An aerial view of the Statehouse in Trenton
By Joshua Burd
The state Economic Development Authority is set to begin accepting applications for a long-awaited new incentive program, following the adoption of short-term rules for the subsidies.
Agency board members voted Wednesday to establish the Emerge program, which would provide employment-based tax credits as high as $8,000 per job annually, following its creation under the Economic Recovery Act of 2020. The offering follows in the footsteps of the Grow New Jersey program that expired nearly two years ago, filling a void for office users and other companies that had helped drive activity in the commercial real estate market.
The Emerge program will make tax credits available to projects that invest private capital into the state and create good-paying jobs, with a focus on certain priority sectors, according to the EDA. Under Wednesday’s action, the board approved rules that will be effective immediately for a short-term duration, enabling the agency to start accepting Emerge program applications in the coming weeks.
Concurrently, the board also approved publishing the rules for public comment prior to adopting longer-term final guidelines.
Gov. Phil Murphy, who signed the Economic Recovery Act in January, hailed the program as a key step toward creating jobs and creating a more equitable economy in the state.
“It is even more important as we begin our recovery from the economic devastation of the COVID-19 pandemic,” Murphy said. “The Emerge program is a well-crafted, targeted tax incentive program that will drive job creation and equitable economic growth throughout New Jersey.”
Through the Emerge program, small and large businesses, as well as nonprofits, can apply for tax credits to support projects that meet minimum capital investment and minimum job creation or retention requirements, according to a news release. Base tax credits will range from $500 to $4,000 per job, per year, depending on location and other aspects of the project, with bonuses available based on project location, industry and alignment with other policy objectives that can increase annual awards to a maximum of $8,000 per job.
Most projects will receive tax credits over a seven-year eligibility period, starting after the EDA confirms the applicant has completed its investment and hired workers.
The agency on Wednesday also outlined additional details of the program:
- Projects with significant numbers of retained jobs — either 500 or 1,000 depending on the project’s location — can receive tax credits for retained jobs, although the legislation sets the amount of tax credits for each retained job at half the amount that would be awarded for equivalent new jobs. Jobs that are covered by what’s known as a labor harmony agreement are eligible for an additional $1,000 bonus over the capped amounts.
- To be eligible for tax credits under the Emerge program, projects must create at least 35 new full-time jobs. That job creation requirement is lower if a business is primarily engaged in a targeted industry or if a business meets the definition of a “small business” in the program rules.
- Additionally, at least 80 percent of incented employees’ work time must be spent in New Jersey, and the business must commit to stay in the incented location for at least 1.5 times the duration of the tax credit period. Projects may make an equivalent donation to a local Recovery Infrastructure Fund in place of investing in their project’s facility. Some requirements are relaxed for small businesses.
- All projects that receive tax credits under Emerge must meet minimum environmental standards, meet prevailing wage obligations for all construction workers and building service workers and provide health care for employees. Projects that have a total cost of $10 million or more are also required to enter into a so-called Community Benefits Agreement with the EDA and the municipality or county in which the project is located, with the goal of monitoring compliance.
- To ensure a strong return on investment for New Jersey taxpayers, projects that receive tax credits under the Emerge program must yield a minimum net positive economic benefit to the state of 200 to 400 percent depending on project location, while awards will be limited to the amount the EDA determines is necessary to induce the project to locate in New Jersey. The authority will also review detailed financial information about the project to verify the award of tax credits is a “material factor” in the decision to create or retain jobs in New Jersey.
The EDA noted that the Emerge program is capped with the Aspire program — a separate incentive designed to catalyze community redevelopment and provide gap financing — at $1.1 billion over six years. Any remaining tax credits left after those six years will be available in a seventh year.
To ensure the benefits are distributed equitably throughout the state, the Emerge and Aspire program cap is split between northern and southern counties for the first three years.
The complete rules for the Emerge program, including eligibility, award sizes and other information, are available at https://www.njeda.com/emerge.
“Supporting projects that bring good jobs to New Jersey is crucial to recovering from the COVID-19 pandemic and achieving Governor Murphy’s vision for a stronger, fairer New Jersey,” said Tim Sullivan, the authority’s CEO. “The Emerge program rules approved today will open the door to exciting new economic development projects that will drive growth in communities across New Jersey while also remaining true to our commitments to equity, transparency, and accountability. This is an important step forward that will set New Jersey on the path to long-term, sustainable and fair economic success.”
Emerge is one of several new incentives created under the Economic Recovery Act, following a multiyear controversy over Grow New Jersey and other tax credit programs that proliferated under Gov. Chris Christie. Other new subsidies include incentives for new construction and for revitalizing brownfields and historic properties, along with financial resources for small businesses, support for new supermarkets and healthy food retailers in so-called food deserts, new funding opportunities for early-stage companies in New Jersey and support for the growing film and digital media industry.
The new Emerge rules will go into effect immediately upon filing with the Office of Administrative Law and will remain in effect for 180 days, the EDA said. During that time, the authority will propose the same rules as long-term guidelines and undertake the required 60-day public comment process, allowing it to begin accepting applications in the coming weeks while simultaneously fulfilling the public engagement requirements of the Administrative Procedures Act.