The new law extends favorable tax incentive terms to Camden, East Orange, and New Brunswick and introduces a clawback provision for low occupancy. (Dana DiFilippo | New Jersey Monitor)
With little fanfare, Gov. Phil Murphy on Thursday signed legislation that expands more generous tax incentive terms to three additional cities, limits the state’s ability to take back excess tax credits, and requires commercial developers facing low occupancy to cede their incentives back to the state.
The signing marks the latest set of changes to the Aspire and Emerge tax incentive programs, which are due to issue $6.6 billion in tax credits over their lives, roughly half of which remained unissued through November. Annual tax incentive awards under the programs are capped at $1.1 billion.
The legislation removes a mandate that required the Economic Development Authority to reduce tax credits if economic conditions are more favorable to a developer than they were expected to be when the tax credits were initially awarded.
But it introduces separate language that would require developers of commercial projects to forfeit tax incentives in any year occupancy falls below 60%, beginning with the fourth year in which they would receive tax credits.
Tax credits under the programs are paid out over a maximum of 10 years, or up to five years for certain projects in government-restricted municipalities. Those are towns and cities that face sufficient municipal distress, are subject to state finance controls, lose at least 25% of their taxable land to the state, or have a national natural landmark at least 50 acres in size.
Under prior law, only Trenton, Atlantic City, and Paterson were considered government-restricted municipalities, a designation that entitles projects there to more generous tax incentives and lowers capital investment requirements for developers, among other things.
The bill signed Thursday would add Camden, East Orange, and New Brunswick to the list of government-restricted municipalities through language that states their populations, their exact municipal distress scores, their statuses as county seats, or the presence of an intersection of two highways there.
The new law also raises the minimum price at which the Treasury can purchase tax incentives issued under Aspire, requiring it to pay at least 85% of the value instead of the 75% floor provided by previous law.
In a fiscal note issued in December, the Office of Legislative Services said Treasury had not, to date, purchased any Aspire tax credits. Repurchasing tax credits under the new terms would impose an immediate cost to the state but would increase future revenue by a larger amount since tax credits are repurchased at a discount on their face value.
The nonpartisan office said it lacked the information necessary to determine the bill’s impact on state finances.
The legislation will allow tax credit awards under Aspire for projects that include up to 100 units of supportive housing for individuals who have special needs or require social services, subject to certain restrictions.
It will also allow awards for projects within a mile of the Trenton-Mercer Airport.
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