Gov. Phil Murphy in late 2024 — Courtesy: Governor’s Office
By Joshua Burd
Gov. Phil Murphy has signed a law to expand the Aspire tax credit program for developers, in part by allowing projects in New Brunswick, Camden and East Orange to secure larger awards, while taking steps meant to help applicants secure construction financing.
Among other changes, the bill adds the three cities to the list of so-called government-restricted municipalities that are eligible for enhanced subsidies from the Economic Development Authority. That means projects in those locations may now seek tax credits equal to no more than 80 percent of eligible costs, up to $120 million, as a means of addressing financing gaps.
There are now six government-restricted municipalities or GRMs, with New Brunswick, Camden and East Orange joining the existing cities of Atlantic City, Paterson and Trenton. The new law, A2076, also expands potential subsidies for projects in the original three GRMs, allowing the state to award tax credits of up to 85 percent of eligible costs and no more than $120 million.
“The legislation’s impact includes a broadening of the types and geographical location of projects which qualify for Aspire incentives, as well as the size of available tax credits and other financial considerations for program applicants,” NAIOP New Jersey wrote in an alert to members Friday, a day after Murphy signed the bill. “Make no mistake, this is a big win for the (commercial real estate) industry.”
The law marks the latest update to Aspire, which launched in 2021 as part of Murphy’s suite of economic development incentives. The EDA has approved some two dozen applications under the program since early 2023 — including many with affordable housing — but only a handful of high-profile commercial projects have reached the approval phase.
Notably, the law allows developers that cannot use or sell their tax credits within one year of their issuance to sell them to the state Department of the Treasury for 85 cents on the dollar. Yet experts note that the state is not explicitly required to buy the tax credits, leaving a loophole that industry leaders hope to address through a companion bill that’s pending in the Legislature.
“This would create the much-needed confidence for the lending community to arrange for construction bridge financing,” NAIOP wrote in its member alert. “The recently introduced A5170/S4027 addresses this key missing provision, which, when added, will encourage more real estate projects statewide to move forward to construction.”
Other changes include shortening the payout period, from 10 to five years, for tax credits that are pledged to projects in the six government-restricted municipalities. The same would go for “special mission” developments — a newly created tier under the law — referring to those in a GRM or so-called enhanced area that serve a special mission, as determined by the EDA, to accomplish the public purpose of a nonprofit developer or entity that’s affiliated with the proposal.
Such projects must include no more than 100 units of 100 percent supportive housing and no more than 25,000 square feet of commercial space for the provision of on-site social service programs that require a license from the state. The bill exempts special mission nonprofit projects from the EDA’s net benefits test, affordable housing requirements and the need to provide a market study as part of an application to the authority.