Amended Economic Opportunity Act Advances
The “Economic Opportunity Act of 2014, Part 1” is working its way through State Senate and Assembly committees. The new bill amends the New Jersey Economic Opportunity Act of 2013 by focusing on developer incentives under the Economic Redevelopment and Growth (ERG) Program, which is one of two main programs expanded by the 2013 Act.
The amendment would ease the requirement that developers set aside 20% of new residential units for affordable housing in order to qualify for incentives. An eligible municipality in which a qualified residential project is located would be allowed to decide the percentage of newly constructed affordable units within the project (up to 20 percent of the total).
Aggregate tax credits available to qualified residential projects would increase from $600 million to $800 million. This amendment would allow the ERG Program to set aside $250 million for residential projects in designated redevelopment and growth areas if 100 percent of the units are reserved for affordable housing. A portion of that amount ($50 million) is allocated to residential projects with 25 to 100 housing units. Priority consideration is given to qualified residential projects within severely impacted and distressed counties, where disaster recovery funds were designated in response to Hurricane Sandy.
Other amendments include an extension of the deadline for ERG-approved residential projects to submit a temporary certificate of occupancy to July 28, 2018, as well as a limited right of first refusal for displaced residents of an ERG-approved residential project to purchase or lease a dwelling unit constructed from such a project.
As originally adopted, the 2013 Act combined the New Jersey Economic Development Authority’s five existing economic development incentive programs into two main programs: the Grow New Jersey Assistance Program, and the Economic Redevelopment and Growth Program.
Grow NJ Program focuses on job creation and retention by offering broad incentives and tax credits for businesses that invest and create jobs in New Jersey. A business that creates and/or retains jobs and makes capital investment in a “Qualified Incentive Area” can apply for grants of corporate business and insurance premium tax credits for job creation and/or retention through this program. In particular, Grow NJ Program offers the following:
- Tax credits are given to businesses for a period of up to ten years, with tax credits ranging from $500 to $5,000 per job, per year.
- Additional tax credits awarded for particular project types and/or locations can increase the total tax credit to as much as $15,000 per job, per year.
- To qualify for tax credits under this program, a company must meet threshold eligibility requirements, which include minimum capital investment and minimum job creation and/or retention requirements.
- The minimum threshold requirements are lowered for certain cities with the lowest median family income based on the 2009 U.S. Census, and for certain municipalities located in eight South Jersey counties.
The Economic Redevelopment and Growth Program offers incentives to developers and businesses by focusing on revenue gaps in development projects and to support the project debt service under a standard financing situation. In particular, the ERG Program offers the following:
- A developer with a commercial or a residential project located in areas targeted for growth in New Jersey can apply for an ERG grant, as long as the developer has an equity participation of at least 20% of the total project cost.
- Residential projects that do not generate tax revenue can qualify for tax credits that can be assigned to lenders for project financing.
- Commercial projects are awarded an incentive grant reimbursement of up to 20% of total project cost, with additional grant funding of up to 40% awarded based on the project type and/or project location.
- All projects are subject to a comprehensive net benefit analysis to verify that the revenues the State receives will be greater than the incentive being provided.
Fifteen projects have been approved so far under the Grow NJ Program in Camden, Essex, Gloucester, Hudson, Middlesex, Monmouth, Salem, and Somerset counties, with awards ranging from $970,000 to $39.5 million. Under the ERG Program, three projects have been approved so far in Essex, Mercer, and Passaic counties, with awards ranging from $7 million to $19 million. The proposed amendments to the 2013 Act will continue to encourage development and job creation by offering beneficial incentives and renewed opportunities for developers to start new projects in New Jersey.
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