New Jersey Zoning Watch

A law blog on New Jersey land use issues

Archive for July, 2009

NJ Economic Stimulus Bill Provides New Incentives for Development

Posted by Phil Morin on July 17, 2009

The New Jersey Economic Stimulus Act of 2009 recently passed both houses of the Legislature and was signed into law by Governor Jon Corzine on Monday, July 27th.  The Act is an amalgamation of initiatives designed to reinvigorate New Jersey’s economy and includes several incentives to jump start commercial real estate development. 

According to the Assembly Budget Committee statement in support of the Act, the Act includes the following: (1) an Economic Redevelopment and Growth Grant Program; (2) authorization for certain municipalities to impose special taxes and surcharges to fund redevelopment activities and certain programs; (3) expansion of transferability of tax credits under the New Jersey Emerging Technology and Biotechnology Financial Assistance Program and changes to the “Urban Transit Hub Tax Credit Act”; (4) relief to certain developers otherwise subject to the “Statewide Non-Residential Fee Act”; (5) grants to municipalities for affordable housing; (6) changes to improve the financing of higher education facilities in New Jersey; and (7) relief to certain manufacturing companies taxes and surcharges on energy and utility services.

Below, I have highlighted the portions of the Act with the most impact on the commercial development community: the Economic Redevelopment and Growth Grant progam; the amendments to the Urban Transit Hub Tax Credit Act; and the relief to developers from the Statewide Non-Residential Fee Act which requires a 2.5 percent contribution of the equalized assessed value of new non-residential construction to a state or municipal affordable housing trust fund.

Economic Redevelopment and Growth Grant program

The Act authorizes State and local incentive grants to developers in “qualifying economic redevelopment and growth grant incentive areas,” which includes the Metropolitan and Suburban planning areas (Planning Areas 1 and 2), centers designated under the State Development and Redevelopment Plan and federal land approved for military base closure.  Projects in transit villages are not eligible for State incentive grants but are eligible for municipal incentive grants.  This program replaces the revenue allocation district (“RAD”) financing program which was seen as too complicated and was sparingly considered as an option by developers and local governments.

Incentive grants are intended to help fill project financing gaps in a difficult financial climate.  To qualify, a developer must contribute its own capital for at least 20 percent of the total project cost and must certify that additional capital is not available from other sources.

Project revenues will fund the grants.  For State grants, the Economic Development Authority and the developer will enter into a redevelopment agreement, which would also require local approval by municipal ordinance.  Such agreements would provide that up to 75 percent of State revenues realized from a project would be pledged toward a grant.  For municipal grants, municipalities may pledge their revenues from payments in lieu of taxes, lease payments to the municipality, property taxes and any additional taxes authorized by law (motor vehicle rental taxes, payroll taxes, parking taxes).

An incentive grant can extend up to 20 years and cannot exceed 20 percent of the total cost of the project.  A determination must be made that the revenues will exceed the grant funds.

Urban Transit Hub Tax Credit Act Amendments

Current law allows a business with a certain level of capital investment in a qualified business facility within an urban transit hub and that employs at least 250 people at the facility to qualify for a tax credit equal to the qualified capital investment, which must be taken over a 10-year period against the corporate business tax or insurance premiums tax liability.  Certain tenants were also able to take advantage of a tax credit, provided they met certain thresholds.

The Act makes numerous changes to the Urban Transit Hub Tax Credit program, including the following: 

