Assembly Commerce, Economic Development and Agriculture Committee Statement to Assembly, No. 4300 (2024)

Summary

An Assembly Commerce, Economic Development and Agriculture Committee statement to Assembly, No. 4300, State of New Jersey, dated May 13, 2024, reporting the bill favorably. The bill changes the New Jersey Aspire Program, administered by the New Jersey Economic Development Authority, which awards tax credits to developers of certain redevelopment projects. It expands the definition of "government-restricted municipality" to include Newark, East Orange, Union City, Elizabeth, New Brunswick, Camden, Vineland, Bridgeton and Lakewood, and provides that the EDA may approve projects there so that they could be eligible with a net positive benefit of 110 percent of the credit amount. The bill also provides that no tax would be imposed on project improvements for the first five years after a permanent certificate of occupancy.

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ASSEMBLY COMMERCE, ECONOMIC DEVELOPMENT AND AGRICULTURE
COMMITTEE

STATEMENT TO

ASSEMBLY,
No. 4300

STATE
OF NEW JERSEY

DATED: MAY 13,
2024

The Assembly Commerce, Economic Development and
Agriculture Committee reports favorably Assembly Bill No. 4300.

This bill provides various changes to the New Jersey
Aspire Program (Aspire Program), which is administered by the New Jersey
Economic Development Authority (EDA) and was enacted as part of the “New Jersey
Economic Recovery Act of 2020,” P.L.2020, c.156 (C.34:1B-269 et al.).

Under the Aspire Program, the EDA awards tax credits
to the developers of certain redevelopment projects, which projects would not
be economically feasible absent such subsidies, and which projects meet certain
other requirements. In turn, these developers are required to comply with
certain additional requirements concerning the development of these projects,
including, but not limited to, the dedication of affordable housing in new
residential projects.

Government-restricted municipalities

The bill revises the definition of
“government-restricted municipality” to expand municipal eligibility to the
municipalities of Newark, East Orange, Union City, Elizabeth, New Brunswick,
Camden, Vineland, Bridgeton, and Lakewood, in addition to Paterson, Trenton,
and Atlantic City.

Net benefits analysis and final award certification

A developer of a redevelopment project applying for an
award of tax credits from the EDA is required to demonstrate that providing
public assistance to the project will result in a net positive benefit to the
State. Currently, the EDA requires each applicant to demonstrate a net
positive benefit to the State of 160 percent of the credit amount.

Under current law, certain redevelopment projects,
including those located within government-restricted municipalities, may be
approved at the authority’s discretion while having a net positive economic
benefit that is as much as 35 percent less than the standard applied to projects
in other locations. This bill would extend this allowance to provide that the
EDA may approve projects located in government-restricted municipalities that
demonstrate a net positive benefit to the State of up to 50 percentage points
less than the standard requirement. As a result, these projects could be
eligible for approval by demonstrating a net positive benefit that is 110
percent of the credit amount.

The bill also removes a provision of law that requires
the EDA to reduce the overall award of tax credits to a redevelopment project
if it is determined, at the time of project certification, that the actual
project financing gap is less than the amount initially approved by the EDA.

Option of prevailing wages or a project labor agreement

This bill revises the definition of the term “project
cost,” for the purposes of the program, to provide that an additional amount,
not to exceed 20 percent of the total project cost for costs not directly
related to construction, may only be included with respect to the cost of
infrastructure improvements. The bill also provides that, for purposes of the
definition of “project cost,” capitalized interest paid to third parties is
deemed to be costs directly related to construction.

The bill also amends the definition of “project cost”
to include the funding of a debt service reserve fund.

Utility authorities and connection fees for redevelopment
projects Under current law, county, regional, and municipal utility
authorities are required to provide reductions in connection fees for new
connections to the water system and sewerage system for certain projects,
including public housing authorities, non-profit organizations building
affordable housing projects, and any other affordable housing projects. The
bill extends this provision of law to require county, regional, and municipal
utility authorities to provide the same reductions in connection fees for the
developers of redevelopment projects under the Aspire Program.

Phased tax abatement for redevelopment projects

The bill also provides for tax exemptions on the
improvements from redevelopment projects. Under the bill, for the first five
years after a project receives a permanent certificate of occupancy, no tax
would be imposed on the improvements on the property. However, the land on
which the project is located would continue to be taxed during the first five
years. Following the initial five-year period, the developer would be required
to enter into an agreement to pay annual payments in lieu of taxation to the
municipality for an additional five-year period. Over the course of this
five-year period, the payments by the developer of the project shall increase
by 20 percent annually.

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