRAP Re-appropriation $ 2,726,622

Total $ 41,226,622

FY 2020 SRAP Spending Plan

Qtr 1 Qtr 2

Qtr 3 Qtr 4

Category # of

Vouchers Amount # of



Vouchers Amount Projected Spending

Tenant-Based 3,107 $ 8,295,690

3,236

$ 8,640,120 3,355

$ 8,957,850

3,474

$ 9,275,580 $ 35,169,240

Project-Based 975 $ 1,962,675

975

$ 1,962,675 975

$ 1,962,675

975

$ 1,962,675 $ 7,850,700

Attrition (approximately 4% per year) (30)

$ (80,100)

(30)

$ (80,100) (30) $ (80,100)

(30)

$ (80,100) $ (320,400)

Subtotal 4,039 $ 10,143,555

4,168

$ 10,487,985 4,287

$ 10,805,715

4,406

$ 11,123,445 $ 42,560,700

Administrative $ 375,000

$ 375,000

$ 375,000

$ 375,000 $ 1,500,000

Total 4,039

$

10,518,555

4,168

$

10,862,985 4,287

$

11,180,715

4,406

$

11,498,445 $ 44,060,700

Quarter 2: An additional 10 veteran's vouchers will be added

Assumes $671 HAP for PBA and $890 HAP for TBRA



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Please see below for a breakdown of FY19 SRAP tenants by segment. Please note that the Family Waiting List segment does not reflect all households who originally entered the program by being selected from the Family waiting list. If at the time of voucher issuance, or any time thereafter while in the program, a household indicates that the head of household has a disability or is a senior, that household is moved to the Disabled or Senior segments of the program. Because households headed by a person who is a senior or disabled pay a smaller proportion of their income toward rent than non-disabled or non-senior households, DCA must include them in the current appropriate segment.

Tenant-Based

Category Number of Households

Waiting List 136

Seniors 552

Homeless/At Risk 938

Disabled 1,381

Total 3,007

Project-Based

Homeless/At-Risk 379

Elderly/Disabled 596

Total 975

18. The department administers various programs that provide housing assistance to veterans, including the State Rental Assistance Program (“SRAP”), the Housing Choice Voucher (“HCV”) program, and the New Jersey Housing Assistance for Veterans pilot program. Pursuant to section 1 of P.L.2004, c.140 (C.52:27D-287.1), the State is required to reserve a portion of SRAP funding for tenant-based rental assistance to veterans. State regulations also provide preferences for homeless veterans and low-income veterans who apply for SRAP tenant-based rental assistance (N.J.A.C.5:42-2.1). In response to a Fiscal Year 2019 OLS Discussion Point, the department stated that it also supports veterans through the award of project-based Housing Choice Vouchers and the administration of the Veterans Affairs Supportive Housing (“VASH”) program. The department anticipated leasing 273 project-based vouchers for veterans in Fiscal Year 2019. The department also reported that it provided 51 veteran households leaving the VASH program with Housing Choice Vouchers. Additionally, the State enacted the “New Jersey Housing Assistance for Veterans Act,” (“act”) P.L.2017, c.258 (C.52:27D-516 et seq.) in January 2018. The act established a five-year pilot program under which grants are to be awarded to qualified charitable organizations to help modify and rehabilitate the primary residences of disabled and low-income veterans. The act appropriated $5 million to support the pilot program and required $1 million in grants to be annually awarded to qualified charitable organizations.



34

A language provision in the Fiscal Year 2019 Appropriations Act authorized the unexpended balance of the original $5 million appropriation to be carried forward to fund the pilot program. In response to a Fiscal Year 2019 OLS Discussion Point, the department stated that it anticipated awarding $1 million in program grants by the end of Fiscal Year 2019. As of April 4, 2019, the department has yet to expend any monies toward the pilot program. A language provision in the proposed Fiscal year 2020 Budget would continue to carry forward the unexpended balance of the $5 million appropriation.

Question: How many SRAP tenant-based vouchers and project-based vouchers, respectively, were provided in Fiscal Year 2019 to assist veteran households? What total amount of SRAP assistance supported veteran households in Fiscal Year 2019? What portion of SRAP funding was reserved for tenant-based rental assistance to veterans in Fiscal Year 2019? What amount of funding will be reserved for this demographic in Fiscal Year 2020?

Question: How many HCV tenant-based vouchers and project-based vouchers, respectively, were provided in Fiscal Year 2019 to assist veteran households? What amount of HCV assistance supported veteran households in Fiscal Year 2019? How many veterans received assistance through the VASH program in Fiscal Year 2019, and in what amounts?

Question: Please provide an update regarding the status of the New Jersey Housing Assistance for Veterans pilot program. When does the department expect to award the first round of pilot program grants? How many veteran households will be served by the pilot program during the first year of operations?

In FY 2019, 121 veteran households received SRAP tenant-based rental assistance and 9 veteran households received project-based assistance, in an amount totaling $1.37 million. DCA does not reserve a specific set-aside for veteran households in the SRAP program, but prioritizes veteran households when issuing new vouchers. DCA administers an allocation of 922 Veterans Administration Supportive Housing (VASH) vouchers within its Housing Choice Voucher Program. Currently, 701 of these vouchers are leased, an additional 94 veteran households are in housing search, and we are awaiting 127 referrals from the Veterans Administration and providers for existing vacancies. DCA has implemented a priority preference for veteran households in its Housing Choice Voucher program, and in the most recent waiting list opening, 2,263 veteran households were placed on the waiting list due to this preference, representing 15% of the waiting list. Regulations for the NJ Housing Assistance for Veterans pilot program will be published within the next 90 days. DCA anticipates making the first round of grants in the second quarter of FY2020, to serve 25 veteran households. 19. The New Jersey Housing and Mortgage Finance Agency (“NJHMFA”) received approximately $415.5 million in aid from the federal Hardest Hit Fund, which was created by the United States Department of Treasury in 2010 to provide targeted support to areas hit hardest by



35

the economic recession and housing market downturn. Federal monies were allocated through five rounds of funding to a total of 18 states, including New Jersey, and the District of Columbia. The NJHMFA uses Hardest Hit Fund monies to administer the Home Keeper, Home Saver, and Home Seeker Down Payment Assistance (“Home Seeker DPA”) programs. The Home Keeper Program provides reinstatement and monthly mortgage payment assistance to eligible homeowners who are at risk of foreclosure because of a qualified financial hardship. In response to a Fiscal Year 2019 OLS Discussion Point, the department reported that it suspended the program in December 2017 and had yet to resume taking applications. The Home Saver Program provides principal reductions and reinstatement payment assistance to eligible homeowners, who seek to refinance or modify a first-time mortgage, and are at risk of foreclosure because of a qualified financial hardship. The department indicated in response to a Fiscal Year 2019 OLS Discussion Point that 381 of 2,896 applicants were approved for the program in Calendar Year 2017. According to its website, the NJHMFA suspended applications for the Home Saver program as of December 31, 2018. The Home Seeker DPA program provides interest-free loans to eligible homebuyers who purchase a home in one of the eight counties most impacted by the foreclosure crisis (i.e., Atlantic, Burlington, Camden, Essex, Gloucester, Mercer, Passaic, and Union). In response to a Fiscal Year 2019 OLS Discussion Point, the department anticipated that the program would assist 1,270 homebuyers in Calendar Year 2018 for a total of $12.7 million and 1,000 homebuyers in Calendar Year 2019 for a total of $10 million.

According to information from the United States Department of Treasury, the three programs collectively provided $330.8 million in assistance to approximately 9,500 homeowners as of September 30, 2018. The United States Department of Treasury also reported that the State reallocated program funds from the Home Keeper program towards the Home Saver and DPA programs during the third quarter of Calendar Year 2018.

Question: Please provide Calendar Year 2018 spending information for the Home Keeper, Home Saver, and Home Seeker DPA programs, respectively. How many homeowners were assisted by each program in Calendar Year 2018, and in what amounts? How many homeowners will be assisted by each program in Calendar Year 2019, and in what amounts?

Question: Has the NJHMFA resumed accepting applications for the Home Keeper and Home Saver programs? Please indicate the number of applicants in Calendar Year 2018 for the Home Keeper, Home Saver, and Home Seeker DPA programs, respectively? How many applicants were approved for each program in Calendar Year 2018?

Question: What amount of funding is currently allocated to the Home Keeper, Home Saver, and Home Seeker DPA programs, respectively? How much was expended on administrative costs in Calendar Year 2018 to support the programs? What amount of funding was reallocated from the Home Keeper program to the Home Saver and Home Seeker DPA programs in Calendar Year 2018? Please explain why these funds were reallocated. When does the NJHMFA expect to fully disburse funding for each program?



36

The HomeKeeper Program provided reinstatement and monthly mortgage payment assistance to

eligible homeowners who were at risk of foreclosure as a result of a qualified financial hardship

such as death of a household earner or serious medical condition. The HomeKeeper program

closed at the end of 2017. 495 pending applications from 2017 were approved and funded in

early 2018 for $24,422,873. NJHMFA did not resume accepting applications for HomeKeeper.

The HomeSaver Program provides principal reductions and reinstatement payment assistance to

eligible homeowner who seek to refinance or modify a first-time mortgage and are at risk of

foreclosure as a result of a qualified financial hardship. NJHMFA resumed accepting applications

on 4/1/2018 for the HomeSaver program and received 1,717 applications for the program. 258

were approved for a total of $12,280,711. The HomeSaver program was closed to new applicants

on December 31, 2018. In 2019, NJHMFA has assisted 64 homeowners with $3,042,652 as of

3/31/19, and projects to assist another 27 homeowners for an additional $1,235,000. NJHMFA is

completing review of the last pending applications and expects the review to be completed in May,

2019.

Federal regulations controlled HomeKeeper and HomeSaver approvals. In HomeSaver, the

regulations required that the existing lender agreed to recast or modify the borrower’s current loan.

Unfortunately, loans secured through FHA and Ginnie Mae were prevented by regulations from

being recast. Additionally, the US Treasury mandated loan-to-value ratios were often too low, and

housing debt-to-income ratio too high for many households to qualify for the program. Also, a

majority of applicants lacked a stable income. Thus, even with assistance, the applicant would not

be able to maintain a recast mortgage.

HomeKeeper approval rates were around 46%. HomeKeeper was designed to assist homeowners

dealing with unemployment and under- employment and therefore did not have the same income

and employment restrictions as HomeSaver. The goal of the program was to assist with mortgage

payments until the homeowner found employment and was able to resume making their mortgage

payments. Most lenders were willing to accept the HomeKeeper payments, unless the homeowner

was already very far down the foreclosure path. There was less of a lender participation

requirement, and as there was no modification component, the lender merely needed to accept the

payments. The program was intended to primarily serve homeowners experiencing a temporary

loss of income. NJHMFA is not in a position to reopen either program.