  • The “urban transit hub” definition is expanded to include in “eligible municipalities”: (1) property located within a half-mile radius surrounding the mid point of one of up-to-two underground light rail stations’ platform areas that are most proximate to an interstate rail station; (2) property adjacent to, or connected by rail spur to, a freight rail line if the business utilizes that freight line for loading and unloading freight cars on trains; and (3) within a half-mile of all light rail stations (and within a mile of the Camden rail station).  “Eligible municipalities” are defined pursuant to the criteria set forth in N.J.S.A. 34:1B-209 as Camden, East Orange, Elizabeth, Hoboken, Jersey City, Newark, New Brunswick, Paterson and Trenton.
  • Adds a mixed use component to definition of “qualified residential project” for purpose of receiving a credit.
  • Lowers the capital investment threshold from $75,000,000 to $50,000,000 for an owner of a “qualified business facility”, and from $50,000,000 to $17,500,000 for a tenant that occupies a leased area of the qualified business.
  • Provides that for a business applying before January 1, 2010, its credit shall not be reduced if it relocates to an urban transit hub from another location or locations in the same municipality.
  • Allows the full-time employee requirement to be met by certain types of contract workers who perform work at the qualified business facility for at least 35 hours a week and allows out-of-State residents working in New Jersey to be counted as “full time employees.”
  • Allows a business to use an affiliate to satisfy the employment or capital investment requirements of the program.
  • Clarifies how tenant investment will be included in the capital investment calculation for the qualified business facility, by providing that the capital investment made by a tenant will be included in the owner’s capital investment to the extent necessary to meet the minimum capital investment threshold. Any capital investment made by a tenant above this amount will be added to the amount of tax credit the tenant is otherwise entitled to receive based on its portion of the net leasable area in the qualified business facility.
  • Allows up to three tenants to meet the 250 employee requirement in the aggregate.
  • Relaxes the 10 percent Statewide full-time workforce reduction trigger before the business suffers a mandatory forfeiture of an annual tax credit by setting the trigger at 20 percent.
  • Expands the urban transit hub credit zones to include business headquarters property that can become a qualified investment facility within a one-mile-wide zone in a qualified municipality.
  • Clarifies that S-corporations and limited liability corporations are included as businesses that may be eligible to participate in the program and clarifies that a tax credit is not to be applied against individual New Jersey gross income tax liability.  An individual who is a holder of a credit may sell their credit, covering one or more years, under the tax credit transfer certificate program for consideration received by the business of not less than 75 percent of the transferred credit amount.
  • Removes the provision that casino licensees cannot qualify for the program.
  • Allows reduction of the credit by 20 percent if less than 200 employees are employed, even if a business relocates to an urban transit hub from another location in the same municipality.
  • Changes the timing of the trigger for forfeiture of the credit so that a business cannot reduce its workforce by more than 20 percent in the last tax accounting or privilege period prior to approval, rather than the greater of the two following periods: in the period prior to approval or in the period prior to the enactment of the original 2007 legislation.

Note that the Act also eliminates any “as of right” qualification and adds subjective criteria for the eligibility for a tax credit, namely that a business shall demonstrate to the EDA at the time of application, that the State’s financial support will yield a “net positive benefit” to the State and the eligible municipality.  Also, a business will not qualify for a credit if the capital investment was the basis for a grant under the InvestNJ Business Grant Program Act.

Additionally, the Act provides for a new credit for “qualified residential projects” under the Urban Transit Hub legislation.  “Qualified residential projects” are defined as a building or buildings, including a mixed use project, consisting predominately of residential units, located in an urban transit hub.  The definition of “residential units” includes rental units, hotel rooms or dormatory rooms.

A developer may receive a credit up to 20 percent of its capital investment for a “qualified residential project.”  To be eligible, a developer shall demonstrate, through a project pro forma analysis, that the project “is likely to be realized with the provision of tax credits . . . but not likely to be accomplished by private enterprise without the tax credits.”

A developer must make or acquire capital investments totalling at least $50,000,000 in a qualified residential project to be eligible for a credit.

Non Residential Development Fee and Affordable Housing

The Act will exempt certain property from the 2.5 percent development fee imposed by the “Statewide Non-Residential Fee Act,” N.J.S.A. 40:55D-8.1 to -8.7 (“SNRF” or “A-500″). 

Development Fee Moratorium: Property which received preliminary or final site plan approval from a municipality or from the New Jersey Meadowlands Commission before July 1, 2010 will be exempt from the fee imposed by the SNRF/A-500, provided that a local building permit is issued prior to January 1, 2013.

Ban on Local Non-Residential Fee Ordinances Remains: The Act does not abolish the section of the SNRF/A-500 which prohibits municipalities through local action from imposing their own obligations on non-residential development.

