An examination of Urban Transit Hub tax credit awards by the Economic Development Authority demonstrates the agency has granted extensions to multiple applicants to keep development projects on track.
Under the Urban Transit Hub law, applicants have 12 months from the approval date to meet at least three major milestones — site control, site plan approval and financing commitments.
But at their discretion, the EDA administrators may extend the deadline by six months if the project shows progress toward meeting those milestones, said Tim Lizura, the agency’s senior vice president for financing and development. And following that initial extension, the EDA can request its board grant the applicant at least another year, he said, as in some cases, an applicant has made progress, but is delayed by “extenuating circumstances.”
Still, the EDA will consider an extension if, “with the evidence that they’ve provided and their plan of action, there would be a high likelihood that they would meet the milestone in whatever the new timeframe would be,” Lizura said.
At press time, EDA was unable to produce a complete list of projects for which it has awarded extensions. Since the program’s inception, the EDA has extended milestone deadlines when a project plan is amended, when its financing commitments change or when it has been affected by a change in the Urban Transit Hub law. Such is the case with an application for a transit village project by the New Brunswick Development Corp., which was approved in May 2010. Devco received a $55.1 million tax credit for a three-phase development in the Hub City, but saw some of its funding prospects diminish over the next year and a half.
But Devco, which expects to finish all three phases this year, also became eligible for a larger tax credit based on a change in the Urban Transit Hub law enacted in July 2011. In November, the EDA increased the project’s tax credit by $21.5 million to help cover the funding gap, effectively restarting the clock on Devco’s milestones.
Devco President Christopher J. Paladino said working with the EDA was “a very dynamic process” as the project changed. He said the agency was willing to help the company amend its application “as long as we had gotten all of our approvals … (and) as long as we could show them the other financing was becoming more certain.”
“I think it’s important to understand that we were showing real progress, and that’s why they were being cooperative and helpful,” Paladino said.
The EDA also has extended the deadline for another mixed-use project in downtown New Brunswick, which was approved in July 2010 for a $19.9 million tax credit, Lizura said. The developer, Boraie Development, was given more time so its project would not add to the traffic impact of the Devco transit village project, which was under construction near Robert Wood Johnson University Hospital.
In such cases, Lizura said, it’s important for the EDA to have the latitude to extend its deadlines. “On the flip side, we want to make sure projects are really going to advance, because we have a limited pot of resources,” he said. “We don’t want to hold credits for a project that might not be ready to advance.”
Boraie representatives did not return calls seeking an update on the firm’s New Brunswick project. The firm also was approved in February 2010 for a $13.4 million Urban Transit Hub tax credit for a project in downtown Newark, but the status of that project also is unclear.
Two other projects approved in 2010 were granted extensions at the EDA’s January board meeting. The board approved a $17.4 million increase in the tax credit for the mixed-used Teachers Village project, in Newark, to $39.5 million, a move that gives developer Ron Beit another year to meet its milestones. Lizura said Beit’s RBH Group has “made a lot of progress” in securing its full slate of financing for the project, which made it a strong candidate for an extension.
In a statement issued through a spokesman, Beit said the project was “nearing finalization of financing as well as groundbreaking, and once those occur, completion of the first phase of Teachers Village will quickly follow.”
The EDA board last month also extended the milestone deadline for Newark Farmer’s Market LLC, which is building a grocery distribution center in the city, because the developer needs additional time to complete the second of two buildings.
When determining the viability of projects, Lizura said the EDA relies heavily on its upfront vetting process. In addition, applicants are required to pay a fee of one-half of 1 percent of the proposed tax credit award.
“It’s also an indicator of how real the developer is, because most developers aren’t going to put a couple hundred thousand dollars in for a project if they don’t believe there’s a true intention to move forward with it,” he said.
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