Economic Opportunity Act of 2013 (P.L.2013, c.161)

—Background—

In today’s competitive world of attracting jobs and investment, States across the nation are developing new and innovative ways to entice corporations, entrepreneurs, investors and developers to do business in their state. This can be done through changes in tax policy or other incentives that offset the cost of doing business. According to the NY Times, states across the nation spend over $80 billion per year in incentives. In that vein, while New Jersey’s incentive programs have done well, it was clear that the programs needed to be improved and expanded. The New Jersey Economic Opportunity Act of 2013 attempts to improve those programs, expand their scope, and provide more opportunities for businesses of all sizes to participate.

—Overview—

The “New Jersey Economic Opportunity Act of 2013,” (hereinafter referred to as EO13) merged five of New Jersey’s most prominent economic incentive programs into two programs, and provided added incentives for development and job creation in certain areas of the state.

Specifically, the new law phased out the Business Retention and Relocation Assistance Grant Program (BRRAG), the Business Employment Incentive Program (BEIP), and the Urban Transit Hub Tax Credit Program (UTHTC) on December 31, 2013, and expanded the Grow New Jersey Assistance Program (Grow) and the Economic Redevelopment and Growth Grant Program (ERG). The law sunsets the “new” Grow and ERG programs on July 1, 2019, and it prohibits the EDA from considering an application for eligibility for tax credits under Grow and ERG after June 30, 2019. The purpose of sunsetting the program is to ascertain its effectiveness.

Please note that the application deadline for the programs phased out by the law was the date of enactment (September 18, 2013). However, if a business submitted an application for eligibility under Grow before the enactment of EO13, may amend the application to receive more favorable terms under the revised programs. But, as stated above, that determination was to be made prior to December 31, 2013.

Businesses that received assistance through State incentive programs prior to the Act’s implementation will not qualify under the new Grow NJ or ERG programs until they satisfy all existing obligations.

Once a project meets the minimum eligibility thresholds, the Grow program established by EO13 provides both baseline and bonus corporate business tax credits based on a variety of criteria.

Those tax credits can be used to offset corporate business tax liability or may be sold on the open market. For the ERG program, grants or credits are provided to bridge the financing gap for certain development projects throughout the state. In instances other than residential projects, the grants are funded through revenues derived from various taxes generated by the projects (i.e. sales tax). For residential projects, corporate business tax credits are provided that, as stated above, can be sold on the open market.

The new law provides incentives statewide, however, the law goes further by creating special incentive areas that provide added incentives (bonuses) as well as different eligibility criteria for companies and developers that invest within those specific geographic boundaries. For example, the law provides lower investment and job creation/retention thresholds in the 8 southern counties of the state (Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean, Salem). Reductions in thresholds are also provided in the newly created Garden State Growth Zones (GSGZ). The GSGZ’s are Paterson, Passaic City, Trenton, Camden and Atlantic City.

New Grow NJ Assistance Program – The new Grow program establishes baseline corporate business tax credits ranging from $500 to $5,000 annually per job. While we cannot outline every defined term in the law, certain key terms are listed below. The terms are listed in alphabetical order. As such, a term may encompass as part of its definition another term that is defined later in this paper.

Distressed municipality – a municipality that is qualified to receive assistance under the Municipal Urban Aid Program (N.J.S.A. 52:27D-178), a municipality under the supervision of the Local Finance Board pursuant to the “Local Government Supervision Act (1947),” a municipality identified by DCA to be facing serious fiscal distress, a SDA municipality (defined below), or a municipality in which a major rail station is located.

Garden State Growth Zone (GSGZ) – The four New Jersey cities with the lowest median family income, based on the 2009 American Community Survey from the US Census (Camden, Trenton, Paterson, Passaic City). The tourism district of Atlantic City was added as the fifth GSGZ in 2014, after “The Economic Opportunity Act of 2014, Part 3” was signed into law (P.L.2014, c.63).

Mega project

 A qualified business facility located in a port district housing a business in the logistics, manufacturing, energy, defense, or maritime industries, that has either:

• a capital investment in excess of $20 million and creates or retains at least 250 full-time employees, or,
• the project creates or retains more than 1,000 full-time employees.

 A qualified business facility located in an aviation district housing a business in the aviation industry, in a Garden State Growth Zone (GSGZ), or in a priority area housing the U.S. headquarters and related facilities of an auto manufacturer, either:

• a capital investment in excess of $20 million and creates or retains at least 250 full-time employees, or,
• the project creates or retains more than 1,000 full-time employees; or,
• a qualified business facility located in an urban transit hub housing a business of any kind, having a capital investment in excess of $50 million and creates or retains at least 250 full-time employees.

Other eligible area – The portions of the qualified incentive area that are not located within a distressed municipality or priority area. Other eligible areas would include aviation districts; Planning Area 3; certain portions of Meadowlands, Pinelands and Highlands; and certain portions of Planning Areas 4A, 4B & 5.

