|Newark's New Streetscapes and Beyond
Urban Areas Benefit
from State Funding
By Caren S. Franzini
Chief Executive Officer
New Jersey Economic Development Authority
If you are seeking to investigate, clean up and redevelop brownfield properties, the EDA can help.
Is it time to spruce up your downtown streetscapes? Well, when the time comes, know that the New Jersey Economic Development Authority is on hand to help.
A giant project in Newark demonstrates how state funding can help benefit urban areas. When the Newark Downtown District Management Corporation (NDD) decided to remake 56 blocks of the city’s Gateway area and nearly 600 properties—a $17.5-million capital project believed to be the largest ever to be financed by a Special Improvement District (SID) in the state—it called upon the financing capabilities of the New Jersey Economic Development Authority (EDA). The project exemplifies Governor Jon S. Corzine’s commitment to stimulate investment in New Jersey’s urban areas and build thriving New Jersey communities.
The streetscape project, which will include decorative street lighting, new street signs, sidewalks and sidewalk treatments, and trees and planter boxes, will be financed through an innovative partnership that will include $10 million in tax-exempt bonds issued by the EDA on behalf of the NDD. The remainder of the funds will be supplied through a combination of cash and in-kind commitments from the NDD, the Newark Urban Enterprise Zone, the city and PSE&G.
SID assessments are being collected from property owners in the Newark Downtown District by the Newark municipal government and disbursed to the NDD. The SID assessments will be used to pay the debt service on the bonds. The project will occur in phases over a three-year period. The first phase will encompass the area immediately surrounding the Prudential Center to prepare the area for its grand opening this fall.
Creating a Special Improvement District The SID program was created under state law to serve as a mechanism for partnerships between a municipality and its business community that promote economic growth. Any municipality with a business area that is well-defined by cultural and/or physical features may apply for a SID designation to the Department of Community Affairs Division of Community Resources. The EDA is currently speaking with several communities about providing funding for their SID projects.
EDA’s funding for the Newark SID represents the latest in a long history of financing involving the agency and the city’s businesses and nonprofit organizations. Since the EDA was founded in 1974, it has provided nearly $1.7 billion in financing assistance to nearly 500 projects in Newark that have created an estimated 17,000 new jobs and supported $2.2 billion in total public/private investments.
In support of Governor Corzine’s comprehensive Economic Growth Strategy for New Jersey, the EDA offers a broad spectrum of financial and technical resources to assist municipalities, spur the growth of businesses and nonprofit organizations, promote the investigation and cleanup of brownfield sites and foster smart growth redevelopment. We can help you tap into the resources that make community revitalization work.
Working in conjunction with the state Office of Economic Growth to advance the Economic Growth Strategy and often acting in partnership with other state agencies, the EDA provides assistance that can cover costs associated with planning and predevelopment remediation of contaminated properties, and redevelopment of economically underutilized sites. EDA provides a broad range of funding options for a wide range of purposes.
Beyond Newark Several other significant redevelopment projects have recently been completed using EDA urban resources. A $5.3-million EDA loan to Matrix East Front Street Urban Renewal Associates, LLC, a unit of the Matrix Development Group, was used to purchase and complete a 66,500-square-foot building in downtown Trenton. The building now serves as the southern New Jersey headquarters of Wachovia Bank.
The loan was the first financing to close, resulting from a $125-million allocation to the EDA under the federal New Markets Tax Credits program, which was provided to spur investment and economic growth in federally designated low-income areas of the state. New Markets loans, offered at a 3-percent fixed interest rate with a term of at least seven years, must be used for fixed-asset financing such as building construction, renovations, real estate acquisitions, and equipment purchases and may also include a working capital component. Developers, businesses and nonprofit organizations may apply for the financing for commercial, industrial or mixed-use projects.
Goodmill, LLC also used $22.5 million in funding under the program to acquire 55 acres of vacant property and begin construction of a shopping center within Millville’s Redevelopment Area District featuring major retailers like Target, PetSmart, Kohl’s, Shop Rite and Staples. Combined, these two projects are expected to generate the creation of 1,300 new, full-time jobs.
