Governor Corzine Signs EnCap Reform Legislation

NORTH ARLINGTON - Further strengthening oversight and safeguarding public investment in private sector redevelopment remediation projects, Governor Jon S. Corzine today signed A-2650/ S-1769.  Known as the EnCap Reform bill, the legislation requires  businesses receiving any combination of financial assistance totaling more than $50 million to file annual, independently audited financial statements with the State Treasurer as well as each entity from which financing was secured. 

"Today, we are putting in place aggressive reforms that will ensure a similar situation is not repeated in the Garden State," said Governor Corzine. "Had these safeguards been in effect prior to EnCap, the project would have been shut down at the first sign of trouble. As stewards of public resources, we must remain vigilant in our efforts to maintain public trust through accountability and transparency. This bill accomplishes that goal." 

For any qualifying contract, the bill specifies that 1) the private business spend a minimum of $1 for every $5 received in public funds; 2) the public entity reserve 10 percent of the total funds approved to be disbursed upon the successful completion of the project; and 3) the private business submit payment of a performance bond, the amount of which would be tied to the project costs attributable to the publicly funded improvements. 

"Quite simply, the public cannot afford to finance another EnCap-style debacle," said Assemblyman Gary Schaer (D-Passaic/Bergen/Essex). "Putting these protections in place will help ensure that the mistakes made with EnCap cannot and will not be repeated. EnCap's failure highlighted the need for more oversight in the way the state provides public money for private redevelopment. The breakdown of checks and balances that precipitated EnCap's collapse must not happen again." 

Through Governor Corzine's commitment and leadership, AIG is now honoring its obligation to fund the cleanup of the Meadowlands site. That cleanup is currently underway. 

"Bergen County learned an expensive lesson that it cannot rely on an honor system of handshakes, winks and nods when it comes to multi-million dollar redevelopment deals," said Assemblyman Fred Scalera (D-Essex/Bergen/Passaic). "This boondoggle could have been stopped at the very first sign of trouble had these reforms been in place sooner. We can never again allow the public's trust to be undermined in such a way. We must make certain that part of the EnCap project's legacy includes the preventative measure and proactive protections that will secure future public-private redevelopment partnerships." 

Failure to comply with the financial statement reporting deadlines now required by the legislation would result in an increase in the amount of public money kept in escrow. Any business that knowingly fails to submit a financial statement or purposefully misrepresents the businesses finances would be required to refund the full amount of the public financial assistance. 

"Public-private partnerships represent a necessary tool for economic growth, but the taxpaying public in New Jersey deserves some guarantees for its investment," said Senator Gordon, (D-Bergen).  "As we saw with EnCap, a lack of financing and transparency standards for private redevelopers allowed an unscrupulous organization to dupe public entities at all levels of government to the tune of millions of dollars.  This law will ensure more honest fiscal reporting and increased private investment in publicly-financed projects, or funds would have to be returned to the public agencies involved." 

In addition, State Comptroller may audit the business's use of any public funds to which the legislation applies and its expenditure of other funds on the project. 

"In the race for ratables and sustained economic growth, many public entities become blinded by the proposed benefits, and fail to do their due diligence in applying scrutiny to private redevelopers," said Senator Loretta Weinberg (D-Bergen).  "While this new law will act as a disincentive for the sort of EnCap-style financing and fraud which has cost New Jerseyans so dearly, public officials have a responsibility to act as whistleblowers whenever corruption, waste and abuse rear their ugly heads.  This law gives us the tools to reclaim public funds spent through hoaxes perpetrated by private redevelopment and remediation firms, but as stewards of the public trust, we have to do a better job to root out the wasting of taxpayer funds in whatever form it may take." 

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