The Home Seeker down payment assistance program provides interest-free, forgivable second

mortgage loans to eligible homebuyers who purchase a home in one of the eight counties most

impacted by the foreclosure crisis (i.e., Atlantic, Burlington, Camden, Essex, Gloucester, Mercer,

Passaic, and Union). NJHMFA received 1,621 applications for the HomeSeeker program in 2018

and funded a total of 1,067 HomeSeeker loans in 2018, for $11,966,000. HMFA anticipates

funding 1500 HomeSeeker DPA loans in 2019, for a total assistance amount of $15,000,000.

In calendar year 2018, $20 million was reallocated from the HomeKeeper program to the Home Saver and HomeSeeker programs. Funds were reallocated from HomeKeeper because the primary need for this program diminished in recent years due to the improving economy and lower unemployment. This program was designed to help homeowners who were unemployed or underemployed with a temporary loss of income. US Treasury approved the reallocation of these funds in early 2018. HMFA has a total of $27.6 million of program funds available. HMFA plans to



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spend up to $1.5 million to close out HomeSaver, and the remaining $26.1 on HomeSeeker over 2019 and 2020. $4.3 million was spent on administrative costs in Calendar Year 2018 to support the programs. HMFA anticipates that HomeSeeker applications will be accepted through third quarter of 2020 with funds fully disbursed by the end of 2020. 20. Since Fiscal Year 2017, the State has annually appropriated $10 million for the Lead-Safe Home Renovation Pilot Program. The program was created to identify and remediate lead-based paint hazards in the homes of eligible low- and moderate-income households. The department stated in response to a Fiscal Year 2019 OLS Discussion Point that 176 housing units had been remediated through the Lead-Safe Home Renovation Pilot Program and that 507 housing units were expected to be remediated by October 31, 2018. In response to a Fiscal Year 2019 OLS Discussion Point, the department also stated that it was “in the process of evaluating the current program for efficiencies, effectiveness, and ways to incorporate best practices” and that it had “not awarded the latest [Fiscal Year 2018] allocation of Lead-Safe Home grants.” In Fiscal Year 2018, $200,000 of the $10 million appropriation for the Lead-Safe Home Renovation Pilot Program was transferred to the Division of Family Health Services in the Department of Health to fund blood-lead testing for children. The remaining appropriation of $9.8 million reverted to the General Fund at the close of Fiscal Year 2018. Additionally, a language provision in the Fiscal Year 2019 Appropriations Act authorizes the transfer of Lead-Safe Home Renovation Pilot Program funds to: (1) the Revolving Housing Development and Demonstration Grant Fund for the purpose of remediating lead in dwelling units throughout the State; and (2) the Division of Family Health Services in the Department of Health for the purposes of child blood-lead testing. In Fiscal Year 2019, the entire $10 million appropriation for the Lead-Safe Home Renovation Pilot Program was transferred to support these purposes. According to the New Jersey Comprehensive Financial System, $9.4 million was transferred to the Revolving Housing Development and Demonstration Grant Fund. The proposed Fiscal Year 2020 Budget recommends continued funding of $10 million for the Lead-Safe Home Renovation Pilot Program.

Question: How many homes were remediated of lead hazards using Lead-Safe Home Renovation Pilot Program funds, including those amounts transferred to the Revolving Housing Development and Demonstration Grant Fund in Fiscal Year 2019? What was the average cost of remediation for each housing unit? Please explain why the department did not expend the Fiscal Year 2018 allocation of funding.

Question: What conclusions did the department reach after evaluating the Lead-Safe Home Renovation Pilot Program for efficiencies, effectiveness, and ways to incorporate best practices? How does the department intend to expend the recommended Fiscal Year 2020 appropriation of $10 million?

The Lead Safe Home Remediation Pilot program remediated 403 homes and abated 52 homes, with an average cost per unit of $6,230 for direct remediation work and $14,436 for direct abatement work (these averages do not include administrative or program support costs). The



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program is highly technical and required significant preparation and training in order for the non-profit grantees to learn the program and institute procedures to ensure the program’s efficiency and effectiveness. Providers struggled to recruit participants for remediation and took more than the originally allotted grant period to expend FY17 funds. While other health hazards, such as mold, are visually evident to households, and while households that receive abatement orders from local public health departments must abate lead hazards, households with children whose blood levels do not mandate abatement can be difficult to engage in the program. Many households indicate a preference for abatement to remove the lead hazard permanently, rather than remediation. Based on the experience in the initial Lead Safe Home Remediation Pilot, DCA has determined that a program addressing the needs of families whose children have elevated blood levels would have had greater impact. Therefore, DCA has determined that the best course is to move from a model of interim controls (lead remediation) to a more lasting solution for the elimination of lead-based paint hazards through lead abatement. Abatement allows the program to address the needs of families with the greatest and most urgent need – those families with children whose elevated blood levels trigger an abatement order. Once an abatement order is issued, interim controls cannot be used to address the lead hazard. Thus, those families who are at greatest risk were not the focus of the Lead Safe Home Remediation Pilot. By repurposing this program on the abatement of lead hazards in the home, families at greatest risk can be served. While shifting the focus from lead remediation to lead abatement will result in a higher per unit cost, our experience with the pilot indicates that the program will have a much greater impact. The costlier expense to the public of health care, is largely avoided. In addition, although the average direct cost of remediation is less than half of the direct cost of abatement experienced in the Lead Safe Home pilot, administrative and program support costs reported by agencies in the program are not included. Those expenses bring the average price of remediation closer to $12,000 per unit, nearly the cost of abatement. Municipalities already have much of the organizational infrastructure required to carry out an abatement program, as well as a pool of potential applicants with abatement orders. For those and other reasons, DCA will also shift the program’ s local operations to municipalities and counties. We anticipate that the administrative and program costs associated with abatement will be lower than those seen with the remediation projects in the pilot. Additionally, DCA anticipates a long-term savings as units addressed with interim controls may require additional remediation over the long term, while abatement will permanently remove the lead hazard. While DCA appreciates the effort and hard work of the grantees in the Lead Safe Home pilot, redirecting this program to provide abatement through municipal and county awards will best achieve the long-term goal of the program: reducing the number of children who will have to live with chronic lead-based health problems and reducing the number of homes that contain lead-based paint hazards. DCA has redirected FY2019 funding to public health departments, as they are the primary evaluation, assessment and enforcement agencies for lead abatement. The program will focus on municipalities that have the highest incidence of children with elevated lead blood level (EBL). Local health departments receive lists of children with EBL from primary care physicians and send lead evaluators to assess the residences of those children. If the evaluation indicates that the child has been exposed to lead hazards in the home, the health department will issue an abatement order and subsequent fines to ensure that the lead hazards are removed. The severity of the hazards and the subsequent enforcement actions create the imperative for homeowners and landlords. The anticipated advantages of providing funding directly to health departments are that they have close relationships with the community, have in-house certified lead evaluators, and an



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applicant pool of willing participants who have a pressing need for the program, addressing the programmatic issues that challenged the remediation program. DCA plans to utilize the abatement model in allocating the FY2020 funding, awarding funds through local public health departments. 21. The “Urban and Rural Centers Unsafe Buildings Demolition Bond Act,” (“act”) P.L.1997, c.125, authorized the issuance of bonds, in the amount of $20 million, to finance the demolition and disposal of unsafe buildings in urban and rural areas. The proceeds from the bond issuance are held in the Urban and Rural Centers Unsafe Buildings Demolition Bond Fund (“Demolition Bond Fund”). Monies held in the Demolition Bond Fund may only be loaned to municipalities for the purposes of demolition projects through specific appropriations by the Legislature. The act requires the Commissioner of Community Affairs to establish criteria for approving eligible loans. The department uses the following priority list when awarding project funds: (1) projects in which the demolition of an unsafe building is necessary for the construction of certain new buildings; (2) projects addressing unsafe buildings located in redevelopment areas that do not pose an imminent and extreme hazard; and (3) projects addressing unsafe buildings not located in redevelopment areas, subject to certain conditions. Municipalities that are eligible to receive State aid under P.L.1977, c.260 (C.52:27D-162 et seq.) or P.L.1978, c.14 (C.52:27D-178 et seq.) may qualify for a project loan. In 2011, the State enacted P.L.2011, c.229, which appropriated $7,403,340 from the Demolition Bond Fund to provide funding under the act. In response to a Fiscal Year 2019 OLS Discussion Point, the department indicated that with the exception of the City of Orange Township, all demolition projects funded through P.L.2011, c.229 were completed. The table below lists those municipalities that received funding pursuant to P.L.2011, c.229, as provided by the department in Fiscal Year 2018.

Municipality Original Loan Award

Adjusted Loan Award

Total Reimbursement

Loan Balance Buildings Demolished

Camden $2,000,000 -- $2,000,000 $0 124

Irvington $923,240 $841,294.27 $841,294.27 $0 42

Millville $60,000 -- $60,000 $0 4

Orange Twp. $325,000 -- $303,549 $21,451 14

Pleasantville $174,000 -- $174,000 $0 4

Vineland $100,000 $96,650 $96,650 $0 4

Totals $3,582,240 $3,496,944.27 $3,475,493.27 $21,451 192

Additionally, a language provision in the Fiscal Year 2017 Appropriations Act, P.L.2016, c.10, allocated $9,950,522.53 from the Demolition Bond Fund for demolition and disposal projects in 12 municipalities; however, according to the department, Pemberton Township withdrew from the program in September 2016. In response to a Fiscal Year 2019 OLS Discussion Point, the department indicated that 190 buildings are anticipated to be demolished through this round of funding. The department provided the following table explaining each of these projects.

Municipality Loan Award Eligible Buildings

Total Reimbursement

Loan Balance Buildings Demolished

Brick $300,000 6 $87,600 $212,400 1



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Camden $3,000,000 22 $1,594,688.76 $1,405,311.24 9

Glassboro $1,499,000 33 $1,158,034.51 $340,965.49 31

Gloucester City $856,329.53 3 $0 $856,329.53 0

Hillside $105,000 3 $0 $105,000 0

Irvington $600,000 55 $0 $600,000 0

Paterson $1,987,343 24 $0 $1,987,343 0

Pleasantville $289,850 12 $140,668.30 $149,181.70 12

Salem $250,000 19 $0 $250,000 0

Vineland $635,000 4 $0 $635,000 0

Winslow $168,000 9 $168,000 $0 9

Totals $9,950,522.53 190 $3,148,991.57 $6,541,530.96 62

Question: Please provide an update regarding the status of each municipal demolition project funded through P.L.2011, c.229. Please provide figures for the following: total reimbursements, loan balances, and buildings demolished by Orange Township.

