Authorization of New Funding
On July 9, 2008, legislation was enacted authorizing $3.9 billion in additional funding for the New Jersey Schools Development Authority (SDA).
The legislation allocates $2.9 billion for 31 special-needs districts, known as SDA Districts. The SDA manages and funds 100 percent of eligible project costs in the former Abbott districts.
The legislation also allocates $1 billion to leverage construction in New Jersey’s Regular Operating Districts (RODs) and includes $50 million for vocational schools. The SDA administers grants for RODs, which manage their own projects.
The legislation fulfilled a pledge made in a January 22, 2008 letter from the State Attorney General to the New Jersey Supreme Court indicating the intent to seek passage of legislation to fund school construction in SDA Districts. Consistent with the Attorney General’s letter, the legislation dedicates a portion of existing state income tax proceeds to fund the debt service on the additional borrowing.
As a result of the legislation’s approval, the Authority has adopted a New Funding Allocation and Capital Plan consisting of 52 school projects. It is advancing 26 SDA District projects that were deferred for construction in April 2007 due to a funding shortfall that was unknown when the projects were approved in July 2005 by the New Jersey Schools Construction Corporation (SCC), the SDA’s predecessor agency. (An additional deferred project, a pedestrian bridge for the new elementary school at Marshall and Hazel in Paterson, is now considered part of the new school construction itself.) It also will build 26 additional schools. The 26 newly selected schools come from a statewide prioritization plan, based on educational need, which was created by the N.J. Department of Education (DOE). Click here to view a presentation on the New Funding Allocation and Capital Plan.
Funding for RODs will be provided through grants, with a minimum state share of 40 percent for eligible project costs. DOE has accepted applications for the initial round of funding for the program. Only projects that are 100 percent eligible for state support and included in one of at least three prioritization “levels” are being considered by DOE, although districts may request debt service aid for other projects. For more information, click here.
The New Jersey Economic Development Authority (EDA) floats bonds to provide funding for the SDA.
The legislation has other key elements. It directs the SDA, in consultation with the State Comptroller, to cause an audit to be conducted of any school facilities project that has a state share exceeding $10 million.
Another key requirement is a study focusing on the potential for cost savings to the school construction program – in both SDA Districts and other school districts – through the use of standardized design elements, components, and construction materials. The study must be submitted to the Governor and Legislature by April 1, 2009.
SDA Project Accomplishments
Overall, as of September 21, 2009, the SDA has completed 613 projects in SDA Districts, including 99 major projects: 50 new schools; 44 extensive additions, renovations and/or rehabilitations; and five demonstration projects. Demonstration projects, funded by the SDA, and under its oversight, are managed by a municipal redevelopment entity and redeveloper and are designed to be the cornerstone of revitalization efforts. The total also includes 21 other rehabilitation projects, 354 health and safety projects and 139 grant projects managed by SDA Districts. Click the following links to see the lists of completed projects and active construction projects.
As of September 21, 2009, the SDA has executed ROD grants impacting 1,377 schools and 490 districts. The total State share of $2,254,780,922 leverages projects costing a total of $7,186,918,906. Approximately 85 percent of New Jersey ROD school districts have benefited from the program.
Origins of the School Construction Program
In 1998, the New Jersey Supreme Court ruled in the Abbott v. Burke case that the State must provide 100 percent funding for all school renovation and construction projects in special-needs school districts. According to the Court, aging, unsafe and overcrowded buildings prevented children from receiving the "thorough and efficient" education required under the New Jersey Constitution.
In response, the New Jersey Educational Facilities Construction and Financing Act (the "Act") was enacted on July 18, 2000, launching the School Construction Program and placing responsibility under the EDA. Full funding for approved projects was authorized for the 31 special-needs districts, then known as Abbotts. Grants totaling 40 percent of eligible costs were made available to the remaining districts.
Overall, the act authorized $6 billion in funding for the Abbott districts, $2.5 billion for RODs and $100 million for vocational districts.
In July 2002, then-Governor James E. McGreevey issued Executive Order No. 24 directing the EDA School Construction and Financing Program to be reconstituted as a new subsidiary corporation called the New Jersey Schools Construction Corporation (SCC). The SCC was given the mission of streamlining the approach to school construction and moving projects expeditiously to completion. It was delegated all responsibilities under the Act except for the power to incur indebtedness, which remains with EDA.
The program promptly launched a series of health-and-safety improvements across New Jersey, totaling 354 projects, and began building new schools and major additions and renovations.
In April 2005, a report by the State Inspector General found the SCC’s program suffered from a wide range of internal weaknesses that left it vulnerable to “waste, fraud and abuse of taxpayer dollars.” The agency began an overhaul as a result.
In July 2005, as a result of discovering that funds were insufficient, the corporation determined it could complete only a limited number of additional projects. The SCC Board approved its first Capital Plan, designating 59 projects, suspending work on the remaining 315.
Also in July 2005, the SCC determined that funds had been exhausted for its highly successful ROD grant program.
School Construction Program Reform
Critical reforms took place in January 2006. An Interagency Working Group on School Construction was established to make recommendations regarding further reforms designed to protect taxpayer dollars, provide accountability and move the program forward.
Under its new management team, numerous reforms were implemented. The agency no longer works on every project approved by DOE without considering availability of funds. Now, projects are prioritized by educational need, and before a project can begin, a comprehensive budget and schedule must be approved by the SDA Board.
Change orders and unanticipated costs are minimized because the agency halted the practice of beginning construction before design is complete, and designing projects before all land is under SDA control.
Furthermore, the SDA has instituted an aggressive cost-recovery program that has recouped millions of dollars for significant project errors by architects, contractors and project management firms.
Establishment of the SDA
Legislation creating the SDA was signed into law on August 6, 2007. The SDA, an independent authority in but not of the Department of Treasury, is the successor to the SCC.
Numerous reforms resulted from the Program and Governance Reform legislation establishing the SDA. Under the legislation, the school construction agency is no longer a subsidiary of the EDA, even though the EDA retains its financing role for the school construction program. The SDA operates in but not of Treasury.
The number of public Board members was authorized to increase from seven to 11. Members are nominated by the Governor and confirmed by the Senate. Members must have backgrounds directly relevant to the new Authority’s mission. The Authority is required to report to the Legislature every six months.
Also due to the Program and Governance Reform legislation, the SDA is developing regulations that will allow for delegating the management of projects to SDA Districts (formerly known as Abbott Districts), as authorized by the Program and Governance Reform legislation of August 2007. Also under development are standards for assessing and building district capacity. The SDA will retain ultimate responsibility for a project.
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