EDA financing also helped Eduardo Trujillo and Benjamin Parra renovate and expand a shopping center in Trenton’s West Ward. A $1-million loan, made at a fixed interest rate of 3 percent for 10 years, was part of a financing package that made the revitalization project and 27 new local jobs possible. Today, Westside Shopping Plaza, featuring a Supremo Super Market and other stores, is open for business and serving the retail needs of the local community.
Redevelopment Area Bond Financing Another tool that can provide flexibility in community development is redevelopment area bond financing. This funding structure enables municipalities to pay for infrastructure improvements and environmental remediation to support redevelopment in municipally designated redevelopment areas. The EDA can issue bonds on behalf of your municipality to fund the infrastructure and remediation portion of the development project. The bonds are backed by a Payments in Lieu of Taxes, or PILOT, agreement negotiated by the municipality with the developer. Your municipality can also designate the EDA as the “redeveloper” and take advantage of the EDA’s powers of condemnation in assembling sites.
The redevelopment of a 37-story former office building, completed last year in downtown Newark, created the city’s first market-rate apartments in 40 years. The deal was made possible with bonds issued by the EDA. The property, known as “Eleven80” because of its 1180 Raymond Blvd. address, was transformed into 317 luxury high-rise rental residences offering more than 30 distinctive floor plans, including studios, one-bedroom units with dens, and two-bedroom apartments with private terraces. The project also includes a ground-floor retail component. It is expected to be the impetus for continued revitalization of the city’s central business district.
The EDA was the conduit issuer of $7.9 million in bonds, which were part of a complex financing package used by Cogswell Realty Group to renovate a vacant building in the heart of Newark’s central business district. The structure was originally constructed as a commercial office building and was used by a number of prominent New Jersey law firms until becoming vacant in the 1990s. The 30-year, taxable bonds, purchased directly by MMA Financial, LLC, closed at a fixed interest rate of 6.50 percent.
The 1180 Astro Urban Renewal Investors, an urban renewal entity and wholly owned affiliate of Cogswell Realty Group led the $108-million project. Other investors included Bank of America, the Federal National Mortgage Association (“Fannie Mae”), the Prudential Insurance Company of America, the New Jersey Housing Mortgage Finance Agency, the Amelior Foundation and owner equity.
“This was an extremely complex business transaction and the EDA was able to understand this complexity,” said Cogswell Realty Group Chief Executive Officer Arthur Stern. “This has truly been a pioneering effort by all of the parties involved in the financing of this project.”
Brownfields Cleanup If you are seeking to investigate, clean up and redevelop brownfield properties, the EDA can help. Municipalities may apply for grants and low-interest loans of up to $3 million per year for investigation and remediation activities on properties they own or for which they hold a tax sale certificate and have a comprehensive plan or realistic opportunity to develop within three years. Funding to municipalities and counties also has been expanded to provide grants for actual cleanup work for certain projects so contaminated properties can get redeveloped faster.
In the first half of 2007, 26 municipalities were approved for grants totaling more than $7.5 million for 36 different brownfield projects under the Hazardous Discharge Site Remediation Loan and Grant Program. More than $93 million has been awarded to municipalities for 760 projects since the program, administered in conjunction with the New Jersey Department of Environmental Protection (DEP), was established in the early 1990s.
The City of Paterson, for example, has received almost $265,000 since 1995 for site investigation and remedial investigation activities at the former site of a textile printing company that the municipality wants to develop for mixed uses. The property is located within the Great Falls Historic District, which has been designated as a Brownfields Development Area by the DEP. The designation establishes a long-term partnership among applicants, the DEP and other agencies, including the EDA, to redevelop urban, residential, industrial and commercial neighborhoods that are adversely impacted by multiple brownfield properties.
For more information on New Jersey’s support for business and economic growth, visit the state’s business portal at www.nj.gov/njbusiness. To learn more about what the EDA has to offer to spur urban development, visit www.njeda.com or contact our Customer Care Center at (609) 777-4898. EDA sales representatives are organized by regions so they are knowledgeable about the communities and the EDA resources available to support redevelopment. They will work to match your needs and goals to the EDA resources that will work best for you.