Question: Please provide an update regarding the status of each municipal

demolition project funded through the Fiscal Year 2017 Appropriations Act, P.L.2016, c.10. What is the total amount expended, by municipality, for the demolition of unsafe buildings? How many buildings have been demolished? What is the amount of total reimbursements and loan award balances for each municipality? When the appropriations authorized by P.L.2011, c.229 and P.L.2016, c.10 are taken into account, what is the amount remaining in the Demolition Bond Fund for the demolition of unsafe buildings?

The chart below provides a status update for the eligible municipalities that received an award of funds under P.L. 2011, c. 229, Round 4 of the Demolition Bond Loan Program, and reflects participating municipalities only.

Amount of Loan Award

Amended Loan Award1

Total Reimbursement

Loan Award Balance

Buildings Demolished2 Municipality

Camden $2,000,000.00 -- $2,000,000.00 $0.00 124

Irvington $923,240.00 $841,294.27 $841,294.27 $0.00 42

Millville $60,000.00 -- $60,000.00 $0.00 4

Orange Twp.

$325,000.00 -- $303,549.00 $21,451.00 12

Pleasantville $174,000.00 -- $174,000.00 $0.00 4

Vineland $100,000.00 $96,650.00 $96,650.00 $0.00 4

Totals $3,582,240.00 $3,496,944.27 $3,475,493.27 $21,451.00 190

1 - Municipalities may request to reduce their loan awards. Upon receiving such a request, the

Department amends the contract to reduce the amount of the loan awards and adjusts the repayment schedule. The unused portion of funds is returned to the Demolition Bond Loan Fund. 2 - Numbers are based on reimbursements paid to date. Except for the City of Orange Township, all demolition projects funded through P.L. 2011, c. 229, are complete. The City of Orange Township has a remaining loan balance of $21,451.00. The



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City has remained in contact with the Department and is working to draw down the remaining funds under Round 4. To date, a total of $3,475,493.27 has been reimbursed across the six participating municipalities for the demolition of 190 buildings. Loan Repayments under this round of funding began October 2014 and will continue through November 2033. The chart below provides a status update for eligible municipalities that received an award of funds under P.L. 2016, c.10, Round 5 of the Demolition Bond Loan Program, and reflects participating municipalities only. Five of the 11 participating municipalities have submitted invoices to the Department for reimbursement. The Department works closely with municipalities through the reimbursement process under this Program and receives monthly reports from each municipality regarding the status of buildings eligible for demolition.

Municipality

Amount of Loan Award

Eligible Buildings

Total Reimbursement

Loan Award Balance

Buildings Demolished1

Brick $300,000.00 6 $87,600 $212,400.00 1

Camden $3,000,000.00 22 $2,342,916.64 $657,083.36 22

Glassboro $1,499,000.00 35 $1,185,767.69 $313,232.31 33

Gloucester $856,329.53 3 $431,809.63 $424,519.90 3

Hillside $105,000.00 3 $46,435.99 $58,564.01 1

Irvington $600,000.00 55 $407,633.35 $192,366.65 35

Paterson $1,987,343.00 24 $1,218,718.73 $768,624.27 2

Pleasantville $289,850.00 12 $140,668.30 $149,181.70 12

Salem $250,000.00 19 $0.00 $250,000.00 0

Vineland $635,000.00 4 $0.00 $635,000.00 0

Winslow $168,000.00 9 $168,000.00 $0.00 9

Totals $9,690,522.53 192 $6,029,550.33 $3,660,972.20 118

1 - Numbers are based on reimbursements paid to date

To date, the Department has reimbursed $6,029,550.33 across nine municipalities for the demolition of 118 buildings. It is anticipated that a total of 192 buildings will be demolished under this Round of funding. The chart shows the total amount reimbursed to each municipality under this Round to date. The total remaining loan balance is $3,660,972.20. The City of Salem has one pending reimbursement of $246,264.85 for the demolition of 10 buildings. Loan repayments under this Round began in July 2018 and continue through October 2037. As of April 15, 2019, there is a balance of $4,031,592.64 in the Demolition Bond Loan Fund for the demolition of unsafe buildings in future rounds. The Fund is replenished as participating municipalities repay their loans. Rounds of funding are announced when the fund is sufficient to



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support the anticipated applications, which has traditionally been a minimum amount of $5,000,000. 22. Since Fiscal Year 2016, the State has annually funded the New Jersey Re-Entry Corporation (“NJRC”) and Volunteers of America (“VOA”). Each organization provides specialized re-entry services, including housing, medical, and employment assistance, to individuals recently released from State correctional facilities. In Fiscal Year 2019, the State appropriated $8 million for the two organizations, including $4 million for the NJRC and $4 million for the VOA. The proposed Fiscal Year 2020 Budget recommends $9 million in re-entry service funding, including $5 million for the NJRC and $4 million for the VOA. Pursuant to a language provision in the Fiscal Year 2019 Annual Appropriations Act, the monies distributed to the NJRC were used to support continued one-stop offender re-entry services in Newark, Jersey City, Paterson, Toms River, and the counties of Bergen, Union, Middlesex, Somerset, and Monmouth. Likewise, VOA funding was used to provide expanded re-entry services in Atlantic City, Trenton, and the counties of Camden, Gloucester, Cumberland, and Salem. Language provisions in the proposed Fiscal Year 2020 Budget would continue to dedicate NJRC and VOA funding to these designated areas. In response to a Fiscal Year 2019 OLS Discussion Point, the department provided the following estimates concerning the funding allocations and assistance totals of each re-entry service location managed by the NJRC and VOA, respectively, in Fiscal Year 2018.

New Jersey Re-Entry Corporation (NJRC)

County Passaic Essex Hudson Ocean Bergen Middlesex/ Somerset

Union Monmouth

Fiscal Year 2018

Funding Amount

$751,934 $607,088 $322,984 $567,996 $466,437 $446,437 $410,687 $446,437

Persons Assisted

409 375 239 276 11 20 36 0

Volunteers of America (VOA)

Area Trenton / Mercer County

Atlantic City / Atlantic County

Camden County

Gloucester, Salem, and Cumberland Counties

Fiscal Year 2018

Funding Amount $1,000,000 $1,000,000 $1,000,000 $1,000,000

Persons Assisted 154 405 218 120

Question: Please provide an update concerning the Fiscal Year 2018 and Fiscal Year 2019 appropriations for the NJRC and VOA, respectively. How many people were assisted at each re-entry service location managed by each organization in Fiscal Year 2018 and Fiscal Year 2019, respectively? What amount of funding was allocated to each re-entry service location managed by each organization in Fiscal Year 2018 and Fiscal Year 2019, respectively? What amount of Fiscal Year 2020 funding will be allocated to each re-entry service location managed by each organization? What percentage of each grant does the department allow for grantee administrative costs? Are grantees required to track and report the recidivism rate of their clients? If so, please provide those results for each grantee.

Both NJRC and VOA have completely spent down their allocations for the FY18 grant cycle. DCA has issued $2,000,000 in advances to each agency from their FY19 allocation.



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Please note that the costs associated with the FY19 grant are estimated costs only. The Department anticipates that there will be a revision to the budget to reflect final and actual costs of each service location. Amount of FY18 funding that was allocated by NJRC to each of its service locations:

New Jersey Re-entry Corporation

Passaic: $442,869 Essex: $537,556 Hudson: $356,387 Ocean: $388,020

Bergen: $521,525 Middlesex/Somerset: $471,366

Union: $417,123 Monmouth: $416,517

Amount of FY19 funding that was allocated by NJRC to each of its service locations:

New Jersey Re-entry Corporation

Passaic: $428,255 Essex: $428,255 Hudson: $428,255 Ocean: $428,255

Bergen: $428,255 Middlesex/Somerset: $428,255

Union: $428,255 Monmouth: $428,255

Amount of FY18 funding that was allocated by VOA to each of its service locations:

Volunteers of America

Location Trenton Atlantic City Camden Tri-County (Gloucester, Salem, Cumberland)

Amount $858,244 $858,244 $858,244 $858,244

Amount of FY19 funding that was allocated by VOA to each of its service locations:


Location Trenton Atlantic City Camden Tri-County (Gloucester, Salem, Cumberland)

Amount $858,322 $858,322 $858,322 $858,322

Please see the chart below for information on people served at each agency’s sites. The FY18 data reflects the fact that the following NJRC sites opened during that fiscal year: Bergen in February 2018, Middlesex/Somerset in March 2018, Union in February 2018 and Monmouth in May 2018. The FY19 data includes numbers reported through the end of February 2019. How many people were served at each site:

New Jersey Re-entry

2018 Passaic: 539 Essex: 539 Hudson: 321 Ocean: 357

2018 Bergen: 73 Middlesex/Somerset: 93 Union: 88 Monmouth: 46

2019 Passaic: 374 Essex: 405 Hudson: 164 Ocean: 201

2019 Bergen: 131 Middlesex/Somerset: 171 Union: 171 Monmouth: 209



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2018 Atlantic City: 593 Trenton: 220 Camden: 357 Tri-County: 226

2019 Atlantic City: 226 Trenton: 141 Camden: 200 Tri-County: 193

DCA does not maintain a threshold for administrative costs for these grants. The chart below shows the administrative costs for the FY2018 grants and the projected administrative costs for FY2019.

