On September 1, the New Jersey Economic Development Authority (EDA) announced its plan to institute a new financial incentive program called the “Brownfields Redevelopment Incentive (BRI) Program,” part of the New Jersey Economic Recovery Act, to spur brownfield redevelopment in New Jersey. The EDA requested public feedback based on information it provided to the public (EDA Information), so that it may tweak the program before the program is established. The EDA held information sessions on September 7 and 8, to present a summary of the program. The slides provided by the EDA at the BRI information sessions are linked here and provide a detailed summary of the program. Following are highlights of key aspects of the proposed program, as set forth in the EDA Information:
- The program will provide $300 million in tax credits to developers of redevelopment projects located on brownfield sites, for remediation costs. Eligible remediation activities are outlined in detail in the EDA Information.
- Eligible remediation costs will include the investigation and remediation of environmental contamination, as well as building and structural remediation activities and required DEP site remediation program and permit fees. The EDA Information discusses specific costs that will and will not be allowable. Costs not associated with the remediation of a contaminated site include the cost of acquisition of the property, costs incurred in financing the remediation, legal and incentive consultant fees and payments for penalties and violations.
- Awards may be made of up to 50 percent of remediation costs for eligible brownfield sites, up to a maximum of $4 million for private development. Brownfield sites in a Government Restricted Municipality or Qualified Incentive Tract may be eligible for up to 60 percent of rehabilitation costs, up to a maximum of $8 million.
- Applications for awards will be scored and decisions made on a competitive basis.
- The EDA will partner with the New Jersey Department of Environmental Protection (DEP) to evaluate applications. The DEP will primarily be reviewing projected costs as to reasonableness, prior to EDA Board approval.
- To qualify to receive tax credits, a developer applicant must demonstrate that a “financing gap” exists.
- The developer must establish that the site is a brownfield site. The EDA defines “brownfield site” or “contaminated site” as any former or current commercial or industrial site that is currently vacant or underutilized and on which there has been, or there is suspected to have been, a discharge of a contaminant or on which there is contaminated building material.
- Parties that are in any way responsible or otherwise liable for the site contamination are not eligible for the program. This will, in most cases, include owners of the site to be remediated.
- Other eligibility requirements include: a letter of support from the governing body; proof that without the tax credit award, the project is not economically viable; proof that a project financing gap exists; proof that the tax credit being considered for the project is equal or less than the project financing gap; confirmation that the remediation has NOT commenced, unless the full extent of contamination is not known; and a determination that the remediation costs are reasonable and appropriate.
- The remediation project must be completed within six years of EDA Board Approval.
- Prevailing wage will be required. The EDA Information provides that “EDA’s prevailing wage requirements apply to construction contracts for work performed for the redevelopment project and subsequent redevelopment project, if applicable. Prevailing wage requirements will apply until two years after the tax credit is issued. Prevailing wage will also apply to all work done by tenants at the redevelopment project.”
- Building services prevailing wage will also be required for 10 years following the completion of the redevelopment project. For building services at the site of the redevelopment project, the 10-year timeframe begins at the end of the redevelopment project as defined in the redevelopment agreement.
- The terms “redevelopment project” and “subsequent redevelopment project” are defined. The definition of “redevelopment project” is: “a specific construction project or improvement undertaken, pursuant to the terms of a redevelopment agreement, by an applicant within an area of land whereon a brownfield site is located. A redevelopment project may involve construction or improvement upon lands, buildings, improvements, or real and personal property, or any interest therein, including lands under water, riparian rights, space rights, and air rights, acquired, owned, developed or redeveloped, constructed, reconstructed, rehabilitated, or improved.” Importantly, the EDA proposes to add that “Redevelopment projects shall include a project that consists solely or primarily of remediation costs” and also that a redevelopment project can be a remediation-only project.
- A “subsequent redevelopment project” is a construction project or improvement that is undertaken after application to the brownfield incentive program at the brownfield site, that is not included within the redevelopment activities set forth in the “redevelopment agreement.”
- The program has been designed to work in conjunction with other EDA programs, so the program is stackable with ASPIRE. (For more information on the ASPIRE Program, click here.)
- All tax credits will be received at one time in one lump sum payment, following certification of completeness of the project.
Issues to be considered by the EDA before it rolls out the new program include:
- Regarding the prevailing wage requirement, a common question has been whether NJ has evaluated the increased labor costs from the prevailing wage requirements for construction and building services, and the potential for those increased costs to reduce or even negate the benefit of the tax credit for larger projects. However the prevailing wage requirement is statutory, so the EDA has no discretion in this regard.
- How large phased redevelopment projects may be handled. May separate phases of the same project be considered separate projects requiring separate applications?
- Will prevailing wage requirements be required for projects receiving HDSRF monies (which do not require prevailing wage), if stacked with a BRI project?
- For redevelopment projects that are remediation only projects, will there be a timeframe that must elapse following which the prevailing wage requirement will not attach to a subsequent redevelopment project? Or will the prevailing wage requirement continue?
For developers and redevelopers whose projects are eligible and who are willing to accept the requirements for qualification and participation, the BRI Program will provide the opportunity for funding projects that may not otherwise have been feasible. We encourage you to review the information provided by the EDA and contact us with any questions you may have. We will continue to keep abreast and inform of any modifications to the BRI Program.