LEGISLATIVE FISCAL ESTIMATE
[First Reprint]
ASSEMBLY, No. 4790
STATE OF NEW JERSEY
220th LEGISLATURE
DATED: NOVEMBER 23, 2022
SUMMARY
Synopsis: Establishes NJ Non-Profit Loan Guarantee Pilot Program within EDA.
Type of Impact: State expenditure increase.
Agencies Affected: New Jersey Economic Development Authority.
Office of Legislative Services Estimate
Fiscal Impact Year 1 Years 2 – 20
State Expenditure Increase Marginal Impact Indeterminate Potential Impact
 The Office of Legislative Services (OLS) concludes that the bill would result in a marginal
cost increase for the New Jersey Economic Development Authority (EDA) associated with the
creation and administration of the New Jersey Non-Profit Loan Guarantee Pilot Program, as
well as a potential increase in expenditures associated with the repayment of any loan for which
the EDA guarantees and the borrower defaults.
 To implement the program, the EDA is expected to incur a marginal increase in administrative
expenses, which costs may result from the development of program guidelines, the review of
application materials, the effectuation of loan guarantee agreements, and the submission of
program reports. Because the EDA has recent experience administering similar programs, the
OLS assumes that these expenses can be supported using existing staff and resources.
 The bill requires the EDA to maintain such reserves as are necessary to secure the balance of
any loan guarantees provided under the program. Depending on the total value of loan
guarantees provided by the EDA, and the reserve balances deemed necessary to secure these
guarantees, both of which may be determined by the EDA, the bill is expected to reduce the
total monies that may be otherwise available for expenditure by the EDA.
 In the event that an approved borrower defaults on a guaranteed loan, the EDA would also be
expected to incur increased expenditures associated with the repayment of the outstanding
Office of Legislative Services Legislative Budget and Finance Office
State House Annex Phone (609) 847-3105
P.O. Box 068 Fax (609) 777-2442
Trenton, New Jersey 08625 www.njleg.state.nj.us
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balance of the guaranteed portion of the loan. Because the OLS is unable to predict the total
value of all loan guarantees provided by the EDA, or the rate at which borrowers will default
on these loans, the OLS is unable to estimate the magnitude of this potential impact.
 The OLS notes that the operation and administration of the program would be supported by
such funding as the EDA deems necessary, from the Economic Recovery Fund, to effectively
implement the program, as well as any other funds that the EDA may receive for the program.
Consequently, the OLS is unable to predict the total amount of funding that the EDA will elect
to make available for the program.
BILL DESCRIPTION
This bill requires the EDA to establish the New Jersey Non-Profit Loan Guarantee Pilot
Program to provide financial assistance in the form of loan guarantees to non-profit organizations.
Specifically, this financial assistance would be used to finance the construction of new physical
spaces that are capable of generating income sufficient to repay the loans.
A non-profit organization that seeks a loan guarantee would be required to submit an
application to the EDA. In addition to any other information that the EDA may deem appropriate,
the applicant would be required to prove that the non-profit organization has: (1) been determined
by the federal Internal Revenue Service to be a tax-exempt organization pursuant to federal law;
(2) been in existence for 10 years prior to the effective date of the bill; and (3) received financial
assistance from the State before the date of enactment of the bill. Thereafter, the EDA may
approve an application if the EDA determines that the applicant has a record of financial stability,
good reputation, and credit worthiness, and the loan for which the application has been submitted
is expected to result in the creation of 10 or more full-time jobs and generate income sufficient to
repay the loan.
After approving an application, the bill requires the EDA to enter into an agreement with a
participating bank and the non-profit organization to guarantee a direct loan or revolving line of
credit provided by the participating bank to finance the construction of a new physical space by
the non-profit organization. However, the bill provides that the value of each loan guarantee
agreement may not exceed $15 million per qualified applicant, nor may the term of each agreement
exceed 20 years. The bill also requires the EDA to establish sufficient reserves and liquid reserves
to provide a sufficient and actuarially sound basis for its pledges contained in any loan guarantee
agreement entered into under the bill.
