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Corner Office Carl Goldberg

//October 12, 2009//

Corner Office Carl Goldberg

//October 12, 2009//

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Stimulus provides creative approach to developmentThe New Jersey Economic Stimulus Act of 2009, signed into law by Gov. Jon S. Corzine in July, has been promoted as a cure-all and dismissed as a give-away. To herald it as a panacea overlooks the creativity, complexity and subtlety of this legislative approach to stimulus. Similarly, dismissing it as a tax break or a freebie for the development community is to ignore the practical effects that well-placed incentives can have on job creation and economic development.

The bill breaks down into four major programs: the Urban Transit Hub Tax Credit; the Economic Redevelopment Growth Grant; a component to encourage public/private partnerships on our campuses for higher education; and a temporary moratorium on the inclusion of commercial and other nonresidential real estate development in affordable-housing regulations. Each of these components is, at its heart, a tool for creating jobs and allowing for a natural progression of economic development to stream from these jobs. Additionally, there are barriers to entry before any benefits become available to developers, corporations or municipalities wishing to participate, ensuring these beneficiaries create real economic activity.

For example, the Urban Transit Hub Tax Credit provides tax incentives for corporations that move to any one of nine eligible municipalities, each within an area designated by the state as in need of additional development and growth. Anything qualifying for these incentives must be located within a half-mile radius of a mass-transportation facility, provide more than $50 million in capital investments and guarantee at least 250 permanent jobs as a result of the construction before the tax benefits are accessible. Not incidentally, the importance of fostering economic growth in areas with access to mass transportation cannot be overlooked in this era of sprawl, traffic and uncertainty over climate change.

The Economic Redevelopment Growth Grants — known in 48 other states and the District of Columbia as tax-incremental financing — provide an additional tier of financing to projects that otherwise have a sound capital stack, but have been stymied by the recent economic crisis. As with the transit tax credit program, there are barriers to entry: A developer must have a minimum 20 percent equity stake, and the requested financing may not exceed 20 percent of the cost. This program is especially useful as a development tool because it provides two separate financing tracks depending on the needs of the project and its host municipality. The local process involves approval by ordinance from the governing municipality, as well as approval from the Local Finance Board. State-level revenues can only be accessed with the approval and participation of the Economic Development Authority, including a rigorous review process and an assessment that the project will be revenue-neutral at the state level. All qualifying projects must be located in a rehabilitation or redevelopment area, and are subject to the same environmental regulations as any other project. Since many of these areas are de facto brownfield projects, the additional financing made available by the ERGG may make the difference between a ratable-generating clean development and contaminated, fallow land.

The host municipality can be sure of reaping the benefits from the capital investment and the new jobs as a direct result of its new residents and the new ratables in the form of property, sales and payroll taxes. Moreover, the local businesses already in place benefit from new customers looking for places to dine, shop or be entertained. Most importantly, while the components that make up the New Jersey Economic Stimulus Act provide long-term tax incentives to developers and other agents of economic growth, the property, sales, payroll and/or utilities taxes would not exist without the tools provided by this legislation. All of the revenues targeted for use in, for example, the ERGG program are incremental, accessed in small amounts over 10 years or more.

This long-term approach to economic development is at the heart of this bill’s creative approach to stimulus. By providing incentives over the short term to keep development ongoing during a time of economic uncertainty, the state has found a means of ensuring long-term growth, in areas where that growth is desirable, and staying competitive in the race to attract large-scale employers and the job growth they can bring to New Jersey.

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Carl Goldberg is a partner with Roseland Property Co., based in the Short Hills section of Millburn. He also serves as chairman of the Legislative Subcommittee on the New Jersey Real Estate Advisory Board and chairman of the New Jersey Sports and Exposition Authority.

Have a hard-hitting stance on a New Jersey business issue? If you are a business or policy leader with a strong opinion, we want to hear from you. Please send op-ed proposals to [email protected].
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