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New Jersey Incentive Update - March 2019

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This morning, the New Jersey Economic Development Authority (NJEDA) will hold its monthly board meeting. Among the actions to be taken, the Board will consider three applications under the Grow New Jersey Assistance Program (Grow NJ). If approved, the three applicants could receive over $24,000,000 in tax credits (over 10 years). The Board will also consider an application under the Economic Redevelopment and Growth (ERG) Grant Program.

Created under the Economic Opportunity Act of 2013, the Grow New Jersey Assistance Program (Grow NJ) is the State’s main job creation and retention incentive program. Under the Grow NJ program, businesses creating or retaining jobs in the State 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 (awards vary based on applicable criteria).

The Grow NJ program has been wildly popular and incredibly successful. Since its implementation, over 250 projects have received awards, totaling over $4.7 billion in tax credits. Approved applicants generally have three years to certify, or complete, a project. A project is deemed complete when the applicant has hired or retained the number of employees listed in its application, and satisfied the program’s capital investment requirements. Once certified, the 250 projects will drive over $4.5 billion in private capital investment, create over 32,000 new jobs, and retain over 35,000 jobs at risk of leaving the State.

If interested in learning more about Grow NJ or other economic development incentive programs, please do not hesitate to contact Chris Murphy at (973) 723-7036 or cmurphy@murphyllp.com.  

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. With offices in Newark, New Jersey and New York City, 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.


Incentive Alert: Governor Murphy Proposes New Incentive Programs

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On Monday, Governor Murphy outlined his plan for revamping New Jersey’s main incentive programs, including the Grow New Jersey Assistance Program (Grow NJ) and the Economic Redevelopment and Growth (ERG) Program, which are set to expire in July of 2019. While the creation of any new program will require new legislation, this is the first step in a process that will likely result in new incentive programs for businesses and developers.

The NJ Forward Tax Credit Program (NJ Forward) will likely take the place of Grow NJ as the State’s main job attraction incentive program. As proposed, NJ Forward will focus primarily on high-wage, high-growth sectors, including life sciences, information and high tech, clean energy, advanced manufacturing, advanced transportation and logistics, finance and insurance, and food and beverage. While the report does not outline specific programmatic details, it states that the proposed program will:

  • Increase focus on global/U.S. headquarters, R&D activities, and foreign direct investments

  • Prioritize new job creation rather than retained jobs

  • Encourage job creation in urban centers and other distressed communities, particularly those with public transit assets

  • Include an annual award cap and review to ensure fiscal sustainability and transparency

  • Feature lower base per-job credit amounts more in line with neighboring states, as well as more focused bonuses that ensure the administration’s policy goals

  • Limit transfers of credits to ensure that job-creating companies reap the primary benefits of taxpayer investment

  • Reward companies that invest in employee skill development and training

The NJ Aspire Tax Credit Program (NJ Aspire) will likely take the place of ERG as the State’s main incentive for developers. The administration is proposing the creation of a new place-based gap financing tool to help catalyze investments in commercial, residential, and mixed-use (including parking) projects, with a particular focus on cities, downtowns, and suburban neighborhoods served by mass transit. As proposed, the program will facilitate the conversion of surface parking lots, vacant and/or abandoned lots, and other underutilized properties into job and tax-generating development opportunities. The program will also assist in the development of market-rate housing in distressed communities and, where appropriate, mixed-income and affordable housing near transit in suburban communities. NJ Aspire will be structured as a competitive tax credit grant, giving the NJEDA discretion in awarding grants to the most impactful and development-ready project.

In addition to NJ Forward and NJ Aspire, the report also calls for the creation of a new remediation and development tax credit program and a dedicated NJEDA loan fund to support brownfield redevelopment, the creation of a state historic preservation tax credit program, and multiple programs aimed at encouraging venture capital investment in high-growth, high-wage sectors.

If interested in learning more about these or other economic development incentive programs, please do not hesitate to contact Chris Murphy at Murphy Partners LLP at (973) 723-7036 or cmurphy@murphyllp.com.

