Any changes that loosen requirements for developers and landowners when it comes to redevelopment tax credits should be carefully scrutinized, as stringent requirements are necessary to ensure that tax credit awards represent a true benefit to their communities rather than mere tax giveaways. It’s unclear why changes are necessary to Aspire given that the legislature amended the program last year and the EDA has just begun awarding credits based on the regulations updated to those legislative changes.
A few items of concern in the current bill:
- Removal of the three-bedroom apartment requirement: New Jersey rental housing remains scarce especially for affordable family units. The replacement of the three-bedroom requirement with a mere 5 percent increase in project cost for three-bedroom inclusion does not change the economic incentives for developers, who can obtain much more rent per square foot from non-family units. Requiring family housing should be part of affordable housing policy broadly.
- Use of credits for warehousing: Even with the addition of a $10 million environmental remediation requirement, warehousing should not be the focus of the Aspire program. As warehousing expands its footprint across the state, it’s unclear why warehouses need any incentives to build, even if substantial environmental remediation costs exist.
- Inclusion of parking in total square footage: The purpose of a transformative project is to improve communities with dramatic changes in residential or commercial space. New Jersey should not be subsidizing housing for cars at the expense of housing for people.
- Reduction in retail space: Reducing the requirement from 50,000 to 20,000 square feet of commercial space is a dramatic shift with no explanation. Again, defining “transformative” downwards is not clearly benefiting communities that have faced underinvestment for years.
- Redevelopment Bridge Program within EDA: Although a bridge financing program may be a good policy in order to assist in building the necessary finance stack for construction, NJPP has concerns about the EDA issuing loans and loan guarantees through the bridge program as well as the credits against which the loans are guaranteed. This creates a potential conflict.
- Carry-forward and transfer concerns: Extending the time window for redemption does increase the value of the credits, but each change in the time window for redemption also results in erosion of the predictability of credit claims. As seen in this year’s budget, tax credits from years earlier can come back to bite state revenue in a future year, making it more difficult to estimate revenues.
NJPP urges the committee to revisit and revise this legislation to address some of these concerns and also to pump the brakes on wholesale changes to the Aspire program this soon after previous changes.
