New Jersey opened applications for a sprawling real estate incentive program meant to entice economic development and commercial and residential real estate projects across the Garden State on Jan. 19.
NJ Aspire is a flagship program under the state’s $14.5 billion 2020 Economic Recovery Act.
Gov. Phil Murphy touted NJ Aspire as an initiative that would help push ahead housing and commercial development projects in “overlooked” communities.
Sullivan
Combined with NJ Emerge, which provides tax breaks for companies that move to New Jersey or expand their existing footprint here, the two programs are capped at a combined $1.1 billion a year.
Developers can tap into NJ Aspire funds for gap financing they need for projects, enabling them to put together needed money if funds aren’t yet available to pay for the whole project.
Of particular focus for NJ Aspire are “mixed-use, transit-oriented, mixed-income and affordable housing” projects, reads a Jan. 19 statement from Tim Sullivan, chief executive officer of the New Jersey Economic Development Authority, which runs both NJ Emerge and NJ Aspire.
Getting the funds
Most projects can get up to $2 million in gap funding under NJ Aspire, covering up to 45% of the costs for a project, or up to 60% in lower-income communities.
Commercial projects need to be at least 100,000 square feet of commercial or residential space to qualify for state funding. Residential projects need to cost a minimum of between $5 million and $17.5 million, depending on the city. And those projects need to set aside at least 20% of their residential units for affordable housing.
The exact size of the award is determined by the nets benefit test, a mathematical formula to determine how much greater the dollar amount of the economic benefit of a project is compared to the cost of the tax break. For Atlantic City, Paterson and Trenton – three of the poorest cities in the state – a developer has to meet a lower threshold than projects that would be located in any other municipalities.
There is no net benefits test for residential projects, or for food stores and health centers of at least 10,000 square feet.
Applicants need to have a letter of support from the local municipality’s top official, such as the mayor. And any projects that cost at least $10 million need to produce a community benefits agreement with area officials outlining how the local community, residents and economy would benefit from that specific project—such as from local hiring and training commitments.
Transforming the neighborhood
The NJ Aspire program calls for what’s known as transformative projects; ones that could by design, alter the neighborhood or community for the better and generate local revenue.
Sullivan said such projects would include large-scale mixed-use or affordable housing developments.
The awards would be capped at 40% of project costs up to $350 million. Eligibility is limited to projects costing at least $100 million and clocking in at 500,000 square feet in some of the state’s poorest towns and cities, or for a film studio of at least 250,000 square feet anywhere in the state.
Under the ERA, the state is setting aside $2.5 billion for these transformative projects over the lifetime of the program.
For commercial projects, up to 50% of the space can be used for retail, and at least 20% has to go toward low- and moderate-income housing. For “transformative” residential projects, there needs to be at least 1,000 units or 100,000 square feet of commercial space, and between 250 and 600 housing units, depending on the neighborhood’s income levels.
Under the state’s previous Grow NJ and Economic Redevelopment and Growth programs, some of New Jersey’s largest incentives went toward the now-Ocean Resort Casino, nuclear energy company Holtec International, and the American Dream Mall in the Meadowlands.
Greater oversight
Walsh
A state audit released earlier this month chastised the NJEDA over lagging oversight for its previous tax credit programs. But the state comptroller’s office, which conducted the audit, noted that it was not authorized to look at whether ERA programs like NJ Emerge and NJ Aspire fixed those issues.
The office found that NJEDA officials relied heavily on projected economic benefits for state incentives, rather than “actual economic benefit data,” and that the agency needs to do more to ensure New Jersey is getting adequate returns on its investments.
“It’s easy for a business looking for tax credits to promise results but harder to deliver,” acting State Comptroller Kevin Walsh said in a statement. “New Jerseyans are entitled to a return on their investment with these incentive programs.”
Progressive groups like New Jersey Policy Perspective questioned whether incentive programs were truly the tipping point for a business to choose New Jersey, and whether they provide a genuine economic benefit to the state.
