COUNTY IMPROVEMENT AUTHORITIES
THE ULTIMATE LOCAL REGIONAL FINANCING AUTHORITY
By: Edward J. McManimon, III, Esq.
When the New Jersey legislature adopted the County Improvement Authorities Law in 1960, the idea was to have a county-wide authority that could undertake a variety of public projects primarily dealing with public transportation and provision for governmental buildings for use by the State or local governmental units. The powers were very broadly stated, but the overall scope of the activities of an improvement authority were perceived to be relatively limited. Since that time, a variety of amendments to the purposes of the authority have been adopted by the State which in effect have made county improvement authorities the single most comprehensive regional authority in the State. Each county is authorized to create such an authority. Unlike other authorities which once established become essentially independent, an improvement authority is required by N.J.S.A. 40:37A-56 to obtain the approval of the governing body of the county prior to the acquisition or construction of any public facility by the authority. This in effect enables the county to reap the advantage of the flexibility established under the Improvement Authorities Law both with regard to the types of projects that it can undertake as well as the financing options afforded in that Act for financing the various projects it chooses to be involved in, while at the same time maintaining a degree of control over the types of activities that such an authority embarks on.
Improvement authorities have a broad grant of powers which include:
1. The power to act as a building authority to provide financing of governmental buildings, equipment, vehicles and other related facilities, particularly with the redefinition of the term "public facilities" which is now defined to mean "any lands, structures, franchises, equipment, or other property or facilities acquired, constructed, owned, financed, or leased by the authority or any other governmental unit or person to accomplish any of the purposes of the authority authorized by Section 11 of the Act (C.40:37A-54)."
2. The power to provide for the construction, rehabilitation, improvement, or enlargement of any convention hall, including commercial facilities, parking facilities, hotel facilities, etc.
3. The power to provide for public transportation, franchises and facilities.
4. The power to provide for aviation for military or civilian purposes.
5. The power to provide for joint, public, or private facilities so long as not more than fifty percent (50%) of the useable space is made available to non-governmental users.
6. The power to acquire real property with or without improvements from the United States or any of its agencies or instrumentalities and the clearance, redevelopment and improvement of such lands.
7. The power to acquire, construct, maintain and operate solid waste facilities.
8. The power to provide for tourist industries and recreational facilities.
9. The power to provide loans and other financial assistance for the construction, reconstruction, demolition, rehabilitation, conversion, repair or alteration of facilities for low and moderate income housing.
10. The power to provide for redevelopment projects.
11. Any combination thereof.
The addition of housing and redevelopment powers in the early 1980’s has provided the opportunity for counties acting through their county improvement authorities to undertake housing projects in the same manner that the New Jersey Housing and Mortgage Finance Agency could and to undertake redevelopment projects in the same manner that local governmental units could under the Redevelopment Agencies Law. In both cases, in addition to the approval of the county referenced above, the approval of the local governmental units in one fashion or another must be obtained thus providing additional controls over the authority. For instance, the redevelopment powers still require a local redevelopment plan to be adopted by the municipality in which the project is located before the improvement authority obtains the jurisdiction to undertake the financing of such a redevelopment project. Similarly, the local municipality in which a low or moderate income housing project will be located must approve the housing project. The significant fact is that the county government through the county improvement authority is given the option to be the focal point or impetus for housing and redevelopment type projects rather than relying on the State in one instance and the local governmental body in the other. Since the redevelopment powers are patterned after the Redevelopment Agencies Law, there are a variety of financing options which are included in the Act which provide for direct assistance in the form of grants, loans, guaranties, or direct improvement by the county itself or any of the local governmental units that may be the beneficiary of such a project. Similarly, there are a variety of additional powers provided to these same bodies by other related laws such as the Housing and Redevelopment Cooperation Law (N.J.S.A. 55:14B-1, et seq.) in assisting housing and redevelopment projects. There are certain statutory limitations which must be analyzed and ultimately complied with which may involve income limits to the occupants in the case of housing or return on equity limits in the case of redevelopment, but for the most part the authorization within the statute is very broad and provided tremendous flexibility to the county to undertake projects in this area.
As a result of many changes that have occurred to the Improvement Authorities Law over the past thirty years, county improvement authorities have undertaken a variety of projects which include:
1. Creating governmental loan and lease pools for equipment and buildings and other public purposes thereby being the ultimate regional authority for coordinating procurement and financing;
2. Financing public facilities for the State of New Jersey within its geographic boundaries;
3. Financing various public facilities on behalf of the county, local, regional and county school districts, fire districts, or local governmental units generally throughout the county;
4. Financing regional library facilities for county-wide library systems;
5. Becoming the regional owner and manager of sludge facilities for various local governmental units that found the improvement authority to be a better vehicle than an interlocal agreement with unwieldy management for coordinating the interests of the various local governmental units to be served by the regional sludge facilities;
6. Financing landfill, resource recovery, transfer stations and various other components of a comprehensive solid waste system;
7. Financing convention centers, airports and other similar facilities;
8. Operating transportation systems;
9. Serving as the public lessor of local school facilities in lease-purchase arrangements as an alternative to private lessor arrangements;
10 Financing and operating low income housing projects to comply with Mount Laurel obligations or otherwise; and
11. Utilizing their redevelopment powers to provide for housing projects where a mix of market rate units was necessary to make the low income units more affordable and thus make the project feasible economically.
One of the significant benefits to the local governmental units that use an improvement authority as a financing vehicle is that there is a much more flexible means of financing available that would otherwise not be available under either the Local Bond Law or Title 18A, Education, or similar laws that would form the basis of debt obligations of the local governmental units. Capital appreciation bonds, zero coupon bonds, term bonds in combination with serial bonds, county guarantied or local guarantied revenue bonds and a variety of other financing options become feasible under financings undertaken by an improvement authority since bonds issued by improvement authorities can be negotiated with investment banking firms. Bond issues are able to be timed in such a way that the authority can take advantage of changes in the marketplace to enter into purchase contracts in a more flexible way than the advertising requirements of the Local Bond Law, Title 18A and related statutes. Assuming sophisticated financial advice by financial advisors to monitor the contracts entered into with investment bankers, this can provide significant advantages particularly on transactions that involve large capital expenditures and which affect more than one municipality.
There tends to be a fear that an improvement authority becomes an enterprise unto itself, and that it becomes difficult to control as it becomes successful. The counties that have utilized improvement authorities to the maximum extent provided in the law have found that they can become much more creative and much more responsive to the developing needs of their county as Federal dollars shrink and local initiatives become more difficult. The degree of control that is exercised by the county is simply a matter of policy. In some cases, that control is manifested by a simple delegation of broad power to undertake the particular projects that are brought to the governing body for consideration. In others, there have been specific strings attached to the approvals that are given by the governing body. In some instances, the approval is given before any action is undertaken, and in others, much more significant discussions are held before any submission is made to the governing body for its consideration. The process is as broad as it is long. The ultimate bottom line is that nothing can be done by the improvement authority without the blessing of the county governing body. The degree of cooperation between the county itself and the improvement authority will determine to what extent the improvement authority is successful as a tool to make county and local government more responsive, more creative and more effective.