Actual and projected administrative costs for NJRC and VOA for FY18 and FY19 grant cycle

Agency FY Actual Administrative costs Percentage of total budget

NJRC 18 $448,593 11%

NJRC 19 $573,958 14%

VOA 18 $567,104 14%

VOA 19 $566,712 14%

An MOU was initially signed between DCA and Parole to run recidivism reports for both NJRC and VOA. Each entity was to provide the agreed upon data fields and Parole would run the information against its existing data base. This was done and DCA compiled the data into a report, which was completed in October 2017. The agreement will be continued so that an updated report can be produced. 23. As requested by the Governor, the Fiscal Year 2019 Appropriations Act restored $500,000 in funding for the Main Street New Jersey (“MSNJ”) program. Pursuant to P.L.2001, c.238 (C.52:27D-452 et seq.), the MSNJ program attempts to redevelop and revitalize local downtown districts by providing small business assistance to members of those communities, including business owners and entrepreneurs. Municipalities are selected for participation in the MSNJ program through a competitive application process. Eligible municipalities are required to have a defined downtown commercial district that contains historic architectural resources. Additionally, eligible municipalities are required to: (1) establish a voluntary board of directors; (2) develop public-private partnerships and a program operating budget that is determined by the Commissioner of Community Affairs to be adequate for not less than three years; and (3) commit to employing a full-time Executive Director for the program in certain cases (C.52:27D-454). Section 1 of P.L.2001, c.238 (C.52:27D-452) also requires the department to fulfill the following duties when implementing the MSNJ program: (1) employ a State Coordinator and staff to oversee the program; (2) enter into contracts with the National Main Street Center, and others, to accomplish the program’s objectives and provide technical assistance to local Main Street programs; (3) develop a plan, with the assistance of the MSNJ Advisory Board, describing the objectives of the program and detailing how the department will coordinate program activities; and (4) coordinate and cooperate with the public and private entities that provide services to municipalities undertaking projects under the program. According to the department, the Office of Local Planning Services administers the MSNJ program. In response to a Fiscal Year 2019 OLS Discussion Point, the department indicated that it expects to assist 20-30 designated MSNJ communities in Fiscal Year 2019. As of April 4, 2019, the department has only expended $1,010 of the amounts appropriated for the MSNJ program in Fiscal Year 2019. The proposed Fiscal Year 2020 Budget continues to recommend $500,000 in funding for the MSNJ program.



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Question: Please provide a Fiscal Year 2019 spending plan for the MSNJ program. hat accounts for the delayed expenditure of Fiscal Year 2019 funding? How many local downtown communities will receive assistance through the MSNJ program in Fiscal Year 2019, and in what forms? Does the department intend to revise the rules and regulations governing the MSNJ program? If so, please explain any notable changes to the

administration of the MSNJ program. How will Fiscal Year 2020 funding be allocated?

The MSNJ program expects to expend $141,200 for professional services provided by the National MainStreet Center’s Main Street America® for technical assistance and training workshops. The remaining funds will be awarded to designated MSNJ districts through operational and physical improvement grants. A great deal of planning went in to the development and promulgation of Main Street New Jersey regulations, which are anticipated to be published in the New Jersey Register for adoption on June 17, 2019. It is estimated that 18-22 previously designated MSNJ communities that have maintained their accreditation with the national organization, will start receiving technical assistance, and be eligible for grants immediately upon the publication of the adoption of regulations in June. The regulations provide a streamlined process for MSNJ applicant eligibility criteria. Districts formally designated as an MSNJ district that have maintained accreditation through the National Main Street Center’s Main Street America® program simply must execute a Letter of Agreement with the Department to be designated as an MSNJ community. In the interim, dozens of communities across the state have been receiving ongoing support and technical assistance from the MSNJ program during 2017-2018. In addition, the MSNJ program facilitated three regional workshops around the state (Montclair, Vineland and Red Bank) to kick-off the re-start of the MSNJ program. Representatives from over 75 municipalities attended the workshops.

In addition to the usual staff-driven and contracted technical assistance and training provided to designated communities, part of the FY19 and FY20 funding is dedicated to operational and physical improvement grants for designated MSNJ districts. While these grants include opportunities for local capacity-building, they are primarily focused on supporting short-term visible and tangible change in MSNJ districts specifically meant for enhancing the public realm (ex: amenities, art, gateways) and buildings that house small businesses – their facades and storefronts.

24. As requested by the Governor, the Fiscal Year 2019 Appropriations Act provided $2.5 million in funding for the Neighborhood Preservation Program (“NPP”), which operates pursuant to the “Maintenance of Viable Neighborhoods Act,” P.L.1975, c.248 (C.52:27D-142 et seq.) and “The Neighborhood Preservation Housing Rehabilitation Loan and Grant Act of 1975,” P.L.1975, c.249 (C.52:27D-152 et seq.). The NPP program provides financial and technical assistance to support the development of certain threatened but viable neighborhoods. The proposed Fiscal Year 2020 Budget recommends $2.5 million in funding for the NPP program. “The Neighborhood Preservation Housing Rehabilitation Loan and Grant Act of 1975” (“Housing Rehabilitation Act”) allows the department, as well as municipalities, to offer loans and grants to eligible entities to finance housing rehabilitation projects in areas that have been



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determined, by the governing body of the municipality, to be substandard or deteriorating. The Housing Rehabilitation Act also established the Neighborhood Preservation Loan and Grant Fund, which is a revolving fund administered by the department. Monies held in the fund may only be used to issue loans or grants supporting housing rehabilitation projects or associated administrative expenses. Similarly, the “Maintenance of Viable Neighborhoods Act” authorizes the department to issue grants to local government units that undertake measures to restore and rehabilitate certain declining, yet still viable, neighborhoods. Grants may be used to support: (1) intensive code enforcement in deteriorating areas; (2) grants and loans issued for privately owned properties pursuant to the Housing Rehabilitation Act; (3) rehabilitation or demolition projects; and (4) certain other activities related to the improvement of blighted areas. Both laws also require the Commissioner of Community Affairs to submit a spending plan with the department’s annual budget request, which details the anticipated expenditure of funds for each constituent program of the NPP. Under section 9 of P.L.1975, c.248 (C.52:27D-150) and section 5 of P.L.1975, c.249 (C.52:27D-156), each spending plan is required to include: (1) a performance evaluation of prior program expenditures; (2) a description of the programs to be supported in the upcoming year; (3) a copy of the regulations governing each program; and (4) an estimate of the planned expenditures in the upcoming year. In addition, the spending plan submitted pursuant to the Housing Rehabilitation Act is required to provide a complete financial statement on the status, to date, of the Neighborhood Preservation Loan and Grant Fund. In response to a Fiscal Year 2019 OLS Discussion Point, the department reported that it would provide approximately 20 grants, each in the amount of $125,000, to eligible municipalities in Fiscal Year 2019. The department also stated that it would use “data-driven approaches to target those threatened but viable neighborhoods where NPP investment will have the greatest impact.” As of April 10, 2019, the department has only expended approximately $10,500 of the $2.5 million appropriated for the NPP program in Fiscal Year 2019.

Question: What municipalities received or have been assured of assistance through the NPP program in Fiscal Year 2019, and in what amounts? What explains the absence of fiscal activity in Fiscal Year 2019? Please describe the eligible activities for which each grant is to be used. How many municipalities applied for assistance through the NPP program in Fiscal Year 2019? Please describe how the department determines where NPP investments will have the greatest impact on threatened but viable communities. Please explain the “data-driven approaches” that are used to target certain neighborhoods for NPP investment. What specific measures are used to quantify the impacts of NPP investments?

Question: Please provide the Fiscal Year 2020 spending plan for each constituent

program of the NPP, as required under P.L.1975, c.248 (C.52:27D-150) and P.L.1975, c.249 (C.52:27D-156), respectively. How many NPP grants does the department expect to award in Fiscal Year 2020? Why is another appropriation warranted in Fiscal Year 2020 given the apparent lack of fiscal activity this year? Does the department intend to make any changes to the NPP program in Fiscal Year 2020? If so, please explain.



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The Neighborhood Preservation Program conducted its last open-competitive funding round in 2008. The program ceased to exist for over a ten-year period until the program was restored in FY19 with $2.5 million in funding. Over the course of FY19, DCA has reoriented the program and revised its guidelines, aligning it with other DCA and state economic development and neighborhood revitalization programs, to maximize its effectiveness. The Department issued a Request for Proposals which will close on May 15. We anticipate that 25-30 municipalities will apply for funding and that we will make 18-19 awards in Summer 2019. NPP is a multi-year program, typically making a three-to-five-year funding commitment to an NPP grantee. First year awards are $125,000 covering an 18- month period (6 months of planning/training and 12 months for the program implementation). Subsequent funding levels of $100,000 per year are non-competitive and determined by DCA based on local program performance in achieving the goals in grantees’ locally- designed action plan. NPP funds can be used for a wide range of activities including: • Intensive code enforcement in deteriorating areas • Financial assistance in respect to rehabilitation of privately-owned properties • Rehabilitation or clearance, demolition and removal of buildings and improvements • Provision of appropriate public services in the neighborhood • Acquisition of blighted properties for rehabilitation • Sale, lease, or donation of rehabilitated blighted properties • Planning of neighborhood programs and establishment of resident/business organization • Administration of NPP activities The Department used the latest available data from the US Census Bureau and Division of Taxation to select eligible municipalities and neighborhoods that would meet the program’s statutory focus on “threatened, but viable” neighborhoods. To do this, the Department examined neighborhood walkability (through median block size, the proportion of workers walking to work, the job- to- population ratio, and population density), concentration of mixed-use blocks (any block with at least one residential lot and one commercial lot), housing vacancies, income levels, home values, jobs, and poverty levels. The data were incorporated into a series of formulas to identify “threatened, but viable” neighborhoods that show clear signs of decline since 2010, where NPP investments could have the most significant impact given their underlying strengths. The first-year grants will encumber approximately $2.4 million in FY19 funds. DCA will expend the balance of FY19 funds by hiring staff to administer the program for the State and provide initial technical assistance to the grantees. DCA anticipates that the Program will fund these FY19 grantees for four subsequent years a at $100,000 a year. As the program has already been re-envisioned and its guidelines and accompanying materials published, DCA is poised to make an additional round of grants quickly, as the foundational work for the program has been completed. DCA does not expect to make changes to the program in FY20. DCA anticipates issuing and awarding a new RFP for additional municipalities in the second quarter of FY20. 25. Pursuant to P.L.2001, c.415 (C.52:27D-490 et seq.), the department administers the Neighborhood Revitalization Tax Credit (“NRTC”) Program. The NRTC Program offers tax credits to business entities that provide approved financial assistance for nonprofit organizations that complete qualified projects, including housing and economic development activities, in certain distressed neighborhoods. The department awards NRTC funding to nonprofit organizations based



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on the submission of a Neighborhood Plan by each applicant. Under current law, the total amount of tax credits certified in any fiscal year may not exceed $10 million. Both the Fiscal Year 2019 and Fiscal Year 2020 budgets reflect a restructuring of the NRTC Program in which $15 million in tax credits would be certified; however, no amendment to the limit has yet been approved by the Legislature. In response to a Fiscal Year 2019 OLS Discussion Point, the department indicated that NRTC funding is targeted towards eligible neighborhoods that possess “sufficient assets to create momentum in fighting distress.” Accordingly, the department reported that it would refine its “Neighborhood Asset Score” to: (1) include a variety of assets that contribute to community success, including housing quality, educational facilities, community engagement, and other assets; and (2) incorporate a measure of the level of neighborhood distress to ensure that program funds target areas in need of investment. Regarding the process for approving Neighborhood Plans, the department also stated, “[t]he Neighborhood Plan process will incorporate the refined Neighborhood Asset Score, as well as thresholds for minimum levels of distress and of community assets and the presence of a strong community-based organization to drive the plan forward” (emphasis added).