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. With offices in Newark, New Jersey and New York City, 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.


Incentive Alert: Governor Murphy Signs the ERG Bond Financing Act

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On August 17, 2018, Governor Phil Murphy signed into law the Economic Redevelopment and Growth Grant Bond Financing Act (P.L. 2018, c. 97), which creates a mechanism to finance projects under the Economic Redevelopment and Growth (ERG) Program.

Created under the Economic Opportunity Act of 2013, the ERG program is the State’s primary incentive for developers. Pursuant to the program rules, a developer that can demonstrate that its redevelopment project requires a subsidy to close a project financing gap may apply for a grant equaling no more than 20% of the total cost of a project (30% in a Garden State Growth Zone), of which the developer must make a 20% equity investment.

In accordance with a redevelopment incentive grant agreement, beginning upon the receipt of occupancy permits for any portion of the redevelopment project, the developer will receive incremental State revenues directly realized from businesses operating on or at the site of the redevelopment project. The developer may apply for an incentive grant in the amount up to 75% of the annual incremental tax revenues generated by the project over a 20 year period. If the redevelopment project is located within a Garden State Growth Zone, 85% of the projected annual incremental revenues may be pledged toward the award.

Prior to the enactment of the ERG Bond Financing Act, developers receiving awards under the ERG program were required to seek financing for up-front costs associated with the project, as the ERG payments were unavailable until the project had been fully completed and certified. The ERG Bond Financing Act creates a mechanism for developers to monetize an ERG award by allowing the municipality in which a project is located to (either directly or through an application to the New Jersey Economic Development Authority or similar public instrumentality of the State) issue bonds secured by a pledge of the ERG grant payments, and further secured by municipal liens and/or special assessments on the property benefiting from the improvements. This will allow developers to finance the up-front costs associated with construction, without having to seek gap financing.

If interested in learning more about state and local development incentives, please do not hesitate to contact Murphy Partners LLP at (973) 723-7036 or info@murphyllp.com.  

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. With offices in Newark, New Jersey and New York City, 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.

Incentive Alert: Rutgers University Report Recommends Changes to New Jersey’s Business Incentive Programs

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On Wednesday, the New Jersey Economic Development Authority (NJEDA) submitted a report to Governor Phil Murphy, conducted by Rutgers University’s Edward J. Bloustein School of Planning and Public Policy, which (among other things) recommended changes to the State’s business incentive programs, including the Grow New Jersey Assistance Program (Grow NJ) and the Economic Redevelopment and Growth Grant Program (ERG).

The report (which can be found here) found the following:   

  • There has been a significant volume of project approvals under Grow NJ, which are associated with significant volumes of retained and created jobs, but which will also generate a substantial offset to the Corporate Business Tax and Insurance Premium Tax in the years ahead;

  • Commercial ERG projects leverage a considerable amount of private investment.

  • Given the long lead time associated with Grow NJ and ERG projects, it is too soon to fully evaluate the impact of these programs on the State’s economy;

  • Projects approved under Grow NJ are generally concentrated in the northern, more populous counties of the State. A significant percentage of project funding in the eight southern counties has been concentrated in Camden;

  • Redundancies in the Grow NJ base and bonus award structure are potentially providing more generous incentives than intended by the statute;

  • Because certain bonuses have been underutilized, it is not clear that the program has advanced certain policy goals intended by the legislation such as clean energy investment and the creation of incubators;

  • There is an opportunity to improve EDA’s analysis of proposed incentive projects.

The report suggested the following to improve the programs:

  • A deeper analysis of the types and quality of jobs created or retained, and whether some or all of the related economic activity would have happened with lower or no incentives.

  • A review of the overall impact of the reduction in Corporate Business Tax revenues (which would be made up for by higher Gross Income Tax from created or retained jobs), given the constitutional requirement that the Gross Income Tax fund property tax relief while the Corporate Business Tax and Insurance Premium Tax are the primary resources for the General Fund.

