Effort to Stimulate Economy Through New Jersey Economic Stimulus Act of 2009 Impacts Development Community

July 29th, 2009 | Posted by: Christopher DeGrezia 0| comments:

2009-02-17-transfer-1174By Cynthia DeLisi, Esq.   

Gov. Jon S. Corzine signed into law the New Jersey Economic Stimulus Act of 2009 on July 27.   The Act is intended to spur economic growth in the state “through the use of tax increment financing, tax credits, development fee suspensions, and dedicated economic development revenues, along with a more efficient redevelopment process.”  Some provisions in the Act are significant for the development community:

Suspension of Non-Residential Development Fees.  The Act suspends the Statewide Non-Residential Development Fee Act (N.J.S.A. 40:55D-8.1-8.7) enacted July 17, 2008.  The non-residential development fee will not be applied to projects receiving preliminary or final approvals prior to July 1, 2010, that have building permits issued prior to January 1, 2013.  Any money paid pursuant to the Development Fee Act since its enactment  is returnable to the paying developer, although requests must be made in writing within 120 days.   A municipality may seek reimbursement from the state for any development fee refunds issued.  The Act also removes the municipality’s affordable housing obligation while the fees are suspended if the Department of Community Affairs determines that the New Jersey Affordable Housing Trust Fund is insufficiently funded to assist in the production of such units.  Municipalities must continue to provide a “realistic opportunity” for affordable housing to be constructed.

Redevelopment Incentive Grants.  Both the New Jersey Economic Development Authority and local municipalities may set up incentive grant programs.  These programs will fund the “project financing gap” or the gap between the redevelopment project cost and financing from private sources, at least 20 percent of which must be from the developer.  The Authority and local agencies will use the following criteria in awarding grants:  1) the economic feasibility of the project; 2) the extent of the economic distress in the area of the redevelopment project; 3) the extent to which the project will advance state/local planning strategies; 4) the likelihood of developing new tax revenue; 5) the relationship to local redevelopment strategies and other projects; 6) the need for a grant to the viability of the project; 7) compliance with other provisions of the Act; and 8) the amount of job creation and economic development. Municipalities may set up a “redevelopment utility” to receive revenues, pay out grants as approved by the Local Finance Board and perform a list of other functions described in the Act.

Expansion of Tax Credits for Development in Urban Transit Hubs.  The Act incorporates light rail stations and freight train connections into the definition of Urban Transit Hub, reduces the amount of investment necessary to qualify and allows tenant investment and employment to be included towards the requirements.  It also allows business to relocate within the same municipality without losing the credit, if such location takes place prior to January 1, 2010. 

Tax Credit for Qualified Residential Development.  Developers may receive a credit of up to 20 percent of its capital investment for projects consisting predominantly of residential units located in an urban transit hub within an eligible municipality.  The developer must have capital investments in the project of at least $50,000 and must show that the project would not be feasible without the tax credit and that it is consistent with state and local planning objectives.  Applications can be made within five years of the effective date of the Act and documentation for approval of the credit must be made within eight years.

Other Sections of Note.  The following are provisions of the Act that may assist developers in specific instances:  1) the Act provides for State colleges to partner with both private entities and municipalities to develop projects; 2) the Act increases the corporation business tax benefit certificate transfer program within the NJ Emerging Technology and Biotechnology Financial Assistance program; and 3) it allows municipalities to charge a $2 fee for admission and parking at a “major place of amusement”.

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