Assembly Commerce, Economic Development and Agriculture Committee Statement to Assembly, No. 2076 (May 13, 2024)

Summary

Assembly Commerce, Economic Development and Agriculture Committee statement to Assembly, No. 2076, with committee amendments, State of New Jersey, dated May 13, 2024. The committee reports favorably and with committee amendments Assembly Bill No. 2076, which as amended amends and supplements the “New Jersey Aspire Program Act” (Aspire Program) and provides for related changes to the New Jersey Gross Income Tax and Corporation Business Tax. The statement says the bill also establishes the “Redevelopment Project Bridge Financing Program,” as part of the Aspire Program, to offer additional financial assistance for redevelopment projects that have an outstanding project financing gap. It describes revised definitions of “commercial project,” “incentive area,” “mixed-use project” and “stranded asset.”

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ASSEMBLY COMMERCE, ECONOMIC DEVELOPMENT AND
           AGRICULTURE COMMITTEE

                           STATEMENT TO

                      ASSEMBLY, No. 2076
                           with committee amendments



       STATE OF NEW JERSEY
                             DATED: MAY 13, 2024

          The Assembly Commerce, Economic Development and
      Agriculture Committee reports favorably and with committee
      amendments Assembly Bill No. 2076.
          As amended, this bill amends and supplements the “New Jersey
      Aspire Program Act” (Aspire Program) and provides for certain
      related changes to the New Jersey Gross Income Tax and Corporation
      Business Tax. The bill also establishes the “Redevelopment Project
      Bridge Financing Program,” as part of the Aspire Program, to offer
      additional financial assistance for redevelopment projects that have an
      outstanding project financing gap.

      Aspire Program Definitions
          The bill revises the definition of a “commercial project” to include
      industrial space that is predominantly used for warehouse distribution
      or fulfillment centers and has at least $10 million in environmental
      remediation costs. The bill amends the definition of an “incentive
      area” to include an endorsed plan and removes certain transportation
      connectivity requirements that exist under current law. The bill
      defines a “mixed-use project” as a redevelopment project that includes
      a residential component and a nonresidential component.
          The bill defines the term “stranded asset” to mean any building
      previously used for commercial, retail, office space, manufacturing, or
      industrial purposes, which building is no longer used for such
      purposes, and which has been abandoned, experienced significant
      vacancies for at least two consecutive years, or has fallen into such
      disrepair as to be untenantable.
          The bill also clarifies that the definition of the term “project cost”
      also applies to the term “total project cost.” The definition for “total
      project cost” under current law instead applies for the term “total
      development cost” or “total redevelopment cost” under the bill.
          The bill provides that for a redevelopment project that is located in
      a government restricted municipality, the calculation of “project cost”
      or “total project cost” also includes the costs of land and building
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acquisition, professional services, environmental remediation, and
infrastructure improvements.

Aspire Program Changes Concerning Residential Projects
    The bill provides that the New Jersey Economic Development
Authority’s (authority) housing affordability controls are to be
consistent with those in the “Fair Housing Act,” except not including
the bedroom distribution requirements for three-bedroom housing
units.
    The bill provides that, in addition to the exemption for certain
commercial tenants, commercial subtenants, or other commercial
occupants with rights in a redevelopment project, any residential
tenant of a redevelopment project is also exempt from the requirement
to pay the prevailing wage rate for each worker’s craft or trade when
that worker is employed to perform building services work at the
redevelopment project.

Sale of Buildings Under the Aspire Program
    A developer is permitted, under the bill, to sell one or more
buildings during the eligibility period if the sale is an arms-length sale
and is subject to the purchaser’s assumption of all obligations under
the Aspire Program.

Aspire Program Community Benefit Requirement
    The bill amends current law to exempt the developers of certain
projects from the requirements of a community benefits agreement
once the host municipality certifies the approval letter or adopts the
redevelopment agreement at a public meeting, which documents are
required to state that the community benefit under a community
benefits agreement has been met.

Aspire Program Occupancy Requirement
    Beginning on the third year following the date of issuance of a
final certificate of occupancy during the eligibility period of a
commercial project and through the eligibility period, the developer
and any co-applicant is required to maintain at least 60 percent
occupancy or to forfeit all tax credits for the tax period in which
occupancy falls below this minimum requirement. Tax credits are
allowed in full upon restoration of 60 percent or greater occupancy.
Occupancy is to be measured by the average occupancy rate during the
relevant tax period. Residential projects are exempt from this
requirement.

Eligibility for Aspire Program
    Among other conditions of eligibility under current law, a
developer may qualify for an incentive award if the developer has not
commenced any construction at the site for the redevelopment project
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prior to applying for the Aspire Program, with certain exceptions. The
bill adds a condition that if demolition and site remediation activities
were commenced prior to application, the developer is required to
have paid all construction workers engaged in such work at the
prevailing wage rate for their respective crafts or trades.