Question: Please explain how the Neighborhood Asset Score is used in the approval of NRTC Neighborhood Plans. What was the Neighborhood Asset Score of each neighborhood that benefited from NRTC funding in Fiscal Year 2019? Please describe each factor that contributes to the calculation of the Neighborhood Asset Score. Is each factor weighted equally? If not, please provide the weighted value of each factor. Please

explain how the department incorporates a measure of the level of neighborhood distress into the Neighborhood Asset Score. What specific measures are used to quantify the level of neighborhood distress?

The Neighborhood Asset Score accounts for 17 points out of a maximum of 100 points for a NRTC project application. It was one component of eight that determined an applicant’s overall score. The Asset Score consists of the following:

a. Community assets (3 points) This point score was calculated by counting the assets listed by an applicant; adjusting the asset count for local population (using “assets per 10,000 persons”); adjusting transportation assets relative to county population density (to remove bias against neighborhoods in lower-population counties); recalculating the asset score based on its position relative to the average score for all applicants; and converting the recalculated asset score to a 0 to 3 point scale.

b. Housing value trend (2 points) –% change in neighborhood median home value since 2000 (as measured by the US Census Bureau in the Decennial Census and American Community Survey), converted to a 0 to 2 point scale.

c. Regional assets (2 points) –This score was calculated by counting the regional assets listed

by an applicant; adjusting the assets count for local population (using “assets per 10,000 persons”); recalculating the assets score based on its position relative to the average score for all applicants; and converting the recalculated assets score to a 0 to 2 point scale.



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d. Municipal revitalization priority (2 points) – Evidence that the municipality views the neighborhood as an area of focus (e.g. designation of “Area in Need of Redevelopment” or “Area in Need of Rehabilitation”) based on documentation provided by the applicant.

e. Effective community organization (3 points) – A listing of fully completed projects involving physical development (from any funding source) executed by the applicant organization within the boundaries of the NRTC neighborhood over the past five years. Applicants had to report the number of years they had been active in that neighborhood. Applicants were scored by the average number of successfully completed projects per year for the period that they have been active in the neighborhood. An applicant’s final score was based on its position relative to the average score for all applicants.

f. Community support and engagement (3 points) – A listing of community development meetings and community improvement events (e.g. clean-ups and trash removal; house exterior beautifications; community garden development or maintenance) with active resident participation within the past 12 months. Applicants were scored on the average number of community meetings and events with resident participation per 10,000 residents. An applicant’s final score was based on its position relative to the average score for all applicants.

g. Distress level (2 points) - Evidence that the neighborhood is sufficiently distressed to

require NRTC investment. Neighborhoods were scored on a distress index that consisted of median home value, median household income, unemployment rate, and the labor force participation rate, as measured by the US Census Bureau’s American Community Survey. The neighborhoods scoring in the top 10% of applicants received a score of 2. The neighborhoods in the bottom 10% received a score of zero. Other neighborhood scores were based on where they scored relative to the top and bottom 10%.

Question: How does the department define a minimum level of “distress” and “community assets”, respectively, for the purposes of approving a Neighborhood Plan? What is the minimum threshold for neighborhood distress and community assets, respectively? What metrics are used to determine each respective threshold?

The levels of distress and community assets will be determined using the same data and criteria used for evaluating an NRTC project application, as described in the response above. The minimum threshold will be a relative measure based on the position relative to the average for all applicants. Therefore, the exact threshold can only be determined once all neighborhood plan applications are received. 26. In May 2018, the State enacted P.L.2018, c.11 (C.54:4-66.6 et al.) authorizing local units (i.e., municipalities, counties, and school districts) to establish one or more charitable funds for certain public purposes. Under the law, a property taxpayer may contribute monies to a charitable fund in return for a property tax credit equal to 90 percent of the charitable contribution, subject to certain limitations. The monies contributed to each charitable fund would be received by the local unit and used to support the operations of the dedicated public purpose. In September 2018, the Division of Local Government Services (“division”) promulgated regulations to effectuate the purposes of the law (N.J.A.C.5:30-18.1 et seq.). Pursuant to



50

N.J.A.C.5:30-18.2, local units may establish charitable funds for the following public purposes: public safety, capital improvement, public works, public health, social services, housing and code enforcement, redevelopment and economic development, recreation, open space, public libraries, and certain services approved by the division. Municipalities and counties also are required to provide the division with a copy of any adopted ordinance or resolution that establishes a charitable fund. However, the United States Internal Revenue Service (“IRS”) also issued proposed rules in August 2018 concerning the provision of local property tax credits for certain charitable donations (e.g., local charitable funds). According to the division, “[t]he proposed IRS regulations would allow the donor to claim the full donation as a charitable deduction [towards a federal income tax filing] only if the property tax credit is 15% or less of the donation amount.” In response to the proposed IRS rules, the State regulations allow any person donating monies to a charitable fund to determine whether the property tax credit would equal 90 percent or 15 percent of the charitable contribution (N.J.A.C.5:30-18.5).

Question: What municipalities and counties have established a charitable fund, and for what public purpose was each charitable fund established? What amount of charitable contributions have been made to each charitable fund, by calendar year? Has the department received further guidance from the IRS concerning the deductibility of charitable fund donations towards federal income tax liabilities? If so, please explain.

N.J.A.C. 5:30-18.2(n) requires a municipality or county that has adopted a charitable fund ordinance or resolution to provide same to the Division of Local Government Services within five (5) days of adoption. To date, no municipality or county has provided the Division with a copy of an adopted ordinance or resolution establishing a charitable fund pursuant to P.L. 2018, c.11. The IRS has not yet acted on the regulations the agency proposed in August 2018, nor has the IRS given the Department guidance concerning the deductibility of charitable fund donations toward federal income tax liabilities. 27a. Since October 2012, New Jersey has received approximately $4.2 billion in federal Community Development Block Grant—Disaster Recovery (“CDBG-DR”) funds to assist in the State’s recovery following Superstorm Sandy. The State uses these federal funds to support various homeowner assistance, rental housing assistance, and community development programs to assist those that were most impacted by the storm, many of which are administered by the department.

Question: Please provide an update concerning the total amount of funds disbursed, by Fiscal Year, for each Sandy-related assistance program administered by the

department using CDBG-DR funds. How many construction projects were completed in Fiscal Year 2018 and Fiscal Year 2019, respectively, through each program? When does the department expect to expend all funding for each program?

The attached chart details the funds disbursed, by fiscal year, for each Sandy-related assistance program directly administered by DCA using CDBG-DR funds. The chart includes the number of construction projects completed in fiscal year 2018 and 2019, respectively, through each program. Lastly, the chart provides the final expenditure date and the anticipated final expenditure date, if applicable.



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27b. In April 2019, the Governor announced several changes to the awarding of CDBG-DR funds to homeowners impacted by Superstorm Sandy. Previously, homeowners could receive a maximum award of $150,000 to rebuild their primary residence through the Reconstruction, Rehabilitation, Elevation, and Mitigation Program (“RREM”) and the Low-to-Moderate Income Homeowner Rebuilding Program (“LMI”). As approved by the United State Department of Housing and Urban Development (“HUD”), the State removed the $150,000 cap on RREM and LMI assistance grants. The State also reallocated $50 million to the programs to support the award of additional RREM and LMI funding.

Question: Will the department adjust the award of RREM and LMI grants to Sandy-impacted homeowners who previously received the maximum $150,000 award but required additional financial assistance to complete home construction? Please provide a copy of the most recent amendment to the CBDG-DR Action Plan, as approved by HUD. If $50 million proves insufficient to resolve remaining homeowner issues, what other CDBG-DR funds could be reallocated to close the gap?

As the Governor announced in April 2019, DCA has received HUD approval to create the Supplemental Fund that provides a zero-interest, forgivable loan available to homeowners still rebuilding through two of DCA’s CDBG-DR funded programs – the Reconstruction, Rehabilitation, Elevation and Mitigation (RREM) Program and Low-to-Moderate Income (LMI) Homeowner Rebuilding Program. The Action Plan Amendment detailing the Supplemental Fund, as approved

by HUD, is attached. See Attachment 2. The Supplemental Fund is designed to eliminate financial barriers that prevent active participants in RREM and LMI from completing construction by supplementing their grant award with additional necessary and reasonable CDBG-DR funding to complete their project. RREM and LMI participants may be eligible to supplement their grant award with additional funds if their project is in the construction phase with unfinished scope work and their grant award is maxed out at the Program cap of $150,000 with a program-calculated unmet need based on their Total Development Cost and Duplication of Benefits analysis. If $50 million proves insufficient to resolve remaining homeowner issues, DCA does have the ability to reallocate, with HUD approval, unspent CDBG-DR funds until the federal expenditure deadline in September 2022. 28. General Provision #89 of the Fiscal Year 2019 Appropriations Act authorizes State agencies to obtain employment and income information from third-party commercial consumer reporting agencies for the purpose of obtaining real-time employment and income information to help determine program eligibility. The intent of the general provision is to achieve cost savings, improve timeliness, and minimize fraud.

Question: Please describe the extent to which the department uses the services of

third-party commercial consumer reporting agencies for the purpose of obtaining real-time employment and income information to help determine program eligibility. What cost savings does the department attribute to the use of commercial consumer reporting agencies in the eligibility determination process? If the department does not use such services, please provide the reason(s) for not doing so.



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The Division verifies employment and income information for the participants in the Section 8 Housing Choice Voucher Program through the U.S. Department of Housing and Urban Development (HUD)’s online Enterprise Income Verification (EIV) system, as mandated by HUD. The Division also uses records through the NJ Department of Labor to verify participant income. In addition to these sources, the Division utilizes a third-party commercial consumer reporting agency to obtain information on the credit history, criminal background, and assets of potential and current program participants. Division staff review records through the third-party agency’s online database. Usage of this system assists the Division in ensuring that program participants meet the eligibility requirements of the program. While the Division does not keep records on cost savings due to this usage, this system provides much greater efficiency by allowing staff to check a centralized source of information, rather than having to check multiple databases and information sources. 29. P.L.2019, c.32 established several multiyear schedules for gradually raising the State minimum wage from currently $8.85 per hour to not less than $15.00 per hour. The increase may affect department staff, third parties that provide services to or on behalf of the department, and programs with means-tested eligibility criteria. In FY 2020, the general State minimum wage will rise as follows: (1) on July 1, 2019 to $10.00 per hour; and (2) on January 1, 2020, to not less than $11.00 per hour. The general minimum wage schedule will increase to at least $12 per hour on January 1, 2021; $13 per hour on January 1, 2022; $14 per hour on January 1, 2023; and $15 per hour on January 1, 2024.

