Corzine stimulus offers major incentives to developers

//July 31, 2009

Corzine stimulus offers major incentives to developers

//July 31, 2009

Critics call the program ‘a giveaway’ in a tough time for local governments.Real estate developers and brokers are taking the wrappers off the different pieces of what is really their own special stimulus plan, which Gov. Jon S. Corzine signed Monday.

The so-called Economic Recovery Legislation (S-2299/A-4048) expands the scope of the Urban Transit Hub Tax Credit Act, helps developers finance a part of their projects with future tax revenues they are expected to create, places a moratorium on an affordable housing fee that commercial developers were required to pay and provides new financing options for developers to build on college campuses.

“There were a number of companies that were waiting for this bill to be signed,” said Tim Lizura, senior vice president in charge of business development at the New Jersey Economic Development Authority. “The bill broadens the applicability of the transit hub program to many more companies.”

The revised transit hub tax credit program lowers the capital investment threshold from $75 million to $50 million for an owner of a qualified business facility, and from $50 million to $17.5 million for a tenant that occupies a leased area of the qualified business.

Lizura said “the total investment this one piece of the bill would leverage is between $2 [billion] and $3 billion” over the life of the transit hub tax credit program. And if it attracts about 20 projects, “you could look at a minimum of 5,000 jobs,” he said; each project is required to create 250 jobs to qualify.

The changes to the transit hub program directly address concerns of real estate developers that the program excluded several potential applicants who couldn’t meet its capital investment specifications. Those changes “make the program more flexible,” according to Gil Medina, executive managing director of real estate services firm Cushman & Wakefield.

Corzine’s latest stimulus boost is a direct result of the efforts by the threesome of a real estate advisory board he created a few months ago, the New Jersey Labor Association and the New Jersey Chamber of Commerce’s so-called Platform of Progress program, Medina said. “The ideas that have been implemented are the ones that everyone believed were of the greatest urgency,” he added. He is a member of the governor’s Real Estate Advisory Board.

Charles Sarlo, vice president and general counsel at DMR Architects, in Hasbrouck Heights, said he expected many of his firm’s clients to look closely at another key feature of the Corzine package — the new Economic Redevelopment and Growth Grant program.

Sarlo said the program, modeled on the state’s Brownfields Site Reimbursement program, “would bring out many projects from the drawing board.” It allows developers to get reimbursement of up to 75 percent of their project development costs against the backing of future tax revenue, so long as they establish that they were unable to secure conventional market financing for that.

“Not only are we giving towns a new tool to help promote smart redevelopment, but we are basing it on a highly successful program that has proven results,” said Assemblyman Louis Greenwald (D-Camden) in a statement.

The legislation also exempts certain properties from the 2.5 percent development fee imposed by the Statewide Non-Residential Fee Act, and appropriates $15 million to the New Jersey Affordable Housing Trust Fund, according to a statement from the governor’s office. As a result, the Department of Community Affairs will have the ability to grant awards or loans to municipalities based on their anticipated use of municipal development fee funds.

Not everybody is happy with the stimulus package. The Economic Stimulus Act “could cost the state, its municipalities, counties and schools millions of dollars as money is diverted to developers and away from essential public services,” the New Jersey Policy Perspective, a nonprofit advocacy group in Trenton, said in a statement. “When this law is in effect, developers will be entitled to receive reimbursement for their costs from up to 22 state and local taxes and fees.”

Naomi Mueller Bressler, NJPP policy analyst, said, “At a time when the state and so many municipalities are finding it so difficult to raise the money they need to continue providing essential services, it seems an especially poor time for state officials to authorize this kind of blatant giveaway to developers.”

“The Corzine administration is giving the state away to developers. First, they privatized site remediation and extended permits, now we are giving away the state Treasury in tax subsidies,” said Jeff Tittel, director of the New Jersey Sierra Club.

It’s not a real estate stimulus package all the way, though. A component encourages investment in technology-centric businesses that have fewer than 225 employees.

Emerging technology and biotechnology companies stand to gain, as they can now sell their net operating losses and R&D tax credits to other corporations with changes to the state’s Technology Business Tax Certificate Program. These changes include an increase in the maximum lifetime benefit per business, from $10 million to $15 million. The firms can use their unusable tax losses and research credits into cash, which can then be used to purchase new equipment or upgrade facilities.

E-mail Shankar P. to [email protected]