LEGISLATIVE FISCAL ESTIMATE
[First Reprint]
ASSEMBLY, No. 4229
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: AUGUST 19, 2024
SUMMARY
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Synopsis: |
Requires NJEDA to establish loan program to assist beginning farmers in financing capital purchases. |
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Type of Impact: |
Potential multi-year increase in State expenditures and revenues. |
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Agencies Affected: |
New Jersey Economic Development Authority. |
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Office of Legislative Services Estimate |
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Fiscal Impact |
Multi-Year Lifespan of Loan Program |
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State Expenditure Increase |
Indeterminate |
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State Revenue Increase |
Indeterminate |
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· 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 a beginning farmer loan program.
· The OLS also expects an annual revenue increase for the New Jersey Economic Development Authority resulting from the payment of application fees, loan issuance fees, and debt service payments by borrowers. Depending on the interest rates approved by the authority, these loan repayments may partially or wholly offset any expenses incurred by the authority in the operation of the loan program.
· The OLS notes that the bill gives discretion to the authority 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 authority 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 authority, in consultation with the Department of Agriculture, 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, the 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 authority. Loan agreements would set forth the terms and conditions of the loan including the interest rate deemed necessary by the authority. Furthermore, the authority, 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 authority to establish terms and conditions governing the occurrence of default by the approved applicant. This bill allows the authority 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 authority 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 increase for the authority resulting from application fees, loan issuance fees, and debt service payments by borrowers. Depending on the interest rates approved by the authority and the rates of default on program loans, these loan repayments may partially or wholly offset any expenses incurred by the authority 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 authority, and the amount of any loan application and issuance fees.
Notably, the bill gives discretion to the authority 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 authority 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 authority will incur in administering the program. The OLS notes, however, that for similar programs, the authority imposed loan application and loan issuance fees on borrowers that were intended to cover the authority’s administrative costs. Considering the uncertainty regarding program costs and demand for the loans, the OLS cannot predict the amount and total collections of any loan application and issuance fees the authority may impose.
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Section: |
Authorities, Utilities, Transportation and Communications |
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Analyst: |
Assistant Fiscal Analyst |
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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.).