Refunds: The Act requires that, in most cases, any funds deposited under the SNRF/A-500 with the State or a municipality be refunded to the developer.  The exception is where a developer received preliminary or final site plan approval prior to the effective date of SNRF/A-500 (July 17, 2008) and agreed to pay a fee based upon a local development fee ordinance.  In that instance, only the difference between the local fee and the 2.5 percent statewide fee will be eligible for a refund.

Municipal Obligation: Furthermore, the Act provides that the portion of a municipal fair share affordable housing obligation created as a result of the non-residential development will be reduced or eliminated if the collection of fees are suspended and if there are insufficient funds in the State affordable housing trust fund or other State or federal sources of funding within the next two years following enactment.

For an example of the practical implications of the Act on actual “in the pipeline” development projects, read the text of Senator Raymond Lesniak’s (D-Union) speech to the New Jersey Business and Industry’s Economic Development Forum at NJ Voices here.

Posted in Affordable Housing, Environmental Issues, Ft. Monmouth Redevelopment, Green Legislation, Legislation, Redevelopment, Transportation | Leave a Comment »

League Supporting Bill Allowing Recreational Set-Asides, Fees-In-Lieu As Part of Development Approval

Posted by Phil Morin on July 16, 2009

The New Jersey State League of Municipalities (“NJSLOM”) issued an e-bulletin yesterday supporting A-3443, sponsored by Assemblyman Herb Conaway, which would amend the Municipal Land Use Law (“MLUL”) to allow municipalities to require the set aside of land or a payment-in-lieu of improvements related to recreational or open space as a condition of a development approval.

Earlier this summer, the New Jersey Supreme Court in New Jersey Shore Builders v. Township of Jackson, held that set-asides of land or financial contributions toward recreational or open space were not authorized by the MLUL as part of the development approval process.  The bill was introduced prior to the Supreme Court’s decision but would address the lack of authority for such set-asides or contributions.

The bill would amend the MLUL to allow a municipality to authorize by ordinance recreational or open space set-asides as part of the municipal approval process and specificially provides that:

The governing body, by ordinance, may adopt regulations requiring a developer, as a condition for approval of a subdivision or site plan, to set aside a minimum percentage of the total area of the subdivision or site plan for open space purposes, for recreational purposes, and for the development of recreational opportunities attributable to the construction or improvements within the subdivision or development. The ordinance shall allow a developer to negotiate a fee with the planning board, in lieu of setting aside land for open space and recreational purposes and developing recreational opportunities, representing the developer’s reasonable and necessary contribution to the provision of open space and recreational opportunities attributable to the construction or improvements within the subdivision or development.

The League is encouraging member municipalities to contact their local Assembly member in support of this bill:

The Court acknowledged that recreation and open space were important considerations in land use planning under the MLUL, but held that more specific authorization was required for municipalities to require set asides or contributions from developers for these purposes, and such authority did not exist in the statutes.

Thus, A-3443 addresses this omission in the MLUL, and expressly authorizes municipalities to condition development approvals based on a set aside for open space, recreational areas and facilities or payments in lieu.     This legislation would assist local governments in open space preservation and sound planning.  

We suggest contacting your Assembly representatives and ask that they support A-3343, and prioritize it when the Legislature returns after the election. 

For a link to the NJSLOM alert, click here.

For a link to the NJSLOM’s summary of the Supreme Court’s opinion, click here.

Posted in Developer's Agreements, Environmental Issues, Green Legislation, Legislation | Leave a Comment »

NJBIZ Article Highlights Praise and Concerns With “Builder-Friendly” Legislative Enactments

Posted by Phil Morin on July 13, 2009

An NJBIZ.com article written by Evelyn Lee contains an excellent synopsis of “developer-friendlier” legislation authored by the New Jersey Legislature and (mostly) signed into law by Governor Corzine over the last year.  The legislation was intended to extend permit approvals, expedite site cleanups and spur development in down economic times. 

