New York Extends Tax Incentives for Businesses and Developers in Lower Manhattan

As New Jersey and New York City continue to compete for marquee corporate tenants, Governor Andrew Cuomo recently signed legislation to extend tax incentives aimed at attracting businesses and developers to Lower Manhattan. The legislation extends five programs, including the Commercial Revitalization Program (CRP), the Industrial and Commercial Abatement Program, the Sales Tax Exemption Program, the Lower Manhattan Relocation Employment Assistance Program (LM-REAP), and the Lower Manhattan Energy Program.

While each program is different in size and scope, the ultimate goal remains the same: to increase private capital investment and encourage job growth in an increasingly competitive environment. The legislation extends the following programs:

  • Commercial Revitalization Program (CRP) provides tax incentives to owners investing in building improvements in nonresidential or mixed-use buildings built before 1975.

  • Industrial and Commercial Abatement Program provides a property tax abatement for up to 25 years for building, modernizing, expanding, or otherwise physically improving industrial and commercial buildings.

  • Sales Tax Exemption Program provides an abatement for goods purchased for building out space in Lower Manhattan.

  • Lower Manhattan Relocation Employment Assistance Program (LM-REAP) provides an annual credit of $3,000 per job, per year for companies moving to lower Manhattan from outside of the city.

  • Lower Manhattan Energy Program provides property owners and commercial tenants in eligible buildings located in lower Manhattan up to 45% reduction in electricity transportation and delivery costs for up to twelve years.   

On the other side of the river, New Jersey still offers highly competitive tax incentives for businesses and developers, including the Grow New Jersey Assistance Program (Grow NJ) and the Economic Redevelopment and Growth (ERG) Program.

Created under the Economic Opportunity Act (“EOA”) of 2013, Grow NJ is the State’s main job creation and business retention incentive program. The program is designed to encourage economic development and job creation and to preserve jobs that currently exist in New Jersey but which are in danger of being relocated outside of the State. Businesses meeting certain requirements may be eligible for tax credits ranging from $500 to $5,000 per job, per year; with bonus credits ranging from $250 to $3,000 per job, per year.

The Grow NJ program has been wildly popular and incredibly successful. Since its implementation, 233 projects have received awards, totaling over $4.4 billion in tax credits. Once certified, the 233 projects will drive over $3.9 billion in private capital investment, create over 29,000 new jobs, and retain over 28,000 jobs at risk of leaving the State.  

Also created under the EOA, the ERG Program is designed to help developers address revenue gaps in development projects (defined as having insufficient revenues to support the project debt service under a standard financing scenario). The Program can also apply to projects that have a below market development margin or rate of return.

In most cases, the base amount of the reimbursement cannot exceed 20 percent of the eligible cost of the project. Importantly, a developer seeking an incentive grant is required to make an equity participation for at least 20 percent of the project’s eligible costs. 

With limited exceptions, the annual percentage amount of reimbursement shall not exceed an average of 75% of the annual incremental state revenues directly realized from businesses operating on the redevelopment project premises. These revenues are then paid to the developer in the form of a grant derived from the realized revenues.

The ERG Program has also been incredibly successful. Under the commercial component of the program, the NJEDA has awarded grants to 11 applicants, totaling $305,508,906. The program has helped drive over $1.5 billion in private capital investment, and has led to thousands of construction jobs throughout the State.

As state and local governments continue to compete for new and existing business, policymakers will continue to leverage tax incentives in an effort to attract jobs and private capital investment. In order to remain effective, tax incentive programs must naturally evolve over time. While some have argued against using tax incentives as part of an overall economic development strategy, the idea that one state would unilaterally disarm in this highly competitive market is hard to imagine. Tax incentives will not always close the deal. However, for states to remain competitive, they must continue to be part of the conversation.  

If interesting in learning more about these and other programs, please do not hesitate to contact Murphy Partners LLP at (973) 877-6984 or info@murphyllp.com

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate development and economic incentive advisory. Headquartered in Newark, New Jersey, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. Through the development of comprehensive legal strategies, our team works tirelessly to create a blueprint for success and advance our clients’ interests in every matter.