Where Redevelopment Really Stands in New Jersey

Where does redevelopment stand in New Jersey? The answer is a little uncertain.

Cutoffs in State Funding

For most of the last quarter of a century, local governments in New Jersey have counted on the participation of the state to develop and implement programs for community revitalization. All that came to a screeching halt, though, when New Jersey’s governor cut off most state aid, mandating that they become more self-reliant. In response, local communities have sought to foster public-private relationships with businesses to create incentives for economic development. State government officials, most notably the New Jersey State Comptroller, have maligned these efforts, contending that the businesses are getting a handout, as they would have located in these communities anyway (this in spite of substantial evidence to the contrary).

To further complicate matters, New Jersey’s Local Finance Board issued a rule requiring that any local government receiving state transition aid must agree in writing to share certain revenues with school districts, even if a project has no relationship to schools or school children, and will not lead to an increase in the number of school children.

The Use of Redevelopment Bonds

One of the most effective tools available for redevelopment is the issuance of bonds under the Redevelopment Area Bond Financing Law. The advantages of such an approach include the ability to sell these bonds as a safe investment, secured by payments in lieu of real estate taxes (PILOTs), as well as a lien on the land and all improvements. Also, because the bonds are repaid from the PILOTs, they generate a source of funds for the project, so that the municipality does not have to come up with separate funds.

New Tax Credits Available

On January 6, Governor Chris Christie signed a new law, establishing the Grow New Jersey Assistance Program. Under the statute, companies looking to move into or stay in New Jersey can obtain a tax credit for significant capital investments. The program offers a credit of $5,000 to $8,000 for each job created or retained by the company, up to a ceiling of 100 jobs. The credits can be claimed for 10 years. The new program expands credits to municipalities throughout the state of New Jersey, based on planning areas and regions zoned for growth.

The Grow New Jersey program is an effort to expand on and improve the largely unsuccessful Urban Transit Hub Tax Credit (UTHTC) incentive program, which initially generated much interest, but carried certain requirements that made many businesses ineligible to participate. The new program expands the geographic areas, lessens the capital improvement thresholds, and focuses on job creation and retention.

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