Port District – The portions of a qualified incentive area that are located within: a) the port district of the Port Authority of New York and New Jersey, as defined in Article II of the Compact Between the States of New York and New Jersey of 1921; or b) a 15-mile radius of the outermost boundary of each marine terminal facility established, acquired, constructed, rehabilitated or improved by the South Jersey Port District established pursuant to “The South Jersey Port Corporation Act,” P.L.1968, c.60 (C.12:11A-1 et seq.).

Priority area – The portions of the qualified incentive area that are not located within a distressed municipality and which:

• Are Planning Area 1 (Metropolitan), Planning Area 2 (Suburban), a designated center under the State Development and Redevelopment Plan or a designated growth center in an endorsed plan until June 30, 2013, or until the State Planning Commission revises and readopts the NJ State Strategic Plan and adopts regulations to revise this definition;
•  Intersect with portions of: a deep poverty pocket, a port district, or federally owned land approved for closure under a federal Base Realignment Closing Commission action;
• Are the proposed site of a disaster recovery project, a qualified incubator facility, a highlands development credit receiving area or redevelopment area, a tourism destination project, or transit oriented development; or,
• Contain: a vacant commercial building having over 400,000 square footage of office, laboratory, or industrial space available for occupancy for a period of over one year; or a site that has been negatively impacted by the approval of a “qualified business facility,” as defined pursuant to the UTHTC Act.

School Development Authority (SDA) District is one identified as defined in section 3 of P.L.2000, c.72 (N.J.S.A. 18A:7G-3). These include the following municipalities: Asbury Park, Bridgeton, Burlington City, Camden, East Orange, Elizabeth, Garfield, Gloucester City, Harrison, Hoboken, Irvington, Jersey City, Keansburg, Long Branch, Millville, Neptune Township, Newark, New Brunswick, Orange, Passaic, Paterson, Pemberton Township, Perth Amboy, Phillipsburg, Plainfield, Pleasantville, Salem, Trenton, Union City, Vineland, and West New York.

“Targeted industry” means any industry identified from time to time by the authority including initially; a transportation, manufacturing, defense, energy, logistics, life sciences, technology, health, and finance business, but excluding a primarily warehouse or distribution business.

Urban Transit Hubs are located within 1⁄2 mile of New Jersey Transit, PATH, PATCO, or light rail stations in East Orange, Elizabeth, Hoboken, Jersey City, Newark, New Brunswick, Paterson, Trenton, and Camden (Note: radius is expanded to one mile for Camden).

Before we can delve into the specifics of the tax credits offered under the new Grow program of EO13, a project must meet the minimum capital investment and job creation/retention eligibility thresholds. To put these new thresholds in perspective, the former Grow NJ Assistance program required a $20 million investment and minimum of 100 created or retained jobs. Furthermore, the Urban Transit Hub Program required a $50 million investment and a minimum of 250 jobs created or retained. Under the new Grow program established under EO13, investment thresholds are dramatically lowered and are based on the type of building and a per square foot investment.

Specifically, the EO13 capital investment thresholds are:

•   Rehabbed Industrial: $20 per square foot
•   Rehabbed Non-Industrial (commercial): $40 per square foot
•   New Industrial: $60 per square foot
•   New Non-Industrial (commercial): $120 per square foot

 The building must meet the minimum green building standards as defined in the Act and prevailing wage must be paid during the construction phase of the project. The latter continues the standard practice utilized in New Jersey for any project receiving state assistance.

Note: The minimum capital investment thresholds are lowered by 1/3 in the 8 southern NJ counties and in the GSGZ’s.

The minimum job requirements are as follows:

Life sciences/technology startups/manufacturing: 10 new jobs  35 new jobs, 25 retained jobs

Targeted industries: 25 new jobs, 35 retained jobs

All other businesses/industries: 35 new jobs, , 50 retained jobs

 Note: The minimum job creation and retention thresholds are lowered by 1/4 in the 8 southern NJ counties and in the GSGZ’s.

Tax Credits: The program establishes base corporate business tax credits for certain types of industries in certain locations throughout the state. Then, the law allows the New Jersey Economic Development Authority (EDA) to award bonus tax credits based on a variety of different criteria which will be used to drive development into certain areas of the state. Bonuses include but are not limited to: areas located in deep poverty pockets; qualified incubator facilities; transit oriented development; food deserts; Urban Transit Hub municipalities; properties located adjacent to a rail spur, transit hub, aviation district, or marine terminal; projects that create jobs with higher than average salaries or substantial job creation (250-1000+ employees).

There is no cap on the value of the tax credits attributable to the Grow program. However, there are specific caps on individual projects. A qualified business can use the credits to offset their Corporate Business Tax liability or sell those credits to another buyer, with certain restrictions. The table below outlines the project types, base credits, maximum gross amount of credits allowed per full-time employee, and total project maximums.