Questions: Please quantify the fiscal impact to the department in FY 2020 of the increases in the minimum wage of department employees from $8.85 to $10 per hour on July 1, 2019 and from $10 to $11 per hour on January 1, 2020, and the number of employees who will be impacted by each increase. Relative to current compensation levels, please provide the same information assuming an hourly minimum wage of $12, $13, $14, and $15.

Questions: Please quantify the fiscal impact to the department in FY 2020 of the increases in the minimum wage of employees of third parties that provide services either to the department, including temporary employment services, or on behalf of the department according to contractual agreements. Relative to current compensation levels, please provide the same information assuming an hourly minimum wage of $12, $13, $14, and $15.

Questions: Please quantify the fiscal impact to the department in FY 2020 of the

increases in the minimum wage of enrollees in programs run by the department that have means-tested eligibility criteria. Relative to current compensation levels, please provide the same information assuming an hourly minimum wage of $12, $13, $14, and $15. Please list the programs with income-based eligibility criteria that will be affected by P.L.2019, c.32 and for each such program specify the law’s projected effects on enrollment, the benefits provided to enrollees, and the projected cost savings to the department.



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All DCA staff earn more than the minimum wage. Thus, no impact is anticipated as a result of the passage of the State minimum wage law for FY2020. The department does utilize contract labor through the State’s Temporary Services contract, mostly to support federally-funded programs. No temporary staff currently has a salary below $11/hour. When full-time staff is hired, they earn a starting salary that exceeds the State minimum wage.

Remaining Volume Cap

2017 Carryforward (M/F) 213,022,976$

2018 Carryforward (M/F) 190,000,000$

2018 Carryforward (SF) 199,804,071$

Total Carryforward 602,827,047$

Closed

Conduit (M/F) (8,940,000)$

Pooled (M/F) -$

Total Closed (8,940,000)$ 593,887,047$

Committed

Conduit (M/F) (127,378,082)$

Pooled (M/F) (14,514,180)$

Total Committed (141,892,262)$ 451,994,785$

DOI Conduit (M/F) (245,323,466)$ Pooled (M/F) (35,587,301)$

Total DOI (280,910,767)$ 171,084,018$

Pipeline - Multifamily

Conduit (M/F) (20,230,000)$

Pooled (M/F) (56,974,350)$

Hospital Program (41,800,000)$

Newark PHA RAD (100,000,000)$

Pipleline - Single FamilyMarch Bond Deal (170,000,000)$ December Bond Deal (135,000,000)$

Total Pipeline (524,004,350)$

Remaining 2018 Volume Cap (352,920,332)$

2019 Cap Allocation 500,000,000$

REMAINING VOLUME CAP 147,079,668$

2019 Volume Cap SummaryApril 8, 2019

Conduit HMFA Loan Municipality County Developer Total Units SN Units Bond Type

New Center City ($7,000,000) Newark Essex NHP Foundation 49 Conduit-APP

New Irvine Turner ($13,230,000) Newark Essex NHP Foundation 94 Conduit-APP

Total - Conduit ($20,230,000) 143 0

The Berkley ($4,064,837) Orange City Essex RPM 51 Pool-App

Camp Kilmer ($13,297,204) Edison Twp Essex Pennrose Pool-App

Jacob's Landing III ($9,268,993) Woodbridge Twp Middlesex Ingerman 60 5 Pool - Cond Com

Egg Harbor Township Family Phase II ($8,108,284) Egg Harbor Twp. AtlanticMichael's Development 60 5 Pool - App

Somerville Senior Citizens ($4,515,032) Somerville Boro Somerset 153 0 Pool - App

Fort Lee Senior ($17,720,000) Fort Lee Borough BergenHsg. Dev. Corp of Bergen County 96 Pool - App

Total - Pooled ($56,974,350) 420 10

TOTAL Pooled & Conduit ($77,204,350) 563 10

Cooper Univeristy Healthcare ($9,800,000)

RWJ Barnabas ($10,000,000)

St. Joseph's Health ($10,000,000)

CHA Partners ($12,000,000)

Total - Hospital Program ($41,800,000)

Newark PHA RAD ($100,000,000)

March Bond Deal ($170,000,000)

December Bond Deal ($135,000,000)

Total - Single Family ($305,000,000)

TOTAL PIPELINE ($524,004,350)

Volume Cap Remaining AFTER 2019 Pipeline ($352,920,332)

2019 Cap Allocation $500,000,000

REMAINING VOLUME CAP $147,079,668

2019 PIPELINE

Pooled

2019 VOLUME CAP PIPELINE

Single Family

Hospital Program

New Jersey Department of Community Affairs

SUPERSTORM SANDY COMMUNITY DEVELOPMENT BLOCK GRANT - DISASTER

RECOVERY

Public Law 113-2; January 29, 2013

FR-5696-N-01; March 5, 2013

FR-5696-N-06; November 18, 2013

FR-5696-N-11; October 16, 2014

Philip D. Murphy Governor

Lt. Governor Sheila Y. Oliver Commissioner

PUBLIC COMMENT PERIOD: December 11, 2018 to January 9, 2019

DATE SUBMITTED TO HUD: January 23, 2019

DATE APPROVED BY HUD: February 22, 2019

ACTION PLAN AMENDMENT NUMBER 28

SUBSTANTIAL AMENDMENT

• Transferring Funds to the Reconstruction, Rehabilitation, Elevation, and Mitigation

Program and the Low- To Moderate-Income (LMI) Homeowners Rebuilding Program

• Transferring Funds to the Fund for the Restoration of Multi-Family Housing (FRM)

• Clarification to the Non-Federal Cost Share (Match) Program

• Clarification to the Rental Assistance Program

• Clarification to the Blue Acres Buyout Program

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SECTION 1: OVERVIEW

New Jersey (State) received approval from the U.S. Department of Housing and Urban

Development (HUD) for the State’s Community Development Block Grant-Disaster

Recovery (CDBG-DR) Action Plan on April 29, 2013. The Action Plan described the State’s

allocation of $1,829,520,000 of first round CDBG-DR funds allocated by HUD to support

New Jersey recovery efforts. Since that time, HUD has approved twenty-seven amendments

to the Action Plan, including Substantial Amendment Number 7, which detailed the

allocation of $1,463,000,000 of second round CDBG-DR funds across the recovery

programs, and Substantial Amendment Number 11, which described the allocation of

$501,909,000 of the third (and final) round of CDBG-DR funds intended to address unmet

recovery needs.

This Action Plan Amendment Number 28 (APA 28) is considered a substantial

amendment according to the definition stipulated in the March 5, 2013 HUD Federal

Register Notice 5696-N-01.

This Amendment is available in English and Spanish through DCA’s website at

http://www.renewjerseystronger.org, and can be obtained by email to

[email protected] (Subject: APA 28) or by contacting Sandy Recovery Division

Constituent Services at 609-292-3750. To obtain a translated copy in a language other than

Spanish, please call 1-855-SANDYHM (1-855-726-3946). When the agent answers the line,

inform them of the requested language. For hearing-impaired users, Text Telephone Service is available at (TTY/TDD) 609-984-7300 or 1-800-286-6613.

The public comment period for Action Plan Amendment 28 was open on December 11,

2018 to 5:00 p.m. on January 9, 2019. Per HUD requirements, a public hearing was held

during the comment period on January 8, 2019 from 4:00 p.m. to 6:00 p. m. at the following

location:

Toms River Municipal Complex, Council Meeting Room

33 Washington Street Toms River, New Jersey 08753

Comments on this proposed amendment were submitted at the hearing, or via email to

[email protected] or to the attention of Lisa Ryan, New Jersey Department

of Community Affairs, 101 South Broad Street, Post Office Box 800, Trenton, New Jersey

08625-0800. All comments are given the same consideration regardless of the method of submission.

https://www.gpo.gov/fdsys/pkg/FR-2013-03-05/pdf/2013-05170.pdf


http://www.renewjerseystronger.org/

mailto:[email protected]


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SECTION 2: FUNDING TRANSFERS

Through this Amendment, the State proposes to transfer $50 million in Community

Development Block Grant-Disaster Recovery (CDBG-DR) funds to the Reconstruction,

Rehabilitation, Elevation and Mitigation (RREM) Program and the Low- to Moderate-

Income (LMI) Homeowners Rebuilding Program (collectively, the Programs).

Additionally, the State proposes to transfer $379,500 remaining in the Sandy Homebuyer Assistance Program (SHAP) to the Fund for the Restoration of Multi-Family Housing (FRM).

Transfer of Funds to the RREM Program and LMI Program

Table 1: Transfer of Funds to the RREM Program

Approved New Jersey Action Plan Program

Activity Previous

Allocation

Amount of Transfer

Activity Revised Allocation

Tenant-Based Rental Assistance Program $28,886,017 (-)$1,523,768 $27,362,249

Stronger NJ Business Grants Program $75,500,000 (-)$750,464 $74,749,536

Stronger NJ Business Loans Program $123,500,000 (-)$18,819,197 $100,680,803*

Neighborhood & Community Revitalization

$74,625,000 (-)$2,250,344 $72,374,656

Non-Federal Cost Share (Match) - Local $91,000,000 (-)$10,000,000 $81,000,000

Non-Federal Cost Share (Match) - FHWA $69,840,427 (-)$1,714,582 $68,125,845

Local Planning Services $12,786,718 (-)$11,700 $12,775,018

Blue Acres Buyout Program $174,500,000 (-)$7,951,174 $166,548,826

Pre-development Loan Fund $3,666,706 (-)$271,665 $3,395,041

Neighborhood Enhancement Program $38,727,006 (-)$2,707,105 $36,019,901

RREM Program $1,303,684,781 (+)$46,000,000 $1,349,684,781 *Inclusive of the $4,000,000 transferred to the LMI Homeowners Rebuilding Program

Table 2: Transfer of Funds to the LMI Homeowners Rebuilding Program


Activity Previous

Allocation

Amount of Transfer


Stronger NJ Business Loans Program $123,500,000 (-)$4,000,000 $100,680,803*

LMI Homeowners Rebuilding Program $50,294,758 (+)$4,000,000 $54,294,758 *Inclusive of the $18,819,197 transferred to the RREM Program

RREM Program and LMI Homeowners Rebuilding Program

The RREM and LMI Programs provide grant awards to eligible primary homeowners for

activities necessary to repair storm-damaged homes, including rehabilitation,

reconstruction, elevation, and mitigation. The State has allocated more than $1.3 billion to

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the RREM Program. To date, RREM has already completed approximately 6,300 projects

and disbursed more than $900 million to eligible homeowners. In addition, the State has

allocated over $50 million to the LMI Program, resulting in more than approximately 200

projects completed.