  • Given the Grow NJ program’s goals of job creation and retention, the report recommends that the alternative approach used in calculating certain awards in the city of Camden (the “Camden alternatives”) be revised to tie awards more closely to the employment created by these firms.

  • NJEDA should consider eliminating or revising the bonus for Transit Oriented Development in Urban Transit Hubs and Garden State Growth Zones. This bonus may be redundant in most cases in these jurisdictions, where it accounts for about 21 percent, or about $250 million of the total award value for projects qualifying for the bonus.

The programs are currently set to expire in July 2019. With the sunset of the programs only a year away, legislators will soon start to discuss potential changes to the programs. While change may be on the horizon, one thing is clear--incentives will continue to be part of New Jersey’s economic development toolkit.

If interested in learning more about state and local incentives, 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. With offices in Newark, New Jersey and New York City, 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.

Incentive Alert: New Jersey Legislature Passes ERG Bond Financing Act

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The New Jersey Senate and Assembly have both passed legislation (S-1849 / A-2041), known as the Economic Redevelopment and Growth Grant Bond Financing Act, which will create a mechanism to finance projects under the Economic Redevelopment and Growth (ERG) grant program.

Created under the Economic Opportunity Act of 2013, the ERG program is the State’s primary incentive for developers. Pursuant to the program rules, a developer that can demonstrate that its redevelopment project requires a subsidy to close a project financing gap may apply for a grant equaling no more than 20% of the total cost of a project (30% in a Garden State Growth Zone), of which the developer must make a 20% equity investment.

In accordance with a redevelopment incentive grant agreement, beginning upon the receipt of occupancy permits for any portion of the redevelopment project, the developer will receive incremental State revenues directly realized from businesses operating on or at the site of the redevelopment project. The developer may apply for an incentive grant in the amount up to 75% of the annual incremental tax revenues generated by the project over a 20 year period. If the redevelopment project is located within a Garden State Growth Zone, 85% of the projected annual incremental revenues may be pledged toward the award.

Currently, developers receiving awards under the ERG program are required to seek financing for up-front costs associated with the project, as the ERG payments are unavailable until the project has been fully completed and certified. The ERG Bond Financing Act seeks to assist developers with up-front project costs by allowing the municipality in which a project is located to (either directly or through an application to the New Jersey Economic Development Authority or similar public instrumentality of the State) issue bonds for projects that receive ERG grants. The bonds would be secured by a pledge of the ERG grant payments, and further secured by municipal liens and/or special assessments on the property benefiting from the improvements.

The bill is currently awaiting the signature of Governor Murphy.

If interested in learning more about state and local development incentives, 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. With offices in Newark, New Jersey and New York City, 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.

Incentive Alert: Amendments to the Grow NJ Program Advance

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On Tuesday, multiple bills to amend the Grow New Jersey Assistance Program (Grow NJ) received favorable committee votes in Trenton. The Assembly Commerce and Economic Development Committee voted 9-0 to amend provisions related to the classification of Garden State Growth Zones (GSGZ) under the program. The committee also approved a bill which would require the New Jersey Economic Development Authority (NJEDA) to establish an “innovation zone” program, and modify the Grow NJ program to provide bonuses and other enhanced incentives to high-technology businesses located in an innovation zone.

Under A-4510, the Grow NJ program would be amended to add a sixth GSGZ, which will include the Atlantic City International Airport and the Federal Aviation Administration William J. Hughes Technical Center, and the area within a one-mile radius of the outermost boundary of that airport and technical center.

Currently, there are five GSGZs, including Atlantic City, Camden, Passaic, Paterson, and Trenton. Businesses relocating to or remaining in a GSGZ receive enhanced incentives, including a base tax credit of $5,000 per job, per year, for up to 10 years.

In addition to creating an additional GSGZ, the amendment also allows projects located in the six GSGZs to take advantage of provisions only available for projects located in Camden, including an alternative grant calculation to determine the total incentive amount available. This provision has driven many of the program’s largest projects (and awards) to Camden. As amended, all six GSGZs would be entitled to the same benefits.

