Educational Facilities Construction and Financing Act

On July 18 the Educational Facilities Construction and Financing Act, S-200 was into law, thereby initiating the largest, most comprehensive school construction program in the nation. Senators William Gormley (R-Atlantic) and John Lynch (D-Middlesex),Assembly Speaker Jack Collins (R-Salem) and Assemblyman Joseph Malone, III (R-Burlington), sponsored the bill.

Major provisions of the new school construction law include:

• State Bonding Caps-The state is authorized to borrow $6 billion for projects in the 30 special needs, or Abbott districts, $2.5 billion for non-Abbott projects, and $100 million for county vocational schools.

• Abbott Districts-The law provides for 100 percent state funding of eligible school construction costs in the Abbott districts.

• Non-Abbott Districts-School construction projects in non-Abbott districts will be funded at their state aid percentage multiplied by 1.15, or a minimum of 40 percent, whichever is greater. In addition, any school system in district factor group A or B may apply for 100 percent state support of its project. If the application is approved, the commissioner would seek legislative approval.

• Facilities Efficiency Standards-The commissioner of education will develop facilities efficiency standardsfor elementary, middle and high schools. These standards will determine the extent to which a district's construction project qualifies for state aid. They represent the instructional and administrative spaces that are educationally adequate to support the achievement of the Core Curriculum Content Standards.

• Project Costs-Projects eligible for state aid include:
  1. Building renovation necessary for compliance with the Uniform Construction Code, health and safety, and/or educational adequacy as determined by facilities efficiency standards. The district is entitled to state aid on the estimated actual costs of the renovation project.
  2. New construction to accommodate increased enrollment. The law provides a cost allowance of $138 per square foot. This figure covers construction and "soft costs," such as site acquisition and site development; services of design professionals, including architects, engineers and construction managers; legal fees; and the costs associated with financing the project.
  3. Building space necessary to comply with state or federal law concerning students with disabilities.
  4. Additional spaces the commissioner of education determines are necessary to meet the educational needs of the district.

• Square Footage Allowance-The square foot allowance per pupil for new construction is as follows:

  Preschool-grade 5	125 sq. ft.
  Grades 6-8	134 sq. ft.
  Grades 9-12	151 sq. ft.

• Construction Oversight/Coordination-For Abbott districts and non-Abbott districts eligible for 55 percent or more state aid, the New Jersey Economic Development Authority will be responsible for construction and financing. All other districts have the option of using the authority's services.

• Retroactivity-The legislation provides benefits retroactively to school districts as follows:

• For districts that have issued debt, the state will provide debt service at a minimum of 40 percent for all qualified project costs (a) if the district has obtained approval from the commissioner of education for the school facilities project since September 1, 1998, or (b) if the district has obtained approval from the state Department of Community Affairs (or the appropriately licensed municipal code official) of the final construction plans and specifications since September 1, 1998.

• For districts that have not issued debt, other than short-term notes, the state will provide a cash grant at a minimum of 40 percent for projects that received approval from the commissioner at any time prior to the law's effective date.

• Appeal of Eligible Costs-The district may apply for additional state aid if detailed plans and specifications completed by a design professional indicate that the cost of the project will exceed eligible costs, as determined by the commissioner, by at least 10 percent. However, the amount of additional state aid will be capped at 10 percent of eligible costs.

• Early Childhood Education-A district that receives early childhood program aid may include, as part of its facilities plan, a community early childhood education facilities project, owned and operated by a nonprofit daycare provider that is licensed by the Department of Human Services.

• Community Development-The treasurer is authorized to designate six school facilities projects as community development projects.

• Failed Referendum-If a district fails to obtain voter approval for a particular project after two attempts, it may ask the commissioner to authorize funding for that project. Such an appeal is restricted by the following criteria: (a) the project is consistent with the facilities efficiency standards; (b) the first attempt at voter approval took place during the previous three years; and (c) the first referendum addressed the same project. If the commissioner determines that the project is necessary for a thorough and efficient education, he will approve the project and authorize the issuance of bonds to cover the local share of the project. The New Jersey Economic Development Authority must construct any project approved in this manner.