Incentive Award Agreement
    Under current law, an incentive award agreement is to include a
requirement that the developer confirm that each contractor or
subcontractor performing work on the project has not been debarred by
the Department of Labor and Workforce Development from engaging
in or bidding on Public Works Contracts in the State. The bill adds to
this requirement that the developer is required to confirm that each
contractor or subcontractor performing work on the project is also not
suspended or disqualified from the same activity. The bill further
requires that a developer confirm that each contractor or subcontractor
performing work on the project is not debarred, suspended, or
disqualified by a federal agency from engaging in federally-funded
construction projects or bidding on federal contracting opportunities.

Eligibility Period Under Aspire Program
    The bill reduces the maximum duration of an eligibility period for
a commercial project, mixed-use project, or residential project to 10
years. Under current law, the maximum duration of an eligibility
period for a commercial or mixed-use project is 15 years, and for a
residential project is 10 years. The bill adds that the authority may
determine a shorter eligibility period if this reduction would enhance
access to tax credit monetization or otherwise enhance the
effectiveness of the program.

Total Tax Credit Eligibility Under Aspire Program
    The bill increases the amount of tax credits that may be awarded to
a developer in certain circumstances. Specifically, the bill provides
that a developer may be allowed each of the following enhancements
to the developer’s total tax credit award: (1) for a redevelopment
project that includes redevelopment of a stranded asset, an increase of
up to 10 percent of the project cost; (2) for a residential project
meeting the three-bedroom distribution requirements of the Uniform
Housing Affordability Controls, an increase of up to five percent of the
project cost; or (3) for a redevelopment project meeting local first
source hiring requirements for residents in the municipality or county
in which the project is located and in surrounding municipalities, as
appropriate, an increase of up to three percent of the project cost.
    However, except for any redevelopment project that is located in a
government restricted municipality, the bill limits a developer’s total
tax credits awarded under the Aspire Program, together with any
program administered by the authority for a redevelopment project, to:
                                    4

90 percent of the project cost for redevelopment projects that receive
tax credits under the federal Low-Income Housing Tax Credit
Program; and 80 percent of the project cost for all other redevelopment
projects.

Aspire Program Tax Credit Carry Forward and Transfer
    Under current law, a developer is required to apply tax credits
during the tax periods approved by the authority. This bill additionally
authorizes a developer to apply tax credits within the three successive
tax periods immediately following the tax period in which the tax
credit certificate is received by the developer. Similarly, a developer
is authorized under the bill to transfer the tax credits, and a transferee
is authorized to use the tax credits, within the three successive tax
periods immediately following the tax period in which the tax credit
certificate is received by the developer.

Transformative Projects Under Aspire Program
     This bill amends current requirements for certain transformative
projects. Under current law, a residential project with fewer than 700
new residential units is required to include the construction of: (1) not
less than 200 new residential units if the project is located in a
government-restricted municipality, 300 new residential units if the
project is located in an enhanced area, or 400 residential units for all
other mixed-use projects; and (2) 50,000 square feet or more of
commercial space to qualify as a transformative project. Under this
bill, these residential projects would be required to include the
construction of either: (1) not less than 200 new residential units if the
project is located in a government-restricted municipality, 300 new
residential units if the project is located in an enhanced area, or 400
residential units for all other mixed-use projects; or (2) 20,000 square
feet or more of commercial space, which may include retail space.
     Additionally, the bill permits a parking component to be included
in the calculation of the total square footage of a transformative
project, but only if constructed in agreement with local zoning,
planning, or similar requirements, or up to the amount required by the
Residential Site Improvement Standards, regardless of whether the
Residential Site Improvement Standards apply to the parking
component. Portions of a parking component that exceed local
parking requirements or the Residential Site Improvement Standards
are not to be included in these calculations. However, if the project is
located within a government restricted municipality, the entire parking
component is required to be included in the calculation of square
footage requirements for a transformative project, regardless of
agreement with local requirements or Residential Site Improvement
Standards.
     The bill provides that a developer may be allowed each of the
following enhancements to the developer’s total tax credit award: (1)
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for a transformative project that includes redevelopment of a stranded
asset, an increase of up to 10 percent of the project cost; (2) for a
residential transformative project meeting the three-bedroom
distribution requirements of the Uniform Housing Affordability
Controls, an increase of up to five percent of the project cost; or (3) for
a transformative project meeting local first source hiring requirements
for residents in the municipality or county in which the project is
located and in surrounding municipalities, as appropriate, an increase
of up to three percent of the project cost.