However, the article notes that many industry leaders still have concerns about the practical application and limitations of several of these new laws:

[T]he Permit Extension Act has some limitations, said Tim Touhey, chief executive of the New Jersey Builders Association in Hamilton. The Highlands region has determined that it won’t allow any permits to be extended, although some of the more developed municipalities in the region — such as Dover and Rockaway — have been designated as growth areas by the state, he said.

The Site Remediation Reform Act also has many unknowns, particularly with regard to presumptive remedies that the Department of Environmental Protection will develop for sensitive sites, said David Fisher, vice president of governmental affairs at Matzel & Mumford Organization, an Edison-based homebuilder. Presumptive remedies are expected to be finalized within a year of the law’s enactment, according to DEP.

“If we don’t know how to clean up a site, then we don’t know how costly it’s going to be,” he said. “What value do you place on land when you don’t know how much it’s going to cost to clean it up?”

Others said that legislative changes fell short in terms of addressing flaws in the state’s affordable housing funding methodology and directing new projects to redevelopment areas.

For the full article, click here.

Posted in Affordable Housing, Environmental Issues, Highlands, Legislation, Redevelopment, Transportation | Leave a Comment »

Christie Energy Plan Would Have Land Use Impact

Posted by Phil Morin on July 8, 2009

Republican gubernatorial candidate Chris Christie unveiled his Energy Plan earlier this week with a strong emphasis on encouraging the manufacturing and installation of wind and solar technologies within New Jersey.   Under Christie’s plan, the manufacturing of wind turbines and photovoltaic equipment in New Jersey will be supported through substantial tax incentives, solar farms will be treated as a permitted use under the MLUL, installation of solar farms as part of a landfill closure plan will be mandated and the installation of solar technology on a portion of preserved farmland will be permitted.

Several of his proposals would make even the most environmentally conscious politicians ”green” with envy while still emphasizing job creation.

According to a release from the Christie campaign, Christie’s Energy Plan includes the following initiatives:

The “Choose New Jersey Energy” Campaign. A Christie Administration will leverage New Jersey’s skilled workforce, technology base, manufacturing base and port facilities to make New Jersey a leader in manufacturing renewable energy.  New Jersey will undergo a brand makeover as part of the “Choose New Jersey Energy” campaign.  Governor Christie will lead a campaign that will market and sell New Jersey’s resources and undeniable potential to energy producers, innovators and developers.

 Establish “Renew NJ” to consolidate all renewable energy manufacturing efforts.  As part of the New Jersey Partnership for Action, “Renew NJ” will focus exclusively on the promotion of New Jersey resources and the development of renewable energy manufacturing. The Christie Plan will move all economic development efforts related to renewable energy from the BPU, which is not in the business of growing jobs, to “Renew NJ.”  “Renew NJ” will serve as a one-stop shop for companies – working to promote the state, market to prospective energy manufacturers both at home and abroad, deliver grants, loans and other state incentives in an efficient and timely manner.

 Incentivize Energy Manufacturing with Tax Credits. In order to make New Jersey an attractive place to manufacture energy, the Christie Administration will offer a tax credit up to 100% of the corporate business taxes or the insurance premium tax for any wind turbine and manufacturing facility that locates in New Jersey.  The incentive will significantly erase the current disincentives in the state’s tax policy, and will be an important tool to lure manufactures to the state.

 Install Solar Farms on Every Landfill.  Considering there are currently over 800 active and closed landfills covering over 10,500 acres in our state, what better way to utilize this space more effectively than with solar farms.  The Christie Plan requires that all New Jersey landfills regulated by the NJ DEP be required to install solar farms as part of their closure plans and on-going maintenance permits.  New Jersey’s landfills represent hundreds of acres able to support significant solar capacity, and the Christie Administration will take advantage of it.

Encourage Solar Farms by Making it a Permitted Land Use. Solar applications should not have to seek use variances or zone changes.  A Christie Administration will make it easer for prospective solar developers to site and build these facilities. Removing the uncertainty and delays inherent in local land use approvals would greatly incent incentivize landowners and potential solar developers.

