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Two former lawmakers, who legislative leadership tapped to help develop New Jersey’s next set of flagship corporate incentives, are eyeing how those programs can be crafted to spur certain types of community-focused developments in federal opportunity zones.

Former state Sens. Ray Lesniak, a Democrat, and Joe Kyrillos, a Republican, have proposed a bonus similar to the now-expired Economic Redevelopment and Growth gap financing program, which fills a portion of the gap between the project cost and the cash businesses have on hand.

This additional incentive would be specifically for residential projects in opportunity zones and distressed-municipality investment zones of Atlantic City, Passaic, Paterson and Trenton. The program would be capped at $600 million for residential projects in opportunity or investment zones which have to have at least 35 percent affordable housing. Of that, $100 million would go to residential projects that are 100 percent affordable housing.

“This is designed to provide decent, affordable housing for residents in [the] New Jersey opportunity zones,” Lesniak told NJBIZ.

A product of the 2017 federal tax cuts, opportunity zones let investors get a tax break by putting money – long term – into distressed communities. There are 8,700 such zones nationwide, 169 of which are in New Jersey, spanning 75 municipalities in all 21 counties.

Lesniak pointed to many of the concerns raised last week at the 2019 Governor’s Conference on Housing and Economic Development in Atlantic City.

There, attendees focused on an August New York Times report which stoked fears that opportunity zones might become tools that allow the wealthy and politically connected to accumulate more wealth while dodging taxes in the process.

State and local officials would have to develop incentives and regulations to prevent similar scenarios from playing out in the future, Lt. Gov. Sheila Oliver told NJBIZ at the conference.

Grow over

Gov. Phil Murphy’s proposed NJ Aspire incentive – capped at $100 million a year to replace ERG – would offer incentive bonuses to attract certain large-scale developments to opportunity zones, known as “transformative projects.”

The most recent version of Grow NJ expired in July, following intense scrutiny by the Murphy administration into whether the state lacked oversight of the program, and whether Grow NJ only ended up benefiting politically connected figures.

Shortly before Labor Day weekend, Lesniak and Kyrillos unveiled what they then called “Grow New Jersey 3.0.”

Under the proposal from late August – part of what Lesniak said he submitted to the Murphy administration and state Legislature for consideration – the state would still award corporate tax credits to businesses considering moving into New Jersey or leaving that state, as was the case with original Grow NJ initiative. But, the new incentive program would tweak the net benefits test – a formula used to calculate how the tax breaks awarded are exceeded by the economic benefit to the state – by reducing the payback period from 20 to 15 years, and increasing the return on investment from 110 percent to between 120 and 130 percent of the tax break.

Individual projects would be capped, but not the program as a whole. The Economic Development Authority, which oversees Grow NJ and ERG, would be in charge of the ultimately agreed-upon iteration of the program.

The chief executive officer will have to certify to the EDA that the business met the obligations laid out in the tax credit agreement. And businesses will have to submit a detailed economic analysis of the different sites they are considering moving to – a point of concern brought up by a task force Murphy convened to scrutinize Grow NJ.

The agency would wield considerable oversight power, something critics of Grow NJ said was lacking among the EDA during the five-year lifetime of the program.

According to a January state comptroller’s audit, tax break payments were given to companies even though the EDA could not certify that they kept up with their side of the incentive agreement. According to the task force, several businesses with close ties to South Jersey powerbroker George Norcross submitted bogus plans about where out of state they would move if they did not win the tax breaks, despite no actual plans to do so.