Statement of the New Jersey State League of Municipalities
On A-500, Before the Assembly Housing and Local Government Committee
Thursday, May 22, 2008, 10:00 AM
Good afternoon, Mr. Chairman. I am Robert Bowser, Mayor of the City of East Orange, and the President of the New Jersey League of Municipalities. We are here to provide you with the reasons for our opposition of A-500.
There is no question that our State faces an affordability crisis. The crux of this crisis is an on-going reliance on the property tax as the primary funding sources for local services. The so-called perfect storm seems to be upon us, and we believe that A-500, as well-intended as it may be, will only add to these problems. We have no doubt that those who sponsor and support this bill and these concepts mean well, and believe this addresses our affordability crisis. We respectfully disagree.
The League has articulated its position on regional contribution agreements on several occasions. Over $210 million in funding has been provided to build new housing and to rehabilitate existing housing, generally in our urban areas and centers. Such agreements are voluntary, and are entered into willingly by both communities.
The State should not intrude, and eliminate this means of compliance with our affordable housing obligations. On the contrary, local governments are looking to the State government for new and additional means to comply with our housing obligations, not fewer.
Now we are told that the $210 million funded by developers will be replaced with $20 million annually in State revenues. This figure, as we understand it, is arrived at as the annual average amount of funding since the inception of these agreements. We note, however, that the per unit minimum cost for each unit increased from $25,000 to $35,000 in 2004, and now COAH has increased the cost to a range between $67,000 and $80,000, depending on the region of the State.
Based on this, it is clear that the $20 million figure would be insufficient as replacement revenue to fund the need for new and rehabilitated housing in our urban areas.
The League has other objections to A-500 and the proposed amendments before you today. We are submitting our comments based on the bill as introduced. Further comments on today’s amendments will follow after we are able to fully review and comment on them.
We do, however, have concerns regarding the commercial development fee. We do not dismiss, by any means, what could be a sustainable funding source so we can build affordable housing. But we note that COAH projects a need of 46,000 units generated by commercial development until 2018.
Our understanding is that the two-and-one-half percent (2.5%) fee on commercial development will provide subsidies, matched by federal tax credits, for 19,000 units of affordable housing in the same time period.
We ask, simply, how will this housing be paid for if and when this funding is fully expended? At this point, we can only draw the conclusion that our property taxpayers will be required to make up this certain and inescapable shortage in funding.
Now, however, it appears as if $20 million in revenues generated by the commercial development fee will be diverted, as indicated in the amendments provided to us as the replacement revenues for RCAs.
Thus, the bottom line is that there is $20 million less to construct affordable housing today than in the bill as introduced.
Is it any wonder that local governments view skeptically the State’s ability to provide this funding on an annual basis when $20 million gets diverted during the first hearing on the bill?
I do not believe it is an overstatement to say that housing policy in our State is at a crossroads.
The State budget proposes to decrease tax relief funding, but A-500 proposes to appropriate $20 million annually to replace $210 million funded by developers. We do not understand how this will result in the construction or rehabilitation of new affordable housing.
COAH has adopted fundamentally flawed regulations, which limit our ability to comply with our housing obligations, while requiring us to incur significant costs which will fall to the taxpayers.
In our view, the State needs a more balanced approach of new construction where appropriate, redevelopment where needed and preservation where environmental constraints demand.
As you may know, in addition to being the Mayor of my city, and the President of the League of Municipalities, I am also a member of the State Planning Commission. And, it is my understanding that what I just referenced above is suppose to be the basic tenants of what we know call “smart growth.”
There is no consistency with the current housing initiatives coming out of Trenton with these basic planning principles. In this debate, we hear nothing about incentives for affordable housing. We hear nothing about how we can encourage sustainable growth.
Instead, our ability to comply with our housing obligations will be restricted, and costs appear to be pushed on to the taxpayer.
We believe that A-500, grouped with these other factors, does not advance affordable housing. On the contrary, we fear the result would be backwards.
We implore that A-500 be held. Instead, we again call on the State Legislature conduct, with the involvement of all stakeholders, a thorough review and overhaul of the Fair Housing Act.
As I said before, the proverbial perfect storm is before us. We can only hope the State realizes that only a partnership with local governments can calm the storm before us.