Since its launch more than two years ago, the New Jersey Aspire tax credit incentive program (“NJ Aspire”) has not been the deal-closing fund that redevelopers have so desperately needed. Thus far, NJ Aspire, like the “ERG” program which preceded it, has been unable to close, or even substantially narrow, projected financing gaps on most potential redevelopment projects across the state’s urban centers.
This isn’t a new challenge; redevelopers have always struggled to make the numbers work on mixed-use and multifamily projects due to the unique added expenses of redevelopment that aren’t typically encountered on “greenfield” new construction projects—namely, land assemblage, environmental remediation, and structured parking costs. Adding to the challenge, incentives at the local level—specifically, long-term property tax exemptions (PILOTs), even when coupled with redevelopment area bond (RAB) sale proceeds—are not usually generous enough to make the numbers work. And now, with the rising cost of labor and materials and the rapid increase in interest rates, even proposed redevelopment projects in tested, primary NJ cities, such as Hoboken and Jersey City, are not penciling-out.
So, with redevelopers and their investors and lenders rarely willing to accept a subpar rate of return, many potential projects are sitting on drawing boards. Pencils-down, shovels-down.
Fortunately, legislation aimed at correcting significant flaws in the NJ Aspire program was approved by the State Legislature last week and signed into law by Gov. Murphy earlier today. The revisions include significant increases in the percentage of “project costs” that may be eligible for tax credits as well as increases in the caps on tax credit awards to individual projects under the program, with the largest of these increases going to projects located in the three “government-restricted municipalities” (Paterson, Trenton, and Atlantic City).