In his State of the State address on Tuesday, Governor Corzine called for a one-year moratorium on the 2.5% non-residential development fee, also commonly referred to as the commercial development fee. If you recall, this fee was implemented by PL 2008, c.46 (A-500, S-1783), which was signed by the Governor in July. The Governor believes that in light of the downturn in the real estate markets, a moratorium on this fee might encourage development, or, at the very least, not discourage development.
Senator Raymond Lesniak has introduced S-2485, which would modify laws concerning affordable housing and makes an appropriation to the Affordable Housing Trust Fund. Included in the provisions of this bill is an 18-month moratorium on the 2.5% fee. The bill then authorizes a transfer of $15 million to replace the revenues projected to be raised by the 2.5% fee. Since the Senator has already indicated that he intends to hold a hearing for this bill and other bills regarding affordable housing (please see his NJ.com blog posting), we are operating under the belief that this bill will be the mechanism to put a moratorium in place.
Last spring, the League demonstrated that the 2.5% fee was an inadequate source for the construction of affordable housing that is generated by commercial development, based on the COAH methodology. (Please see our Dear Mayor letter of June 10.) Our argument that there was inadequate funding for the construction of affordable housing, and our conclusion that the shortfall would be pushed to the property taxpayer was further demonstrated in a letter issued by the Office of Legislative Services (OLS) on November 14, 2008 and in a clarifying letter issued by the OLS on December 5, which states, “…we conclude that the resources identified by the department will not be sufficient to fulfill the fair share housing obligations of many municipalities as estimated in accordance with the requirements set forth in the rules of the Council on Affordable Housing (COAH).”
While we certainly understand and appreciate the intent of such a moratorium, it raises additional concerns. This moratorium will further dilute an already inadequate funding source, and run the risk of even greater financial obligations on the property taxpayer. Thus, we have communicated to the Administration and to Senator Lesniak that we can only support this moratorium if it goes hand-in-hand with an elimination of any affordable housing obligation created by the commercial development that is exempted from the commercial fee or unless there is adequate replacement funding. We believe that the $15 million in replacement funding, in and of itself, is inadequate. However, the fact that the replacement revenue is in the bill in the first place does demonstrate an acknowledgement of our concern.
At our annual “Mayor’s Legislative Day” in Trenton, both Governor Corzine and DCA Commissioner Joe Doria addressed the issue. The Governor reiterated his support for a moratorium on the fee, though he did not connect the impact of the fee reduction to an elimination of the portion of each municipality’s obligation attributable to commercial development. Commissioner Doria discussed the concept in general terms, and discussed the possibility that if the 2.5% fee moratorium were put into place, the older provisions in the COAH regulations, which authorized fees implemented by local governments, might be put back into effect. Such implementation, however, would be dependent on the language of any forthcoming legislation.
Also at Wednesday’s event, State Senator Ronald Rice, who chairs the Senate Community and Urban Affairs Committee, stated his intention on holding legislative hearings on COAH shortly.
Meanwhile the League’s legal challenge of the COAH regulations, backed by the financial pledges of 253 municipalities, proceeds, as referenced in our Dear Mayor letter of January 6.
We will continue to advise you as developments warrant. Questions on this letter can be directed to Mike Cerra at firstname.lastname@example.org or at (609) 695-3481 x120.
Very truly yours,
William G. Dressel, Jr.