Urgent Legislative Alert
June 19, 2009
RE: A-4048, The New Jersey Economic Stimulus Act of 2009;
2.5% Commercial Fee Moratorium
Last Thursday, the Assembly Appropriations Committee considered and approved A-4048, the New Jersey Economic Stimulus Act of 2009. On Monday, the Assembly Budget Committee considered and amended the same bill. A-4048 is an omnibus piece of legislation that ties in a number of other bills and concepts with the intent to reinvigorate New Jersey’s economy. On Monday, the Senate Budget committee will take up a similar bill, sponsored by Senator Raymond Lesniak.
The League presented testimony on the bill, noting that while the League and local governments support a number of the economic development initiatives contained within the bill, there were some concerns with the legislation that we hoped can be addressed through amendments. We are pleased to report that we have made progress in addressing some of these concerns, and we are optimistic that our remaining concerns will be addressed.
A-4048 is an omnibus bill that includes a number of other economic growth initiatives. A number of these economic development initiatives result from previous proposals supported by the League, as tools to promote economic development, jobs and growth, particularly the newly proposed “Economic Redevelopment and Growth Grant” (ERGG) program.
Sections 3 through 12 authorizes State and local incentives grants to developers in particular incentive areas, including the Metropolitan and Suburban planning areas, centers designated under the State Plan and transit villages. The Revenue Allocation District (RAD) program will be replaced with a new “Economic Redevelopment and Growth Grant” program. The new ERGG would be similar to the Brownfields Site Reimbursement program, which allows for the financing of redevelopment through revenues derived from a site's redevelopment, such as sales and business taxes instead of solely through local borrowing.
The legislation also authorizes the cities of Newark and Elizabeth to implement a 5% fee on motor vehicle registrations to fund redevelopment activities. Further, cities of the 2nd class, which hosts a major amusement facility, would be authorized to impose a surcharge of up to $2 on each admission and on parking fees for the purposes of senior citizen, youth health and recreational purposes.
Also, under A-4048, the “Urban Transit Hub Tax Credit Act” is to be expanded, with the intent to promote corporate capital investment and development near mass transit centers. This program offers a 100% corporate business tax credit to companies planning capital projects that invest at least $75 million and create or relocates 250 jobs to within a half-mile of mass transit stations in Trenton, Newark, New Brunswick, Paterson, Elizabeth, Hoboken, Jersey City and East Orange, and within one mile in Camden. Under A-4048 the investment threshold would reduced to $50 million and any business that leases space would see their investment threshold further $17.5 million.
A-4048 also authorizes a municipality to enter into an agreement with an institution of higher education for the issuance of bonds by the municipality, a county improvement authority or a redevelopment agency, to finance a higher education project.
Section 40 of the bill includes a temporary moratorium on the collection of the 2.5% fee on non-residential development. Originally, the bill stated that the portion of the affordable housing obligation resulting from a particular non-residential development shall be “suspended.” The League raised concerns over the use of word suspended since it could be interpreted to mean the obligation is accrued during a moratorium. The result would be that a municipality would retain the housing obligation generated by a non-residential development but without the funding, and the financing of the housing would fall on the property tax.
In response to these concerns, the Assembly Appropriations Committee amended the language to read, “A municipality shall be relieved of the portion of its affordable housing obligation attributable to a particular non-residential development…”
This language goes on to state that the municipality is relieved of this portion of its obligation when the fee is suspended, and when there are insufficient funds in the Affordable Housing Trust Fund and other State or federal housing subsidies to assist a municipality in production of housing.
We thank Senator Lesniak and the sponsors of the legislation for the change in language from “suspended” to “relieved” which offers more certainty for the municipality. We are unclear as to what “insufficient” and “to assist” means, and are concerned that if an alternate funding source is used which does not equal what would have been derived from the 2.5% fee, that property taxpayers would again be required to offset this gap. The League testified to that and we are hopeful that clarifying language will be forthcoming.
Developers will have 120 days from the effective date of the legislation to seek a reimbursement from either the local government or State, whichever level collected the fee. Fees are to be returned in 30 days. Section 39(d) of A-4048 states that a municipality which has “expended, or legally committed by binding contract to expend the fees shall be reimbursed from the $15 million appropriation to the Affordable Housing Trust Fund.
This legislation will be of great benefit to communities and the State’s economy, so we believe it is of utmost importance to address the remaining concerns with the legislation. Further amendments are likely, but there is a likelihood that the bill will be on the Governor’s desk before July 1.
Questions and comments on this letter can be addressed to Mike Cerra at email@example.com or 609-695-3481 x120.
Very truly yours,
William G. Dressel, Jr.