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

Summary

Statement of the Assembly Commerce, Economic Development and Agriculture Committee, State of New Jersey, dated May 13, 2024, reporting favorably and with committee amendments Assembly Bill No. 2076. As amended, the bill amends and supplements the "New Jersey Aspire Program Act" and establishes a "Redevelopment Project Bridge Financing Program" offering loans or loan guarantees to redevelopment projects with an outstanding project financing gap. It reduces the maximum eligibility period for commercial, mixed-use and residential projects to 10 years. Commercial project developers must maintain at least 60 percent occupancy or forfeit tax credits for that tax period. Except in a government restricted municipality, total tax credits are limited to 90 percent of project cost for projects receiving federal Low-Income Housing Tax Credits and 80 percent for others.

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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 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 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: 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)
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
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;

(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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