Aspire Program Fees
    The bill requires that the fees charged by the authority under the
program be proportional to the tax credit amount allowed for a
redevelopment project. The authority is required to promulgate a
schedule of fees that are limited to coverage of actual direct costs of
administering the program, coverage of reasonable indirect costs of
administering the program, and maintenance of reasonable reserves for
administering the program.
    The bill provides that any application submitted on or after the date
six months prior to the bill’s effective date is subject to the new
requirements provided for in the bill, except for the fees imposed on
applications that precede the effective date of the bill.

Redevelopment Project Bridge Financing Program Under Aspire
Program
    The bill provides for the establishment of a “Redevelopment
Project Bridge Financing Program” for the purpose of offering loans or
loan guarantees, at the discretion of the authority, to the developers of
redevelopment projects that have an outstanding project financing gap.
The purpose of the Redevelopment Project Bridge Financing Program
is to offer additional financing to the developer of a redevelopment
project, prior to the issuance of tax credits under the Aspire Program,
to ensure the completion of the project.
    To apply for a loan under the program, the developer is required to
submit to the authority a proposed loan and interest amount, a
repayment plan, an accounting of the remaining project financing gap,
and any other information the authority requires. To apply for a loan
guarantee, the developer is required to submit to the authority a
proposed loan guarantee amount and terms, an accounting of the
remaining project gap, and any other information the authority
requires. As a condition of requiring a loan or loan guarantee, the bill
requires each worker employed to perform construction work on the
redevelopment project to be paid not less than the prevailing wage rate
for the worker’s craft or trade.
    The bill authorizes the authority to issue loans and loan guarantees
using a “Redevelopment Project Bridge Financing Revolving Fund,”
into which all monies received from loan repayments are to be
                                  6

deposited. All monies received in the fund are to support the program
until such time as the authority determines there remains no need for
bridge financing, or until December 31, 2028, whichever occurs first,
at which point the monies in the Redevelopment Project Bridge
Financing Revolving Fund are to be deposited into the General Fund.
    The bill requires that the authority recommend to the Governor and
the Legislature an amount for appropriation, which amount is
necessary for the administration of the Redevelopment Project Bridge
Financing Program.

Aspire Program Tax Credit Redemption
    The bill requires the Department of the Treasury to redeem unused
tax credits, as the department deems necessary. The bill authorizes the
department to purchase such certificates at a discount of their face
value, which discount may not exceed 10 percent. The tax credit
redemptions are to be paid in the same manner as tax refunds, except
that the proceeds of the redemption may be issued over one or more
tax periods, but not to exceed the eligibility period.

Changes to Corporate Business Tax and Gross Income Tax
    The bill amends current law to exclude gains from the transfer of
tax credits issued pursuant to the “New Jersey Economic Recovery Act
of 2020” from the calculation of “entire net income” under the New
Jersey Corporate Business Tax and “gross income” under the New
Jersey Gross Income Tax.

   This bill was pre-filed for introduction in the 2024-2025 session
pending technical review. As reported, the bill includes the changes
required by technical review, which has been performed.

COMMITTEE AMENDMENTS:
    The committee amended the bill to:
    (1) provide that an industrial space that is predominantly used for
warehouse distribution or fulfillment centers is required to have at
least $10 million in environmental remediation costs to qualify as a
“commercial project”;
    (2) provide that if the developer of a redevelopment project
commenced demolition and site remediation activities at the project
site before submitting an application for the Aspire Program, the
developer is required to have paid all construction workers engaged in
such work at the prevailing wage rate;
    (3) require a developer to confirm that each contractor or
subcontractor performing work on the project has not been debarred,
suspended, or disqualified by the Department of Labor and Workforce
Development from engaging in or bidding on Public Works Contracts
in the State or by a federal agency from engaging in federally-funded
construction projects or bidding on federal contracting opportunities;
                                    7

    (4) permit a developer to meet the local first source hiring
requirements to obtain a tax credit enhancement by hiring residents in
the municipality or county in which the project is located and in
surrounding municipalities, as appropriate;
    (5) require that a parking component be constructed in agreement
with local zoning, planning, or similar requirements, or up to the
amount required by the Residential Site Improvement Standards,
regardless of whether the Residential Site Improvement Standards
apply to the parking component, in order to be included in the
calculation of the total square footage of the project;
    (6) revise the criteria for certain residential projects, which contain
fewer than 700 new residential units, to qualify as a transformative
project;
    (7) provide that the developer of a transformative project is eligible
for the same tax credit enhancements as the bill provides for the
developer of a redevelopment project;
    (8) require a developer who receives financial assistance under the
Redevelopment Project Bridge Financing Program to pay each worker
employed to perform construction work on the redevelopment project
the prevailing wage rate for the worker’s craft or trade; and
    (9) provide technical changes to the bill.


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