 New Jersey Farmland Isn’t Just for Agriculture. Keeping with New Jersey’s commitment to preserve and protect our natural resources, the Christie Plan will allow Permanently Preserved Farmland to use up to 20% for solar panel installation.

For a link to the Star Ledger article discussing the Christie Energy Plan, click here.

For a link to the Daily Record article on Chris Christie’s and Governor Jon Corzine’s same day visit to two different solar manufacturing plants, click here.

Posted in Environmental Issues, Green Legislation, Rezoning | Leave a Comment »

Bill Granting Wind, Solar and Photovoltaic Projects “Inherently Beneficial Use” Status Sent To Governor

Posted by Phil Morin on July 3, 2009

A bill which defines the term “inherently beneficial uses” under the Municipal Land Use Law passed without much fanfare in the closing hours of the 2009 summer legislative session.  However, while the term “inherently beneficial use” was coined by the courts to identify development that deserved, from a public policy standpoint, a presumption that the development satisfies the positive criteria in connection with a “d” variance, the term was never defined by the legislature.

Provided the bill is signed by Governor Corzine, the definition of “inherently beneficial use” will now include wind, solar and photovoltaic facilities and structures, along with other recognized categories such as hospitals, schools, child care centers and group homes.  Thus, the proposed new law provides a substantial leg up to certain “green power” development projects while leaving developments featuring other alternative energies,  such as geothermal, cogeneration, hydropower and nuclear power, to continue to have to demonstrate the positive criteria for a “d” variance.

According to the Assembly floor statement to S1303:

This amendment would clarify that a “wind, solar or photovoltaic energy facility or structure” would be considered “inherently beneficial,” and therefore presumptively satisfy the positive criteria for the grant of a variance under subsection d. of N.J.S.A.40:55D-70, regardless of whether the facility or structure is a principal use, a part of the principal use, or an accessory use or structure.

The new definition that will appear at N.J.S.A. 40:55D-4 is:

“Inherently beneficial use” means a use which is universally considered of value to the community because it fundamentally serves the public good and promotes the general welfare. Such a use includes, but is not limited to, a hospital, school, child care center, group home, or a wind, solar or photovoltaic energy facility or structure.

For a copy of the bill, click here.

Posted in D Variances, Environmental Issues, Green Legislation | Leave a Comment »

Governor Signs Age-Restricted Housing Bill

Posted by Phil Morin on July 3, 2009

On July 2, Governor Corzine signed into law the controversial bill which allows applicants who received land use approval for an age-restricted development to reapply to land use boards for relief from the age-restrictions. 

The law now includes several additional hurdles for developers to lift age-restrictions and reduces the time for an appeal of a denial of a conversion to 30 days from the board’s resolution as opposed to 45 days from publication of notice of the decision.

A press release from Assemblyman Louis Greenwald (D-Camden) details the highlights of the new law:

Greenwald stressed that no 55-and-over development will be eligible for conversion if even one individual has already purchased or put down a deposit on a unit. Age-restricted developments where residents have already moved into homes similarly will be prohibited from conversion.

As reported by the Star-Ledger on Feb. 15, 2009, New Jersey’s municipalities have approved an overabundance of 55-and-older age-restricted housing developments. Estimates suggest the oversupply of such age-restricted homes is between 15 to 20 years into the future, far outweighing current demand.

“Because of the supply glut in the age-restricted housing market, projects have stopped. Yet many young professionals – teachers, police officers and firefighters among them – are finding themselves increasingly unable to afford homes in the very communities they serve,” said Greenwald. “We must provide a limited and responsible avenue to build homes for the middle-class residents who need them while putting New Jerseyans back to work.”

Under the law, a developer seeking to convert an age-restricted community will be required to file an application with the local planning board or zoning board of adjustment that granted the initial approval of the development. Prior to issuing an amended approval for the conversion, the local board will be required to have received documentation from the developer demonstrating that the stringent site improvements and infrastructure requirements have been satisfied.

For the complete press release, click here.

Posted in Affordable Housing, Legislation, Rezoning | Leave a Comment »