LEGISLATIVE FISCAL ESTIMATE

[First Reprint]

ASSEMBLY, No. 4645

STATE OF NEW JERSEY

220th LEGISLATURE

 

DATED: NOVEMBER 2, 2022

 

 

SUMMARY

 

Synopsis:

Requires NJEDA to establish loan program to assist beginning farmers in financing capital purchases.

Type of Impact:

Potential multi-year increase in State expenditures and revenues.

Agencies Affected:

New Jersey Economic Development Authority.

 

 

Office of Legislative Services Estimate

Fiscal Impact

Multi-Year Lifespan of Loan Program

 

State Expenditure Increase

Indeterminate

 

 

State Revenue Increase

Indeterminate

 

 

 

 

 

·         The Office of Legislative Services (OLS) expects the bill to result in an indeterminate increase in State expenditures associated with the administration and operation of the beginning farmer loan program.

 

·         The OLS also expects an annual revenue gain for the New Jersey Economic Development Authority (EDA) from the payment of application fees, loan issuance fees, and debt service payments by borrowers.  Depending on the interest rates approved by the EDA, these loan repayments may partially or wholly offset any expenses incurred by the EDA in the operation of the program.

 

·         The OLS notes that the bill gives discretion to the EDA in determining the overall size of the loan program, the maximum amount of each loan, the interest rates imposed on eligible loans, and the terms governing an event of default.  Because the OLS cannot predict how the EDA will implement these aspects of the loan program, the OLS cannot quantify the anticipated fiscal impact of the loan program.

 

 

BILL DESCRIPTION

 

      This bill requires the EDA, in consultation with the Department of Agriculture (DOA), to develop and administer a beginning farmer loan program to facilitate the acquisition, by beginning farmers, of agricultural land, agricultural improvements, or depreciable agricultural property. Additionally, this bill establishes requirements for prospective applicants for the loan program.  Approved loans under this program would be issued pursuant to a loan agreement executed between the beginning farmer and the EDA.  Loan agreements would set forth the terms and conditions of the loan including the interest rate deemed necessary by the EDA.  Furthermore, the EDA, at its discretion, may require approved applicants to submit audited financial statements to ensure the beginning farmer’s continued viability.  The bill also permits the EDA to establish terms and conditions governing the occurrence of default by the approved applicant.  Additionally, this bill requires the EDA, in consultation with the DOA, to adopt rules and regulations establishing the maximum allowable net worth at which a person will be deemed a beginning farmer, using data compiled by the National Agricultural Statistics Service in the United States Department of Agriculture.   This bill allows the EDA to participate in and cooperate with programs of the Consolidated Farm Service Agency in the United States Department of Agriculture, the Federal Land Bank, or any other federal government or State agency or program in the administration of the loan program.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS estimates that the loan program will result in an annual expenditure increase for the EDA attributable to the issuance of loans to qualified beginning farmers and the administrative expenses over the duration of the loan program, including the cost of producing the required rules and regulations.  The bill will also produce an annual revenue gain for the EDA from application fees, loan issuance fees, and debt service payments by borrowers.  Depending on the interest rates approved by the EDA and the rates of default on program loans, these loan repayments may partially or wholly offset any expenses incurred by the EDA in the operation of the program.

      The OLS cannot determine the magnitude of the direct fiscal impacts, and by extension, their net fiscal effect on the State because of a lack of information on several key variables, such as the total amount of money to be lent, the average interest rate of the loans to be issued, the default rate of borrowers, the cost of administering the loan program, the cost of capital for lending by the EDA, and the amount of any loan application and issuance fees.

      Notably, the bill gives discretion to the EDA in determining the overall size of the loan program, the amount issued per loan, the interest rates imposed on eligible loans, and the terms of default on program loans. Because the OLS cannot predict how the EDA will implement these aspects of the loan program, the OLS cannot quantify the anticipated fiscal impact of the loan program.

      In addition, the OLS lacks sufficient information to quantify the annual costs the EDA will incur in administering the program.  The OLS notes, however, that for similar programs, the EDA imposed loan application and loan issuance fees on borrowers that were intended to cover the EDA’s administrative costs.  Considering the uncertainty regarding program costs and demand for the loans, the OLS cannot project the amount and total collections of any loan application and issuance fees the EDA may impose.

Section:

Authorities, Utilities, Transportation and Communications

Analyst:

Michael Walker

Assistant Fiscal Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).