Additionally, the bill requires the EDA to establish a special revolving fund, known as the New
Jersey Non-Profit Loan Guarantee Fund, to implement the program. Under the bill, the EDA
would be required to deposit the following monies into the fund: (1) such amounts from the
Economic Recovery Fund as the EDA deems necessary to effectively implement the program,
subject to the availability of funds; (2) any monies received by the EDA from the repayment of
the monies in the guarantee fund used to provide loan guarantees pursuant to the bill and interest
thereon; and (3) any other monies of the EDA, including but not limited to, any monies available
from other business assistance programs administered by the EDA that are authorized and
determined by the EDA to be deposited in the fund.
Beginning 24 months following the effective date of the bill, and each year thereafter in which
a loan guarantee agreement remains in effect, the EDA would also be required to prepare and
submit a report concerning the operations of the program.
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FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that the bill would result in a marginal cost increase for the EDA associated
with the creation and administration of the New Jersey Non-Profit Loan Guarantee Pilot Program,
as well as a potential increase in expenditures associated with the repayment of any loan for which
the EDA guarantees and the borrower defaults. However, the OLS is unable to quantify the
magnitude of these potential expenditures because it is unable to predict: (1) the total funding that
will be made available for the program; (2) the total value of loan guarantees that will be approved
by the EDA; (3) the reserve requirements that will be established for these loan guarantees; and
(4) the rate at which borrowers will default on guaranteed loans.
To implement the program, the EDA is expected to incur a marginal increase in administrative
expenses, which costs may result from the development of program guidelines, the review of
application materials, the effectuation of loan guarantee agreements, and the submission of
program reports. However, the OLS notes that the EDA has recent experience in administering
similar loan guarantee programs, including the New Jersey Entrepreneur Support Program, which
according to the EDA’s 2020 Annual Report, supported investments in 13 companies with more
than $2 million in loan guarantees. Given this experience, the OLS assumes that the administrative
expenses incurred by the EDA in the implementation of the program can be supported using
existing staff and resources.
Notably, the bill requires the EDA to maintain such reserves as are necessary to secure the
balance of any loan guarantees provided under the program. Consequently, depending on the total
value of loan guarantees provided by the EDA, and the reserve balances deemed necessary to
secure these guarantees, both of which may be determined by the EDA, the bill is expected to
reduce the total monies that may be otherwise available for expenditure by the EDA.
For context, the EDA currently guarantees certain loans using monies from the Economic
Recovery Fund. According to the EDA’s audited financial statements for the year ending
December 31, 2020, the EDA’s reserve requirement for these loan guarantees is based on a debt-
to-worth ratio of 5 to 1, where “debt” represents the exposure and commitments to loan guarantees,
and “worth” represents the deposits available for payment. Assuming that the EDA adopts similar
reserve requirements for this program, the initial reserves required for the program would equal
approximately one-fifth of the total value of guaranteed loans. In this scenario, the OLS notes that
the amount of required reserves would decrease over time, as borrowers’ principal payments
reduce the EDA’s exposure to guaranteed loans, until the provisions of all loan guarantee
agreements expire approximately 20 years after the date of enactment.
In the event that an approved borrower defaults on a guaranteed loan, the EDA would also be
expected to incur increased expenditures associated with the repayment of the outstanding balance
of the guaranteed portion of the loan. However, because the OLS is unable to predict the total
value of all loan guarantees by the EDA, or the rate at which borrowers will default on these loans,
the OLS is unable to estimate the magnitude of these potential expenditures.
As permitted by the bill, the operation and administration of the program would be supported
by such funding as the EDA deems necessary, from the Economic Recovery Fund, to effectively
implement the program, as well as any other funds that the EDA may receive for the program.
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Given this allowance, the OLS is also unable to predict the total amount of funding that the EDA
will make available for the program.
Section: Authorities, Utilities, Transportation and Communications
Analyst: Joseph A. Pezzulo
Senior Research 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.).