Step 1 Long-Range Facilities Plan

All school districts must prepare and submit a long-range facilities plan to the commissioner of education by December 15, 2000. The document must detail the district's school facilities needs and how it will address those needs over the next five years. Computer software for the long-range facilities plan will be piloted in selected school districts during the month of August. The Department of Education will provide regional training on software use in September.

Long-range plan necessary for facilities funding-Prior to submitting an application for a school facilities project, a district must have its long-range facilities plan approved by the commissioner. The plan must comply with the "facilities efficiency standards." These standards will be published in the "New Jersey Register" shortly, and will become effective after a 30-day public comment period. Immediately upon their publication, NJSBA will make the standards available on its Web site at www.njsba.org.

Exceptions-Prior to October 1, 2000, the commissioner may approve a facilities application without the district having filed a long-range plan if (a) the project is necessary to protect health and safety of the school's occupants; (b) it is related to early childhood education programs; (c) the school facility is overcrowded; or (d) the district has received bids on the project and further delay will negatively affect the project's cost.

Time-lines-The commissioner has 90 days from receipt of a district's long-range facilities plan to determine whether it is complete. If the plan is complete, the commissioner has 60 days from the date the district is notified to determine whether to approve the plan.

Step 2 Project Approval

Any district seeking to initiate a school facilities project must submit a project application to the commissioner. The commissioner will review a district's proposed project to determine whether it complies with the facilities efficiency standards and the district's long-range plan. The commissioner must also approve additional space that exceeds the state standards, if the district demonstrates the additional space is necessary for required programs.

Time-lines-The commissioner must make a decision on a district's application within 90 days from the date on which he determines the application is complete. If the commissioner cannot make a decision within the 90-day period, he must notify the district in writing explaining the reason for the delay. Within 60 days of the expiration of the original 90-day period, the commissioner must make a decision on the application or it will be deemed automatically approved.

Approved projects-If the commissioner approves a district's school facilities project, he will calculate eligible costs of the project on which the district will be entitled to receive state aid.

Disapproved projects-If the commissioner does not approve additional space beyond that provided in the facilities efficiency standards, the district may either modify its plan or pay for the excess costs.

Step 3 Eligible Costs

New construction-Eligible costs for construction of new facilities and additions to existing facilities are calculated by determining the amount of allowable square footage (as per the facilities efficiency standards) and multiplying that square footage by $138 (the per square foot cost allowance).

As an example, a school district must build an addition to house 50 additional elementary students. The facilities efficiency standards provide for 125 square feet per elementary student. The total allowable square footage for the project would equal 6,250 (50 students x 125 square feet).

To determine the district's state aid, the square footage (6,250) is multiplied by the square foot cost allowance of $138 ($138 x 6,250 square feet = $862,500 in eligible project costs). Assuming the school district qualifies for the minimum 40 percent state aid, it would be entitled to an up-front cash grant of up to $345,000 ($862,500 x .40 = $345,000).

Renovation-Eligible costs for renovation projects equal the estimated actual costs. The estimated costs of a renovation project may contain only those costs necessary for compliance with the Uniform Construction Code, for health and safety, and/or for educational adequacy as determined by the facilities efficiency standards.

Step 4 Financing and Construction

With the exception of the Abbott districts, school boards must obtain voter or board of school estimate approval for the local share of the construction project. State funding for the project is available once the district secures financing for the local share of the project.

Referendum language-The referendum must identify the final eligible costs of the project, as determined by the commissioner, as well as those amounts that are in addition to eligible costs.

School districts with a state aid percentage of less than 55 percent-A school district with a state funding percentage of less than 55 percent can opt to receive state aid for the project as debt service aid or as an up-front cash grant. It also has the option of constructing the project on its own or using the New Jersey Economic Development Authority (EDA).

Abbott districts, school districts with a state aid percentage of 55 percent or greater, and Level II districts-Abbott districts are required to use the EDA for construction and will have 100 percent of approved costs paid by the state through EDA financing. Districts in Level II monitoring and districts that have a state aid eligibility of 55 percent or greater must also use the EDA for construction of their projects. However, when the eligible costs of a school facilities project are $500,000 or less, the EDA may authorize the district to undertake the project on its own and enter into a grant agreement with the district for the state's share of the financing.

Copyright © 1998 New Jersey School Board Association. All rights reserved.