Meadowlands Remediation and Redevelopment Project
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State of New Jersey Office of the Inspector General Mary Jane Cooper, Inspector General Meadowlands Remediation and Redevelopment Project February 28, 2008 Office of the Inspector General Meadowlands Remediation and Redevelopment Project ~ Table of Contents ~ I. INTRODUCTION...................................................................................................................... 1 A. Scope of Investigation........................................................................................................... 1 B. Investigative Process............................................................................................................. 3 C. Standards ............................................................................................................................... 4 D. Format of Report................................................................................................................... 4 II. CONCLUSIONS....................................................................................................................... 5 A. NJMC Enters Agreement with Private Entity....................................................................... 5 B. Private Entity Seeks Public Financial Assistance ............................................................... 15 C. Private Entity Mismanages Project ..................................................................................... 20 D. Summary ............................................................................................................................. 25 E. Recommendations ............................................................................................................... 27 III. LANDFILL CLOSURE AND DEVELOPMENT AGREEMENT....................................... 31 A. New Jersey Meadowlands Commission ............................................................................. 31 1. Management of Solid Waste and Landfill Closure.......................................................... 34 a. Department of Environmental Protection Regulatory Control ..................................... 35 b. NJMC Landfill Closure Methodology.......................................................................... 37 2. Development of the Meadowlands ................................................................................... 38 a. Brownfield Act Encourages Private Development ....................................................... 38 b. Redevelopment Plans for Rutherford and Lyndhurst ................................................... 39 B. NJMC Partners with EnCap for Meadowlands Remediation and Redevelopment Project . 41 i 1. NJMC Requests Statements of Qualifications................................................................. 41 2. Creation of EnCap............................................................................................................ 42 3. EnCap Overstates Its Qualifications and Experience ...................................................... 45 4. NJMC Selects EnCap....................................................................................................... 48 5. EnCap’s “Gold Coast” Vision ......................................................................................... 52 a. EnCap Encourages Expansion of Project Area............................................................. 53 b. EnCap Realizes Its Vision Will Increase Costs ............................................................ 54 6. Re-Creation of EnCap...................................................................................................... 56 a. New Ownership............................................................................................................. 56 b. NJMC Not Aware of Full Extent and Significance of Changes ................................... 58 7. EnCap Takes Control....................................................................................................... 64 IV. NJMC AND ENCAP WORK TO FULFILL CONTRACT TERMS ................................... 65 A. Property Amassed for EnCap Development ....................................................................... 65 B. EnCap Obtains Project Insurance and Performance Bond.................................................. 66 C. NJMC Closure Fund Depleted ............................................................................................ 67 D. NJMC Limited Review and Approval ................................................................................ 69 E. Agreement Amended to Provide EnCap Ownership of the Property.................................. 71 F. Expansion of EnCap Vertical Development Rights ............................................................ 73 G. Attempts by EnCap to Develop Porete Avenue, North Arlington...................................... 76 V. DEP REQUIREMENTS FOR MEADOWLANDS REMEDIATION................................... 81 A. DEP Permits........................................................................................................................ 81 B. Landfill Closure Methodology............................................................................................ 83 1. Cover System................................................................................................................... 84 ii 2. Fill Protocols.................................................................................................................... 85 a. Below Barrier................................................................................................................ 85 b. Cap ................................................................................................................................ 86 c. Above the Barrier.......................................................................................................... 86 C. Fill Acceptance Procedures and Certifications ................................................................... 87 D. Application/Certifications................................................................................................... 89 E. Fill Delivered to the Site...................................................................................................... 90 F. Ground Improvement Program............................................................................................ 91 VI. ENCAP OBTAINS PUBLIC FINANCIAL ASSISTANCE FROM EDA ........................... 92 A. EDA Financial Assistance for Private Entities ................................................................... 92 1. Creation and Purpose of the Economic Development Authority..................................... 92 2. The EDA Funding Process............................................................................................... 94 B. EnCap’s First Application for EDA Financial Assistance.................................................. 95 1. EnCap’s Amended Application ....................................................................................... 97 2. EDA Approval of $145 Million in Bonds for Project...................................................... 99 3. 2001 Insurance Coverage............................................................................................... 101 C. March 2004 EnCap Application to Restructure Its Loan.................................................. 103 1. EDA Board Approval of Refunding Plus $5M........................................................... 105 2. EnCap Amends Collateral.............................................................................................. 107 3. 2004 Insurance Coverage............................................................................................... 109 D. EDA Financial Assistance Repaid in Full......................................................................... 110 VII. ENCAP OBTAINS $212M IN PUBLIC FINANCIAL ASSISTANCE FROM EIT/DEP .................................................................................... 111 A. Environmental Infrastructure Trust................................................................................... 111 iii B. Department of Environmental Protection ......................................................................... 113 C. EnCap representatives Identify EIT and DEP Loans as a Source of Financing ............. 114 1. EnCap Proposes EIT/DEP Financing ............................................................................ 116 2. EIT and DEP Review of EnCap Proposal...................................................................... 118 3. Negotiations Concerning Terms of the Loans ............................................................... 121 a. Interest Rate ................................................................................................................ 122 b. Proposal for Bullet Maturity ....................................................................................... 123 c. Brownfield Reimbursements....................................................................................... 124 d. State Rejects EnCap’s Proposed Terms...................................................................... 125 D. EnCap and EIT/DEP Reach Agreement ........................................................................... 126 1. Security for the EIT Loan .............................................................................................. 128 2. Security for the DEP Loan............................................................................................