Despite the State’s progress, some homeowners find it difficult to make meaningful

progress in their construction. Applicants face delays for a variety of reasons including

fraudulent contractors and a lack of qualified builders, but most of all, applicants lack the necessary funding to complete construction.

The State developed a multi-faceted approach to guide homeowners to completion. This

approach consists primarily of two program updates: (1) offer additional construction

funding and (2) extend rental assistance. The first is detailed below, while the second

update is addressed in Section 3.

First, the State will create a “Supplemental Fund” (“Fund”) to offer applicants additional

construction funds to complement the grant award received through the Programs.

The award will be calculated based on unmet need and carry a five-year residency

requirement, which will be secured by a subordinate mortgage on the subject property. No

monthly principal payments will be required upon completion. Rather, the mortgage will be forgiven after five-years following the completion of construction.

The mortgage will burn off or be forgiven at the rate of 20% per year. Upon sale of the

subject property prior to completing the five-year residency requirement, the applicant

will be required to pay back to the State any unforgiven portion of the loan.

These additional funds will be available exclusively to RREM and LMI Program applicants

who still have an unmet need. Between both programs, 695 applicants bear a total unmet

need of $44.1 million. The average estimated Total Development Cost for each of their

projects is approximately $266,000, more than $100,000 over than the maximum allowable

grant. For these applicants, 55% of whom are LMI, $150,000 will never be enough to

complete their projects.

Importantly, this additional financing can be used only toward eligible costs incurred to

complete an eligible scope of work under the RREM or LMI Programs; applicants cannot

use this funding to enhance or expand their rebuilding plan.

The Fund is intended to fill the gap for RREM and LMI Program applicants who have no

other means to complete construction. Therefore, homeowners who have not completed

construction but who have addressed their funding gap with other government, non-profit

or philanthropic funds are not eligible. Homeowners who have completed construction are

also not eligible for additional financing through the Fund.

The Supplemental Fund is essential to completing the State’s housing recovery efforts.

Sandy-impacted families need the additional resources to complete construction and get

back home. At this phase of recovery, applicants in the two programs who had the ability

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to fully fund their projects with other funding sources, including personal finances, have

done so. Additional funding is critical for applicants who have reached this impasse.

Importantly, this proposed funding transfer does not affect any existing commitment of program funds to any individual, business, community or project.

Transfer from the Tenant-Based Rental Assistance Program

The Tenant-Based Rental Assistance (TBRA) Program provides temporary rental

assistance to LMI residents. Rental assistance is provided for twelve months with an option to renew, but not to exceed twenty-four months.

Per the waiver provided in Federal Register Notice 5961-N-02, all subsidies are scheduled

to end December 31, 2018. The program has successfully transitioned many applicants to

existing State rental assistance programs for LMI renters. Moreover, the program has spent

nearly the entire allocation prior to the prescribed deadline.

The State has concluded that transferring $1,523,768 will not impact DCA’s ability to fully

serve all eligible TBRA applicants. An extension request will be submitted to HUD for these funds upon transfer.

Transfer from Stronger New Jersey Business Grants Program

The Economic Development Authority (EDA) oversees the Stronger NJ Business Grants

Program, which provides grants/forgivable loans to small business of up to $50,000 for

working capital or construction needs. The program’s application period closed on

December 31, 2013, and since that deadline, EDA has disbursed $55.8 million to 1,150

small businesses. The State has concluded that transferring $750,464 will not impact the

program’s existing obligations. An expenditure extension modification will be submitted to HUD for these funds upon transfer.

Transfer from Stronger New Jersey Business Loans Program

The Stronger NJ Business Loans Program is also overseen by the EDA and provides low-

cost loans of up to $5 million to eligible small businesses for Sandy-related repairs, working

capital and/or business expansion to create jobs and help revitalize the economies of

Sandy-affected communities. The program has approved approximately $83 million in

loans for 120 businesses, as of the third quarter 2018. The State has concluded that

transferring $22,819,197 will not impact the program’s existing obligations. An

expenditure extension modification will be submitted to HUD for these funds upon

transfer.

Transfer from the Neighborhood Community Revitalization Program

The Stronger NJ Neighborhood and Community Revitalization (NCR) Program invests in

municipal projects through two initiatives: Streetscape projects and the Development &

Public Improvement (D&I) projects. The Streetscape projects are funded with grants of up

to $1.5 million to support projects such as street lighting, sidewalks, and landscaping in the

nine most impacted counties. More than $12 million has been disbursed for these projects.


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The NCR D&I projects include larger scale planned physical improvements that contribute

to the revitalization of Sandy-damaged areas. At the end of the third quarter approximately

$43 million has been disbursed for D&I projects. Because NCR has committed all its

available funding, the State has concluded that transferring $2,250,344 will not impact the

program’s existing obligations. An expenditure extension modification will be submitted to

HUD for these funds upon transfer.

Transfer from the State and Local Non-Federal Cost Share (Match) Programs

The State has allocated $69 million of CDBG-DR funds to the Non-Federal Cost Share

Program to cover the 20 percent non-federal cost share for the Route 35 project funded by

the Federal Highway Administration. The State highway project on the Barrier Island was

reconstructed with flood vents, pump stations, and other “best practice” mitigation

measures. Reconstruction was completed in 2016. Thus, the State’s re-allocation of $1,714,582 will not impact existing obligations under the program.

Additionally, the State has allocated $91 million to the Non-Federal Cost Share (Match)

Program to offset the cost to State, county, municipality and other government entities for

their funding portion of FEMA-funded disaster recovery projects. FEMA pays 90% of the

costs for such projects and requires the State and local government entities to pay a 10

percent match. The State covered some or all of the 10 percent cost share for many

disaster-recovery projects through the Non-Federal Cost Share (Match) Program.

After covering the eligible match for local governments and reserving enough funding to

cover the required match for the State agencies’ FEMA-funded projects, the State has

concluded that a reallocation of $10,000,000 will not impact existing obligations under the

Non-Federal Cost Share (Match) Program. An expenditure deadline modification will be submitted to HUD for these funds upon transfer.

Transfer from Planning Programs

To meet planning needs across multiple platforms, the State created the Post Sandy

Planning Grant Program, which provides Local and Regional Planning Grants to address

ongoing planning needs resulting from Superstorm Sandy by allowing communities to

develop community recovery plans that strategically address vulnerabilities exposed by

the storm. Communities could then hire certified planners to address conditions created or

exacerbated by the storm and identify approaches to more resilient building and

sustainable economic growth. The program also provides Statewide Planning Grants to

state agencies for activities required by HUD for the implementation of programs, including

historic preservation, archeological, and other mitigation studies.

The State has concluded that transferring the remaining $11,700 in funding will not impact

DCA’s ability to meet the remaining local and regional obligations. An expenditure deadline extension request will be submitted to HUD for these funds upon transfer.

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Transfer from the Blue Acres Buyout Program

Overseen by the Department of Environmental Protection (DEP), the Blue Acres Buyout

program offers buyouts to property owners in a floodway, a flood-prone area, or an area

that has sustained severe repetitive loss to remove residents from harm’s way. Moreover,

through the demolition of the properties and the creation of open space, the program

enhances natural protections against future severe weather events.

The State continues to evaluate homes located in repetitive flooding communities. The

State has concluded that transferring $7,951,174 will not impact DEP’s ability to meet obligations under the program.

Transfer from Predevelopment Fund for Affordable Rental Housing

The Pre-Development Fund was overseen by the New Jersey Redevelopment Authority

(NJRA) and provided financing to help nonprofit developers cover the pre-development

costs of properties that are unsafe, underutilized, or in foreclosure. The program offered

support at the early stages of development to allow nonprofit developers to complete site preparation work as well as work to finalize construction and permanent financing.

The program has fully served all eligible nonprofit developers. Transferring the remaining

$271,665 funds from the Pre-Development Fund will not impact the DCA’s ability to close

the program. An expenditure deadline extension request will be submitted to HUD for

these funds upon transfer.

Transfer from Neighborhood Enhancement Program

The State has allocated $38 million of CDBG-DR funds to the Neighborhood Enhancement

Program (NEP), previously termed as the Blight Reduction Program. NEP was established

to fund the rehabilitation or reuse of foreclosed, vacant or abandoned properties that present risk of neighborhood blight to create affordable housing.

The final application period for NEP closed on June 26, 2015. Even after serving all eligible

NEP applicants, there remains $2,707,105 in available funding, which will be transferred to address the remaining unmet need in the RREM and LMI Programs.

Transfer of Funds to the Fund for the Restoration of Multi-Family

Housing

Table 1: Transfer of Funds to the FRM Program


Activity Previous Allocation

Amount of Transfer


Sandy Homebuyer Assistance $18,933,283 (-)$379,500 $18,553,783

Fund for Restoration of Large Multi-Family Housing

$651,547,401 (+)$379,500 $651,926,901

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The Fund for the Restoration of Multi-Family Housing (FRM) Program is overseen by the

Housing and Mortgage Finance Agency (HMFA) and provides funding to facilitate the

creation or rehabilitation of quality, affordable rental housing units in the nine most

impacted counties. CDBG-DR funds are provided as zero- and low-interest loans to

qualified developers to leverage 9% and 4% low income housing credits, tax-exempt

bonds, and stand-alone financing to support development. Development includes

rehabilitation or replacement of affordable rental units that were damaged as a result of

the storm, new rental housing that addresses an unmet need resulting from the storm, or

conversion of existing structures into affordable housing that addresses an unmet need

resulting from the storm. In addition, a portion of the fund will be used to assist in the

development of new permanent supportive housing units for people with special needs as

well as public housing and other federally-supported housing.

Increased demand, coupled with the storm-related depletion of rental stock, increased

rents in all impacted counties. Taken together, the loss of units, low vacancy rates, and

increased costs created hardships for LMI households seeking affordable rental housing. To

continue efforts to create affordable housing in areas impacted by the storm, the State

proposes a reallocation of unused Sandy Homebuyer Assistance Program funding.

Transfer from Sandy Homebuyer Assistance Program

The Sandy Homebuyer Assistance Program (SHAP), administered by the HMFA, provides

equity contributions of up to $50,000 to eligible applicants seeking to purchase homes

within the nine counties most-impacted by Superstorm Sandy as determined by HUD.

