Tim Sullivan, CEO of the New Jersey Economic Development Authority
By Joshua Burd
State officials are relaunching a high-profile developer tax credit program that was halted nearly two years ago, offering $50 million in subsidies as a result of a newly approved law.
In an announcement Tuesday, the Economic Development Authority said it will start accepting applications on June 1 for the residential component of the Economic Redevelopment and Growth program. The move temporarily revives the gap financing program — with new prevailing wage and minimum wage requirements — after it was effectively suspended in June 2019 as the state’s controversial incentives program expired.
The EDA can now award up to $50 million in new residential ERG tax credits under a provision of the Economic Recovery Act of 2020, which Gov. Phil Murphy signed into law on Jan. 7, creating a new $14.5 billion package of incentives.
“The extension of the residential portion of the ERG program will support investment in projects that offer attractive housing options for families while revitalizing surrounding neighborhoods,” said Tim Sullivan, the authority’s CEO. “The inclusion of $50 million for the ERG program by Governor Murphy and the Legislature will help advance projects that are ready to move forward now, while the new programs created by the Economic Recovery Act are taking shape.”
The EDA will administer the new round of the ERG applications on the program’s pre-existing regulations and statutes, as amended by the Economic Recovery Act, which added the new wage requirements to the state’s incentives programs. Notably, commercial real estate industry stakeholders have voiced concerns that the prevailing wage provision, which essentially requires the use of union labor, could jeopardize a project’s financial viability and dull the impact of the incentive.
Under the new law, residential ERG projects can receive tax credits of up to 30 percent of total eligible project costs, while projects in Atlantic City, Camden, Paterson, Passaic and Trenton can receive tax credits of up to 40 percent of eligible project costs.
A program known as Aspire, which was created by the Economic Recovery Act, will ultimately replace ERG as state’s gap financing tool for commercial, mixed-use and residential development projects.
The authority said it anticipates issuing a formal call for applications with further information about the process in early April, noting that ERG tax credits are not meant to be a substitute for conventional debt and equity financing. The EDA added that applicants should generally have their primary debt financing in place before applying.
For additional information and detailed eligibility requirements, applicants can visit https://www.njeda.com/economicrecoveryact/.
