In September 2007 – one month before the Dow hit its all-time high – over a dozen trade associations representing business, real estate and labor met to address “twin crises” affecting New Jersey. One, a short term “demand” crisis: the outmigration of jobs and residents to other states. The other, a longer term “supply” crisis: when businesses and people stop leaving the state and more start arriving, as demographers predict, where will this fully built-out state house them, if not on the remaining greenfields now off-limits to development?
The upshot of that meeting was the formation of the “Smart Growth Economic Development Coalition” and a year-long effort to draft a “stimulus package” for legislative consideration.
Many of the ideas promoted in the Coalition’s stimulus package are now embodied in the Economic Stimulus Act of 2009 (A-4048/S-2299) which the State Senate and Assembly are considering this week. The Coalition, whose member-organizations include groups that have thought long and hard about urban renewal, comprehensive land use planning, affordable housing, and business retention and attraction, strongly believe that A-4048/S-2299 will have dramatic positive consequences for the future of our state.
For example, consider the “Urban Transit Hub Tax Credit” (UTHTC) program within A-4048/S-2299. From an economic development perspective, this powerful new business incentive tool – unlike any business inducement program in the country – will attract large-scale employers to our state’s urban centers. Businesses otherwise headed to adjacent states or the sunbelt will be compelled to at least give serious consideration to locating their offices or factories to the cities included in the program. And because there’s a six-year window for eligibility, this program will spur projects in the next few years that will significantly contribute to the State’s economic recovery.
The nine eligible “urban aid” cities are not the only ones who will benefit if businesses relocate there. The state’s taxpayers will also win because the sooner these cities grow their property tax bases, the sooner they will be weaned-off of state aid. And the environment will benefit because under the program, office towers must locate within a half-mile of commuter rail stations to qualify for the tax credit, thus encouraging employees to take mass transit, and factories must locate along freight rail lines to qualify for the tax credit, thereby taking three or four tractor trailers off our roadways for every rail car loaded or unloaded.
Consider also the “Economic Redevelopment and Growth Grant” (ERGG) program within A-4048/S-2299. If anyone has ever wondered why large-scale mixed-use redevelopment projects have not risen in cities beyond our Hudson River waterfront, where rents and hourly parking rates enjoy the proximity to Manhattan, the answer is simple: the unique costs of redevelopment – land assemblage, environmental remediation, expensive structured parking – far outstrip the cost of developing in previously undeveloped greenfields, and yet there are no premium revenues to offset those added costs. Not even the developers of successful redevelopment projects on New Jersey’s “Gold Coast” have been able to “make the numbers work” for new redevelopment projects in those cities in recent years. Forty-eight other states have well-oiled tax increment financing programs to help close the financing gap on redevelopment projects, and yet, ironically, the state that needs redevelopment more than any other, New Jersey, has not had a workable tax increment financing program and will not unless A-4048/S-2299 becomes law.
Opponents of A-4048/S-2299 would have you believe that the legislation is nothing more than wasteful “pork-barrel” or “Christmas tree” subsidies to wealthy business-owners and developers. They could not be more wrong.
The Urban Transit Hub Tax Credit program is a fiscally responsible, smart growth response to the generous financial rewards other states are offering to businesses. In other states, incentives are granted regardless of where a business relocates, while the UTHTC is specially targeted to only nine urban, rail-connected cities. Competing states offer as-of-right incentives, but the UTHTC requires the NJEDA to confirm that an applicant’s project will have a net positive benefit to the state and host city after all public support to the project and municipal services have been taken into account.
The same applies to the Economic Redevelopment and Growth Grant program. Critics decry ERGG’s use of local property taxes to defray the cost of redevelopment projects. They claim that these dollars merely allow developers to earn the same profits that they used to earn developing greenfields before they were placed off-limits; the truth is that developers stand to actually lose money on most redevelopment projects, thus explaining the absence of construction cranes on the skylines of Newark, Elizabeth and Camden. Critics of A-4048/S-2299 also fail to mention that ERGG grants can only be funded using the incremental extra taxes generated as a result of a project; the existing taxes paid on a property can’t be touched. They also fail to note that once debt service on a project’s construction costs has been satisfied, 100% of the incremental extra taxes will go to the host municipality. And critics overlook the multiplier effect: these redevelopment projects will create near-term construction jobs, and longer-term permanent jobs, as well as new economic activity generating new income taxes and sales taxes. The smart growth economic development incentives contained in A-4048/S-2299 are not for “special interests.” They’re in everyone’s best interest.
Ted Zangari practices law in Newark and is the founder of the Smart Growth Economic Development Coalition.
The following are members of the Smart Growth Econimic Development Coalition:
- Building Contractors Association of New Jersey
- CoreNet Global – NJ Chapter
- Counselors of Real Estate – NJ Chapter
- Downtown New Jersey
- International Council of Shopping Centers – NJ Chapter
- National Association of Industrial and Office Properties – NJ Chapter
- Newark Real Estate Board
- Newark Regional Business Partnership
- New Jersey Apartment Association
- New Jersey Association of REALTORS
- New Jersey Builders Association
- New Jersey Business & Industry Association
- New Jersey Laborers’-Employers’ Cooperation and Education Trust
- New Jersey Society for Environmental, Economic Development (NJSEED)
- New Jersey State Chamber of Commerce