LEGISLATIVE FISCAL ESTIMATE
[First Reprint]
SENATE, No. 3344
STATE OF NEW JERSEY
220th LEGISLATURE
DATED: DECEMBER 14, 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 Economic Development Authority 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
authority guarantees and the borrower defaults.
 To implement the program, the authority 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 authority has recent experience administering
similar programs, the OLS assumes that these expenses can be supported using existing staff
and resources.
 The bill requires the authority 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 authority, and the reserve balances deemed necessary to secure
these guarantees, both of which may be determined by the authority, the bill is expected to
reduce the total monies that may be otherwise available for expenditure by the authority.
 In the event that an approved borrower defaults on a guaranteed loan, the authority 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 authority, 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 authority deems necessary, from the Economic Recovery Fund, to
effectively implement the program, as well as any other funds that the authority may receive
for the program. Consequently, the OLS is unable to predict the total amount of funding that
the authority will elect to make available for the program.
BILL DESCRIPTION
This bill requires the Economic Development Authority 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 authority. In addition to any other information that the authority 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 authority
may approve an application if the authority 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 authority 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 authority 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 authority to establish a special revolving fund, known as the
New Jersey Non-Profit Loan Guarantee Fund, to implement the program. Under the bill, the
authority would be required to deposit the following monies into the fund: (1) such amounts from
the Economic Recovery Fund as the authority deems necessary to effectively implement the
program, subject to the availability of funds; (2) any monies received by the authority 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 authority, including but not limited to, any
monies available from other business assistance programs administered by the authority that are
authorized and determined by the authority 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 authority 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 Economic
Development Authority 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 authority 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 authority; (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 authority 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 authority has recent experience in
administering similar loan guarantee programs, including the New Jersey Entrepreneur Support
Program, which according to the authority’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 authority in the implementation of the program
can be supported using existing staff and resources.
Notably, the bill requires the authority 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 authority, and the reserve balances deemed necessary to
secure these guarantees, both of which may be determined by the authority, the bill is expected to
reduce the total monies that may be otherwise available for expenditure by the authority.
For context, the authority currently guarantees certain loans using monies from the Economic
Recovery Fund. According to the authority’s audited financial statements for the year ending
December 31, 2020, the authority’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
authority 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 authority’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 authority 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 authority, 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 authority deems necessary, from the Economic Recovery Fund, to
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effectively implement the program, as well as any other funds that the authority may receive for
the program. Given this allowance, the OLS is also unable to predict the total amount of funding
that the authority 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.).