The Assembly Commerce and Economic Development Committee also voted 7-0 to approve A-3747, which would require the NJEDA to establish an "innovation zone" program, which would consist of three innovation zones, each surrounding a research university or college or research hospital, and located in Greater Camden, Greater New Brunswick, and Greater Newark. The bill would require the NJEDA, with the approval of the State Treasurer, to modify its existing business assistance programs to give bonuses or other enhanced incentives to high-technology businesses located in an innovation zone.

Created under the Economic Opportunity Act of 2013, Grow NJ is the State’s main job creation and retention incentive program. Under the program, businesses creating or retaining jobs in the State 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 (awards vary based on applicable criteria).

The Grow NJ program has been wildly popular and incredibly successful. Since its implementation, 232 projects have received awards, totaling over $4.4 billion in tax credits. Approved applicants generally have three years to certify, or complete, a project. A project is deemed complete when the applicant has hired or retained the number of employees listed in its application, and satisfied the program’s capital investment requirements. Once certified, the 232 projects will drive over $3.9 billion in private capital investment, create over 28,000 new jobs, and retain over 30,000 jobs at risk of leaving the State.

If interested in learning more about Grow NJ or other economic development incentive programs, please do not hesitate to contact Murphy Partners LLP at (973) 723-7036 or info@murphyllp.com.  

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in commercial real estate 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.

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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.

New Jersey Economic Incentive Preview - April 2017

On Thursday, April 13, 2017, the New Jersey Economic Development Authority (NJEDA) will hold its monthly board meeting in Trenton. Among the actions to be taken, the Board will consider applications under the Grow New Jersey Assistance Program (Grow NJ) and the Economic Redevelopment and Growth (ERG) Program. The Board will also consider the issuance of bonds, loans, and guarantees for multiple applicants.

  • Grow New Jersey Assistance Program

The Board will consider three applications under the Grow NJ Program, totaling over $25,000,000 in tax credits. If approved, the three projects will bring jobs and capital investment to Paterson, Camden, and Piscataway Township.

Created under the Economic Opportunity Act of 2013, Grow NJ is the State’s main job creation and business retention incentive program. The purpose of the program is 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.” N.J.S.A. 34:1B-244(a).

Determination of the size of an award is based on the project’s location, the corresponding capital investment, and the jobs created or retained at a qualified business location. Applicants must demonstrate that the project will yield a net positive benefit to the State and must indicate that the award of tax credits under the program is a material factor in the business decision to make a capital investment and locate in the State. N.J.S.A. 34:1B-244(b)(3).

The Grow NJ Program has been wildly popular and incredibly successful. Since its implementation, 228 projects have received awards, totaling over $4.3 billion in tax credits. Once certified, the 228 projects will drive over $3.8 billion in private capital investment, create over 28,000 new jobs, and retain over 27,000 jobs at risk of leaving the State.

  • Economic Redevelopment and Growth (ERG) Program

The Board will also consider one application under the ERG Program. The development project, located in Atlantic City, is seeking a total of $38,400,000.

Under the ERG Program, the NJEDA and the State Treasurer “may enter into a redevelopment incentive grant agreement with a developer” for any “qualifying redevelopment project located in an economic redevelopment and growth grant incentive area.” N.J.A.C. 19:31-4.1(a).

If a project is located in a Garden State Growth Zone (GSGZ), which includes Atlantic City, the applicant can receive “up to an average of 85 percent of the project annual incremental revenues” that are “directly realized from businesses operating on the redevelopment project premises.” Id. These revenues are then “paid to the developer in the form of a grant derived from the realized revenues.” Id.  

With limited exceptions, for projects located in GSGZs, the base amount of the combined reimbursements from State and local grants or tax credits cannot exceed 30 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.” Id.

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.

MURPHY PARTNERS LLP

If interested in learning more about these and other programs available through the State of New Jersey, please do not hesitate to reach out to us by telephone at (973) 877-6984 or by email at info@murphyllp.com. In the meantime, please take some time to explore the website. We look forward to hearing from you soon.

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