Among other things, the program helps renters become homeowners and helped protect

ratable bases in the counties hardest hit by the storm.

HMFA has approved all eligible applicants. Therefore, a reallocation of $379,500 will not

affect any existing commitments to program beneficiaries. An expenditure deadline extension request will be submitted to HUD for these funds upon transfer to FRM.

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SECTION 3: CLARIFICATIONS

Clarification to the Non-Federal Cost Share (Match) Program

The State is proposing clarifying language related to the Non-Federal Cost Share (Match)

Program. The State created this program to offset the cost to State, county, municipality or

other government entities for their funding portion of a FEMA-funded disaster recovery

projects. FEMA requires the State and local government entities to pay a ten percent match

for disaster recovery projects while FEMA pays the remaining ninety percent. Rather than

see property taxes increase in the communities affected by Sandy, the State covered some

or all the ten percent cost share for many projects through the Non-Federal Cost Share

(Match) Program.

In continuance of this effort, the State clarifies that this assistance will fund the match for

some or all costs associated with the FEMA Public Assistance program, Direct Federal

Assistance, and any other federally-funded recovery projects that require a cost share. This

change aligns with the initial Action Plan and will not affect the allocation to the program,

nor will it affect program beneficiaries.

Clarification to the Blue Acres Buyout Program

The Blue Acres Buyout Program, overseen by the DEP, offers buyouts to property owners

in a floodway, a flood-prone area, or an area that has sustained severe repetitive loss. To

reduce administrative burden and maximize funding available for buyouts, the program

was initially limited to homeowners in pre-defined targeted buyout areas. The State

pledged to extend the program to other areas at its discretion, assuming available funding.

Yet, the eligibility criteria included that the property must have been impacted by

Superstorm Sandy.

To allow DEP to expand the program as intended in the Action Plan, the State clarifies that

eligible properties must have been impacted by Superstorm Sandy, Tropical Storm Lee, or

Hurricane Irene or have an impact exacerbated by one of these storms. This clarification is

in accordance with Federal Register Notice 5696-N-01 and will not affect the allocation to Blue Acres, nor will it affect program beneficiaries.

Clarification to the Rental Assistance Program

The Rental Assistance Program (RAP), administered by the Housing and Mortgage Finance

Agency (HMFA), offers RREM and LMI Program applicants up to $1,300 per month of rental assistance for up to twenty-one-months.

The State allocated $12.5 million in CDBG-DR funds to the RAP program in Action Plan

Amendment 18. Concurrently, the State requested and received a waiver from HUD

allowing the state to use up to $30 million of CDBG-DR funds “to provide up to 21-months


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of RAP assistance to eligible RREM and LMI program applicants.” Federal Register Notice

5909-N-56. Per the waiver, RAP accepted its last application on December 31, 2017.

Eligible homeowners may receive a full 21-months of CDBG-DR assistance, in accordance

with the waiver. Yet homeowners continue to be plagued by construction delays caused by

contractor fraud and exacerbated by a lack of resources. To that end, the State has decided

to make additional funds available for construction. However, until those homeowners can

finish construction, homeowners will remain out of their homes.

Therefore, as the second prong of New Jersey’s two-step approach to full homeowner

construction completion, the State has requested a new waiver to allow homeowners an

additional 19-months of rental assistance. Thus, eligible homeowners would be able to

receive a full 40-months of CDBG-DR rental assistance. Further, to ensure applicants

receive the maximum allowable assistance under the waiver, the State has requested an

extension of those funds beyond June 2019. This will afford homeowners the ability to

place additional funding and attention towards completing their project over the course of

the next two building seasons in 2019 and 2020. While Action Plan Amendment 27

increased the total RAP allocation to $15.5 million, this clarification does not affect the

allocation to RAP, nor does it affect the program’s beneficiaries.



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SECTION 4: PUBLIC COMMENTS/RESPONSES

As required by HUD, this proposed Substantial Amendment was made available for public

comment over a period of at least thirty days. Also, per HUD requirements, the State held a

public hearing to solicit comments in connection with this proposed amendment. The date

and location of the public hearing were:

Tuesday, January 8, 2019 (4:00p.m.-6:00p.m. EST)

Toms River Municipal Complex, Council Meeting Room

33 Washington Street,

Toms River, NJ 08753

Commenters were able to submit comments to this proposed amendment (i) via email to

[email protected] (Subject: ACTION PLAN AMENDMENT 28); (ii) via U.S.

mail; or (iii) via oral or written comments at the public hearing. All comments are given the same amount of consideration regardless of the method of submission.

The State reviewed all public comments provided during the comment period and, per HUD

guidelines, has synthesized public comments submitted regarding this proposed

amendment. The State has included written responses to those comments below as part of the final amendment submitted to HUD for review and approval.

COMMENT 1 SUPPORT FOR ACTION PLAN AMENDMENT NO. 28 Commenters expressed support for Action Plan Amendment No. 28, specifically the proposal to create a “Supplemental Fund” to offer applicants in the Reconstruction, Rehabilitation, Elevation, and Mitigation (RREM) Program and the Low- to Moderate-Income (LMI) Homeowners Rebuilding Program additional construction funds to help them finish rebuilding their Sandy-damaged homes. Support was also expressed for the State of New Jersey’s request to HUD for a new waiver to allow homeowners in RREM and the LMI Program an additional 19 months of rental assistance beyond the current maximum of 21 months.

Staff Response: DCA appreciates the commenters’ support for Action Plan Amendment No. 28.

COMMENT 2 INDIVIDUAL CASES Commenters detailed case-specific questions and/or concerns about their individual rebuilding projects within the Reconstruction, Rehabilitation, Elevation and Mitigation (RREM) Program and Low-to-Moderate Income (LMI) Homeowners Rebuilding Program.

Staff Response: Because these public comments are case-specific and in many cases include private information, DCA is responding to these commenters individually through the


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Department’s Sandy Constituent Services Office to provide information and assistance specific to their needs.

COMMENT 3 SUPPLEMENTAL FUND ELIGIBILITY Commenters asked what the process will be for homeowners in the RREM Program and LMI Program to be eligible for assistance from the Supplemental Fund.

Staff Response: The Supplemental Fund will be available exclusively to RREM and LMI Program participants who have not finished rebuilding and still have an unmet need. The Fund is intended to fill the gap for those participants who have no other means to complete construction. Therefore, homeowners who have completed construction are not eligible. Homeowners who have not completed construction but who have addressed their funding gap with other government, non-profit, or philanthropic funds will be unable to receive additional financing through the Supplemental Fund. Importantly, assistance from the Supplemental Fund can only be used toward eligible costs incurred to complete an eligible scope of work under the RREM or LMI Programs; applicants cannot use this funding to enhance or expand their rebuilding plan.

COMMENT 4 RECOUPMENT OF GRANT FUNDING Commenters stated that DCA should forgive all existing recoupment claims for homeowners in RREM and the LMI Program. One commenter also expressed that recoupment forgiveness should be extended to all Sandy recovery programs, including the Landlord Rental Repair Program.

Staff Response: On the sixth anniversary of Superstorm Sandy, Governor Murphy announced DCA

would be taking a new approach to working with families being asked to repay

over-disbursements they had received through the RREM and LMI Programs. DCA is

working with advocates and the Governor’s Office to formalize the details of this

new policy in a process that listens to the concerns of Sandy survivors. These changes will not apply to the Landlord Rental Repair Program.

COMMENT 5 FRAUDULENT CONTRACTORS Commenters expressed their displeasure with fraudulent contractors and the significant roadblocks such fraud has caused in their efforts to rebuild their Sandy-damaged primary residences. They also urged the State of New Jersey to do more to combat contractor fraud in the aftermath of disasters.

Staff Response: The State recognizes the negative impact that fraudulent contractors have on the

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lives and property of people trying to recover from Superstorm Sandy. As such, the State committed resources from day one to rooting out fraud, theft and other illegal activities conducted during the recovery from Sandy. In addition, DCA continues to work diligently with law enforcement partners at all levels of government to pursue civil and criminal charges against individuals who misuse Sandy recovery funds. Recognizing the repercussions of contractor fraud on the rebuilding process, DCA established a policy to directly address the issue for RREM/LMI Program applicants. Under the policy, if a RREM or LMI Program homeowner believes they have been defrauded by a contractor, they are advised to immediately file a complaint with a law enforcement agency (i.e., the New Jersey Division of Consumer Affairs, police department, local prosecutor’s office, etc.) to report the allegation of fraud. If the law enforcement agency finds evidence of fraud, DCA may provide additional construction funds to address the change in circumstances without the homeowner having to wait for the courts to adjudicate.

COMMENT 6 SUBSTANTIAL DAMAGE DETERMINATION Commenters expressed that substantial damage determinations from municipal floodplain managers should not have factored into the application process for the RREM Program and LMI Program.

Staff Response: Given limited available recovery funds, the State tried to target its financial resources first to those who were most in need. With respect to assisting homeowners, this meant prioritizing homeowners for funding based on the extent of the damage to their primary residences. Homeowners whose homes sustained substantial damage received first priority (i.e., damages exceeding more than 50 percent of the home’s pre-storm value). With the third allocation of funds, the State was able to serve all eligible applicants on the waitlist.

COMMENT 7 TIMING OF PUBLIC HEARING A commenter asked why the public hearing was held between 4 pm and 6 pm, and stated that the hearing should have been held for a longer period of time in the evening. The commenter also expressed not enough public notice was given for the public hearing.

Staff Response: The public hearing was held between 4 pm and 6 pm to accommodate the needs of various populations. Importantly, any person who could not attend the public hearing could have submitted a comment via email or U.S. mail any time during the 30-day comment period, and that comment would receive equal treatment as comments provided verbally during the public hearings. A press release about the public comment period and public hearing was issued two weeks before the hearing date and legal notices were published in the state’s major regional newspapers,

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including the Star-Ledger, Asbury Park Press, Press of Atlantic City, and The Record, as well as Spanish-language newspapers.

COMMENT 8 SANDY-IMPACTED MORTGAGE FORBEARANCE Commenters expressed support for the Sandy-Impacted Forbearance Certification and asked that it be continued since the term of forbearance will expire later this year for homeowners who received the certification.

Staff Response: The Sandy-Impacted Forbearance Certification was established by a 2017 state law that provided foreclosure protection to homeowners with property damaged by Superstorm Sandy. It is not a program funded through CDBG-DR dollars.

discussion · 2019. 5. 2. · title: discussion

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