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June 28, 2011

Re:  A-4221/S-2974, Suspension of 2.5% Non-residential development fee Affordable Housing

Dear Mayor:

Yesterday, companion legislation was introduced and approved by the respective budget committees which would suspend the 2.5% fee on non-residential development for a total period of 36 months, retroactive to July 1, 2011.

A-4221, sponsored by Assemblyman Albert Coutinho, and S-2974, sponsored by Senate President Stephen Sweeney and Senator Ray Lesniak, will likely be scheduled for floor votes later this week and sent to the Governor.    The bill is viewed an economic development initiative and enjoys broad, bipartisan support.  Passage of the law is likely.

Originally, the legislation was intended to permanently repeal the fee and the League objected to the sponsors for a number of reasons.  For instance, while the original bill would have repealed the fee, there was no reference to the impact on municipal housing obligations. If left unchanged, this could have resulted in commercial development triggering an affordable housing obligation but with no funding to the municipality.  Further, the original bill would have required refunds for any fees collected since July 1 of last year, regardless of whether the dollars were spent or unspent.

During the day yesterday, the League raised these concerns to the sponsors of the legislation.  The League pointed out that a precedent was already established with the passage of the NJ Stimulus Act of 2009, which suspended the fee but also suspended the affordable housing obligation. (For more on the 2009 law, please see our Dear Mayor of July 27, 2009.)

After a flurry activity through the day, the bill was amended to do the following to address the concerns raised by the League and other stakeholders:

  1. Changed from an outright repeal to a suspension of the fee for approximately 36 months, retroactive to July 1, 2010 through July 1, 2013.
  2. Suspend the housing obligation generated by non-residential development in the same manner, so that a municipality is not left with an unfunded housing obligation. 
  3. Allow for reimbursement to the developer, unless the municipality has expended the dollars.   Municipalities eligible to collect the fee would not be required to refund monies that have been spent on affordable housing.  In this case, the developer would need to submit a claim for a refund within 120 days of the effective date of the Act. 

We appreciate the willingness of the sponsors and their staff to address the concerns raised by the League. 

If you recall, the fee on non-residential development was implemented by PL 2008, c46.  The revenues from the fee were intended to replace the revenues provided through regional contribution agreements (RCAs), which were banned under the 2008 law. However, the continued impacts of the recession have not only slowed economic development in the State, but slowed the collection of these revenues.  Since last July, approximately $980,000 was collected.    While the suspension of this fee further reduces revenues for a short time, the sunset in the bill forces the issues back to forefront in the near future. The League continues to call for a comprehensive reform to the Fair Housing Act, and the ultimate fate of the non-residential development fee should be addressed in such comprehensive legislation. We recognize, however, that such comprehensive reform will likely not pass the Legislature until after the Supreme Court acts on the current appeals to the challenges to the COAH 3rd round regulations.  If you recall, the Court agreed to hear the League’s appeal of the October 2010 decision and we expect oral argument to be scheduled sometime in the early fall.  

Questions on this letter or this issue can be addressed to Mike Cerra at mcerra@njslom.com or 609-695-3481 x120.   

Very truly yours,

 

William G. Dressel, Jr.
Executive Director

 

 

 

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