An aerial view of the statehouse in Trenton
By Joshua Burd
State officials are set to begin taking applications under a new incentive program that will look to provide gap financing to commercial and residential projects across New Jersey.
Known as Aspire, the subsidy will take the place of the well-known Economic Redevelopment and Growth program long used by developers building near transit hubs, providing affordable housing or advancing other public policy objectives. The new tax credit program is now effectively open for business after the state Economic Development Authority on Wednesday approved short-term rules for applicants, while setting up a 60-day public comment period for what will be permanent guidelines.
In doing so, the EDA continued its rollout of a series of new incentives created by the Economic Recovery Act of 2020, which Gov. Phil Murphy signed into law in January.
“New Jersey’s economy is growing, and with economic growth comes the need for housing and commercial development,” Murphy said. “The Aspire Program is a much-needed incentive that will support the construction of new housing and commercial projects throughout the state, with an emphasis on communities that have been left out of growth in the past.”
The EDA on Wednesday said it expects to field applications for Aspire by year-end, when ERG is set to expire. The new framework will emphasize mixed-use, transit-oriented development in New Jersey by providing tax credits to commercial and residential developments that have a financing gap, providing up to $42 million for most projects.
According to the guidelines, awards will be based on a percentage of a project’s eligible costs, subject to a cap that is determined by its location, other financing available and other aspects of the development. Applicants that meet specific criteria may receive tax credits up to $60 million, while those that qualify as “transformative projects” may be awarded as much as $350 million.
Developers will be subject to a host of requirements such as complying with environmental laws, meeting green building requirements and paying wages aligned with union labor to construction workers and building service workers. Retail, warehouse and hospitality establishments with a certain number of employees that are included in projects with a state proprietary interest and that receive tax credits must enter into a so-called labor harmony agreement with a labor organization that represents relevant employees in the state.
“Supporting equitable development and growth that aligns with communities’ priorities is central to Governor Murphy’s economic plan,” said Tim Sullivan, the EDA’s chief executive. “The Aspire Program rules approved today establish the framework for a robust policy that will support much-needed mixed use, transit-oriented development in communities all around New Jersey. Importantly, these rules also build in much-needed safeguards to ensure transparency, accountability and fiscal responsibility. This is an important step forward for New Jersey that will drive sustainable, inclusive growth.”
To be eligible for Aspire tax credits, a project must be located in an eligible incentive location, which may include metropolitan and suburban areas designated by the State Plan, an aviation or port district or other designated centers that are within a half-mile of a rail transit station or a high-frequency bus stop, the EDA said. Film production projects anywhere in the state may be eligible for a subsidy under the program.
The authority also detailed other thresholds, including the need for at least 100,000 square feet of retail or commercial space in commercial projects. Residential projects, meantime, must have eligible project costs totaling $5 million to $17.5 million, depending on location.
To qualify as a “transformative project” and receive subsidies above the typical cap, a development must have eligible costs of at least $100 million and be at least 500,000 square feet or up to 250,000 square feet for film studio projects. Such projects must also demonstrate what the EDA described as “special economic importance” to New Jersey and leverage its mass transit, higher education and other economic development assets to attract or retain employers and skilled workers.
“The Aspire Program rules that were approved today will facilitate the development of transformative mixed-income, mixed-use projects that will promote housing opportunity and economic growth throughout our state,” said Melanie R. Walter, executive director of the New Jersey Housing and Mortgage Finance Agency. “We look forward to working with community and development partners to implement these rules, seamlessly combining Aspire and Low-Income Housing Tax Credits, from the NJEDA and HMFA, respectively, and leveraging these valuable resources to produce high-impact, high-quality development that benefits our residents.”
In addition to meeting the baseline eligibility requirements, applicants must be in substantial good standing with the state departments of Labor & Workforce Development, Environmental Protection and Treasury. The new guidelines also include provisions geared toward fiscal responsibility and transparency, seeking to guard against the concerns that stoked controversy under the state’s previous generation of incentives.
Collectively, projects under Aspire and the new jobs-based Emerge incentive are subject to a cap of $1.1 billion per year in tax credit awards for each of the first six years of the programs, with the cap split between northern and southern counties, the EDA said. Unused amounts may be carried forward each year, while any remaining unused tax credits are available in the seventh year.
Meantime, applicants must provide a letter of support from the governing body of the municipality or municipalities in which the project is located, while projects with an eligible cost equaling or exceeding $10 million must also enter into a so-called Community Benefits Agreement with the authority and relevant jurisdictions. The EDA added that projects including newly constructed residential units must set aside at least 20 percent for occupancy by low- and moderate-income households.