$500 Million Clean Water Fund subsidizes new development

ENCAP DEBACLE LOOMS OVER LATEST NEW JERSEY WATER FUND PLAN — Impending Legislative Approval Fails to Address Root Causes of Smoldering Scandal
NJ has a $16 Billion Unmet Clean Water Infrastructure Need – So Why are Clean Water loans subsidizing new development?
Trenton — Yesterday, a key committee of the New Jersey legislature approved financing for a new round of water projects, but this year’s $500 million spending plan does not remedy the flaws that led to the Encap fiasco, according to testimony delivered by Public Employees for Environmental Responsibility (PEER).
At a meeting yesterday, the Senate Environment Committee signed off on a four bill package which implements the Infrastructure Trust financing program, clearing the way for a half-billion dollars of new state clean water loans to be issued this fall. This endorsement for extending unchanged current policies occurs just months after an Inspector General’s report laid out causative factors behind the Encap scandal in which the state Department of Environmental Protection provided a $212 million, largely unsecured loan to a project that went belly-up, leaving taxpayers to pay a multi-million tab.
Despite the bath taxpayers took when Encap declared bankruptcy, the Corzine administration is actually increasing reliance on the very techniques that led to the fiscal follies of Encap. For example, it has adopted rules allowing clean water funds to be used for “conduit financings,” “transit villages,” and “transfer of development rights” projects and other high-finance, high-risk projects. Here’s the DEP’s list of “non-traditional” eligible project categories that receive priority points:
Smart growth projects
Transfer of Development Rights (TDR) Receiving Areas
NJDOT Designated Transit Villages –
State Plan Urban Centers and Urban Complexes
Designated Brownfields Development Areas –
Conduit Borrowers (like ENCAP)
Sustainable Community Planning
$25 million Set aside Landfill Closures and Site Remediation
In testimony before the committee today, New Jersey PEER Director Bill Wolfe argued that fundamental features enabling Encap remain. Under the new plan –
1) Clean water funds could be used to subsidize private “brownfields” projects (for example, multi-million dollar loans to big corporations, such as Hartz Mountain ($31 million) and Michelin Tire ($6.6 million) are on the funding list). In addition, tax-secured loans could still go to new development including projects only tangentially related to clean water purposes – as opposed to upgrading existing deficient infrastructure, despite state Department of Environmental Protection (DEP) estimates of a $16 billion infrastructure backlog;
2) The proposed Trust renewal legislation fails to remedy insider and lobbyist abuses identified by the Inspector General as facilitating the Encap debacle; and
3) The legislation does not address the lax financial oversight of loans found by the Inspector General, such as DEP waiver of loan collateral and security and approval of payments for ineligible uses. Without remedying weak DEP financial controls and insufficient staff to oversee loans, the Legislature leaves the program vulnerable to more financial manipulation and abuse.
“We need to close the cookie jar by prohibiting private use or benefit from Infrastructure Trust loans,” Wolfe commented, “We need to focus state support on priority clean water projects instead of no-collateral development schemes sponsored by Governor Corzine.”

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Look at development projects subsidized
Download file
Read the 2007 PEER letter to EPA asking for oversight
http://www.peer.org/docs/nj/07_30_1_epa_oversight_req.pdf
See the 2008 U.S. EPA disclaimer
http://www.state.nj.us/dep/dwq/pdf/cwf_epa_disclaimer.pdf
Look at the Inspector General report
http://www.state.nj.us/oig/pdf/Meadowlands%20Remediation%20and%20Redevelopment%20Project.pdf
http://www.state.nj.us/dep/dwq/pdf/cwf_2008prop_toc.pdfView the Wastewater Infrastructure Trust Intended Use Plan
Examine diversion of water infrastructure funds to development schemes
http://www.peer.org/news/news_id.php?row_id=813
Review $16 billion backlog of water infrastructure needs
http://www.peer.org/news/news_id.php?row_id=813
New Jersey PEER is a state chapter of a national alliance of state and federal agency resource professionals working to ensure environmental ethics and government accountability