With the world’s focus tethered to economic stimulus related to the impacts of COVID-19, it’s easy to forget that New Jersey’s Grow New Jersey and Economic Revitalization & Growth programs expired on July 1, 2019 without a replacement.  Since then, the legislature has made several attempts at replacing these critical programs without success.  Finally, last week Assembly Bill 4, titled “New Jersey Economic Recovery Act of 2020,” was passed by votes in both the New Jersey State Assembly and State Senate. The bill is a comprehensive tax incentive overhaul legislation in response to the COVID-19 pandemic, and replaces the expired corporate tax incentives with new programs.  The plan provides for the administration and funding of programs related to the creation of jobs, property and real estate development, small and early-stage business, and other community projects. It specifically seeks to assist impoverished areas throughout the state, many of which have been disproportionately affected by the pandemic.

Proponents of the bill urged the need to pass this legislation in order to retain and attract businesses to the State of New Jersey, something it has struggled to do without an incentive program.  While the legislature did not afford affected stakeholders a significant chance to review and comment on the bill, the new program represents a major milestone in New Jersey’s economic recovery as it will give businesses, developers and investors the tools needed to spur private investment throughout New Jersey, in particular in distressed areas.

The Grow New Jersey program is succeeded by NJ EMERGE.  The program works in a similar fashion, where awards are granted to those generate jobs or retain jobs in imminent danger of leaving New Jersey.  The awards will be calculated based on the estimated “net benefit” the project will bring to New Jersey.   However, in response to the significant criticism of the Grow New Jersey program by Governor Murphy and the State’s task force, a number of changes have been made.  The new program targets high-growth industries that pay wages of $15.00/hour.  In addition, those seeking to utilize the program should expect lower per-job awards and increased reporting and disclosure requirements.

The Economic Revitalization & Growth Program is succeeded by NJ ASPIRE.  Like ERG, NJ ASPIRE is meant to provide gap financing to real estate developments and redevelopment projects that otherwise would not be economically feasible.  Again, the legislature crafted this program so it provides the most significant benefits to those projects most important to New Jersey in accordance with the goals set forth in the State Redevelopment Plan, namely mixed-use, transit oriented and affordable housing projects.  In response to criticisms of the ERG program, NJ ASPIRE will include reconciliation mechanisms whereby grant recipients will have to repay certain amounts if the project over performs.

One of the programs outlined in the bill is a brownfield remediation incentive program designed to assist with the cleanup and redevelopment of areas throughout the state that are contaminated or at some point contained contaminated buildings. Developers who take on these projects would enter into development agreements with the New Jersey Economic Development Authority and would be able to obtain tax credits from the Authority through a related application process.

It will be interesting to see the private markets enthusiasm to the new Law.  Many recipients under the New Jersey’s Grow New Jersey and Economic Revitalization & Growth program came under what some perceived as unfair scrutiny and public criticism under the former program.  In any event, practitioners anticipate that for the new Law to be effective, the qualifications must be clearly defined with applicants confident that, once established, the rules will not subsequently become an area of political arguments.

The companion piece of legislation in the Senate was Senate Bill 3295. The amended bill is now on Governor Murphy’s desk. If the bill becomes law, it will take effect immediately.

Co-authored by Brian J. Shemesh, Esq. and Kristen Lyons, Esq.