Bill sponsor Sen. Nellie Pou said the state’s Aspire tax incentive program has helped to revitalize communities by offering tax credits for mixed-use, transit-oriented development. (Dana DiFilippo | New Jersey Monitor)
A Senate panel has unanimously approved a bill that would require some recipients of certain state tax incentives to temporarily cede their awards if occupancy falls too low and allow the Economic Development Authority to extend loans meant to fill funding gaps that tax credits do not.
The bill, which the Senate Economic Growth Committee approved in a unanimous vote Thursday, would be the latest update to the voluminous Aspire tax incentive program signed into law in 2021, one meant to encourage development, including in some of the state’s most beleaguered cities.
“We all know of successes the Aspire program has realized in its short lifespan. It has offered unique opportunities that have helped revitalize communities by offering supports to mixed-use, transit-oriented and real estate development through tax credits that help to close financing gaps,” said bill sponsor Sen. Nellie Pou (D-Passaic).
Among a host of other changes, the bill would require commercial projects to maintain at least 60% average occupancy within a given tax year beginning three years after the project receives a final certificate of occupancy. Those who fail to maintain occupancy at that level would be required to forfeit their tax credits and could not reclaim them until they brought average occupancy back up to 60%.
The provision is meant to send more workers to physical office buildings and the shops that surround them. In part, the state’s tax incentive programs are intended to boost economic activity in disadvantaged towns and cities, a mission made harder by the rise of remote work.
The legislation would create new incentives to redevelop abandoned commercial buildings, allowing the Economic Development Authority, which administers tax incentives under Aspire and related programs, to raise awards by up to 10% of a project’s total cost.
“I’m here today before you because we are at a precipice in the commercial real estate industry in this country with regards to a number of office buildings that are being devalued because of the lack of revenue because of the new normal for working,” said Tony Pizzutillo, a government affairs consultant for NAIOP, a commercial real estate development association.
The bill would allow smaller enhancements — 5% and 3% of project costs, respectively — to residential projects where three-bedroom units account for at least 20% of low- and moderate-income units or to projects that hire local workers.
Tax credits from any source could cover no more than 80% of a project’s costs, or 90% if the project receives credits through the federal Low-Income Housing Tax Credit Program.
Some questioned the need for more generous terms on tax incentives.
“What is the problem this is actually trying to solve? Whenever there’s some huge tax credit bill that has lots of changes in it, you’ve got to wonder what is the problem here?” Peter Chen, a senior policy analyst for New Jersey Policy Perspective, told the Monitor. “There’s already a decent number of Aspire programs. There’s lots of projects that have been funded.”
Other provisions would allow the Economic Development Authority to issue bridge loans in cases where tax credits do not fully fill funding gaps and loans would enable project completion. The authority could issue loan guarantees under the same terms.
The bill would allow developers to propose terms for loans or guarantees through the agency, but the legislation would give ultimate authority on terms to the EDA.
Proceeds from the loans would go back into a revolving fund from which the loans would be issued. Within 90 days of the bill’s enactment, the EDA must recommend an initial appropriation for the revolving fund, though the size of that appropriation is yet unclear.
Other provisions would allow the state treasurer to redeem outstanding tax credits at a discount of not more than 10%. Developers would receive the outstanding value of the credit as a tax refund over one or more years.
Existing law allows the Treasury to recoup unused tax incentives, paying no more than 75% of their value, with some exceptions.
Though the bill met with little opposition Thursday, one hesitant supporter urged caution on provisions that would allow developers to skirt community benefit requirements tied to most awards under Aspire.
“As it’s currently constructed, that certification with the municipalities could end up being a problematic portion,” said James Williams, director of racial justice policies and government relations for the Fair Share Housing Center.
In nearly all circumstances, developers that receive awards under Aspire are required to enter agreements with the host town to offer job training, employment, youth development, and similar services.
Existing law allows developers to meet community benefit requirements if the host municipality certifies certain documents, but developers who do so must be overseen by a community advisory committee and certify they are providing the benefits they agreed to or risk losing tax credits.
The bill would exempt developers from that oversight if the host municipality adopts the same documents through a resolution.
“If the whole purpose of this is ‘these have benefits to the community,’ then it should be relatively easy to develop something that says ‘this actually has benefits to the community’ rather than just an elected body essentially just certifying that, ‘yep, it sure does have benefits’ and moving on,” Chen said.
Appropriation committees in both chambers must approve the legislation before it reaches a floor vote.
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