Earlier this month, both Senate and Assembly committees took up the Economic Opportunity Act of 2013, a mammoth piece of legislation that consolidates New Jersey’s disparate economic development incentive programs into two. Grow NJ is focused on attracting and retaining companies here in New Jersey, while the Economic Redevelopment and Growth Grant Program (ERG) creates incentives for development and redevelopment in urban and other designated areas.
The bills are moving fast and have garnered widespread support muted by some criticism.
Grow NJ provides financial incentives to companies to encourage economic growth and job creation, as well as to preserve jobs in New Jersey that are at risk of relocation. The bill links incentives to specific job creation goals based on industry type and minimum capital investment thresholds. It also provides increased tax credits to companies that locate in urban and distressed municipalities. Additional tax-credit awards are offered to companies locating in impoverished areas, building near public transit, providing jobs in New Jersey’s targeted growth industries, and adhering to green-design standards, among other categories.
ERG provides tax incentives for both commercial and residential development in qualified locations. On the commercial side, the tax credit is linked to a net-benefits test and actual incremental tax revenue generated by the project. On the residential side, the bill provides up to $600 million in tax incentives for development and redevelopment projects in qualified areas. Of this total, $250 million is reserved for residential projects in designated urban areas that are near transit, including rail and light-rail stations.
Under the old Urban Hub Tax Credit program, only nine municipalities were eligible for tax-credit funding. This bill reserves $250 million for those municipalities, but then goes on to furnish an additional $200 million to other distressed municipalities and poor neighborhoods around the state. These areas can also benefit from the revitalization and economic growth that the Urban Hub Tax Credit has facilitated in places such as Newark and Jersey City.
The bill also takes into consideration the toll taken by Hurricane Sandy and designates funds to those hard-hit disaster areas that are in need of economic stimulus. For these areas, the bill appropriates $100 million for residential development and redevelopment. The remaining incentives are essentially spread throughout other regions of the state.
This bill is a particularly critical tool for urban areas that are diamonds in the rough, but have long suffered from public- and private-sector disinvestment. These are the places that Richard Florida, author of “The Rise of the Creative Class,” argues are well-positioned for economic growth and prosperity in the new economy.
These urban centers are the places where “the creative class” of educated knowledge-based professionals wants to live. They are the communities where the Millennial Generation, those born in the 1980s and 1990s, are gravitating, evidencing different choices from their parents, who tended to prefer more suburban environments.
Despite this well-documented trend, developers still struggle to make these places work economically. Why? One key reason is that in many urban areas of New Jersey, including Trenton and Camden, there is a financing gap. In other words, the cost to a developer of producing a quality product that young professionals would find desirable exceeds the market value of what a buyer is willing to pay in these urban markets. That’s where a program such as ERG comes in and why it is such a critical tool for urban developers working to invest and create quality housing.
One project that would facilitate the transformation of an urban market is the Block-3 undertaking in Trenton’s Wire Rope District. This venture consists of a set of historic but vacant Roebling factories, adjacent to a RiverLine light rail station and the redeveloped Roebling Market.
The development comprises approximately 450,000 square feet of market-rate residential housing, along with creative-class office and restaurant and retail amenities arranged around a central piazza programmed with various festivals and art shows.
HHG Development has been designated by the Mercer County Improvement Authority to transform this 6.8-acre tract of vacant Roebling factories. The project has received all planning-board and environmental approvals. The hurdle? The venture has a financing gap and needs the ERG Program to move forward.
Our urban areas are not the only places that stand to benefit from the Economic Opportunity Act of 2013. New Jersey’s suburban office parks are suffering from dramatically high vacancy rates. James Hughes and Joseph Seneca recently published a fascinating document, “Rutgers Regional Report: Reinventing the New Jersey Economy,” which tells the story of the rise and current decline of New Jersey’s suburban office parks.
The authors note that 1980 to 2000 marked a “20-year run” that transformed the state from an aging manufacturing center to a “leading-edge, postindustrial, information-age, service economy, comprising legions of high-wage, middle-skilled knowledge workers.”
They also indicate that 80 percent of the commercial office space ever built in New Jersey was put up in the 1980s, with the 11-county northern and central Jersey market becoming the fifth-largest metropolitan office market nationally, connected by a vast suburban roadway network.
The problem? The suburban office park is no longer “viewed as the most efficient and cost-competitive place for carrying out knowledge-based activity.” Both the office inventory and the transportation infrastructure that supports it are aging and suffer from underinvestment. New generations of workers are interested in “diversity, sustainability, and walkability.” Once New Jersey outpaced New York City in terms of job growth; now New York City has taken the lead.
So what should New Jersey do? As the Rutgers report says, “wholesale abandonment is really not a viable option,” so there is a need to “re-imagine . . . existing assets.” New Jersey needs to look at adaptive reuse and green design, as well as considering uses of land and the shape of community beyond the four corners of the office structure itself.
The Economic Opportunity Act of 2013 provides incentives to do just that. The bill provides new financial incentives for the redevelopment of vacant commercial buildings that have over 400,000 square feet of office, laboratory, or industrial space that have been vacant for at least one year.
Novo Nordisk, a global healthcare company specializing in diabetes care, based in Middlesex County, New Jersey, is an example of how to “reimagine existing assets.” Novo Nordisk is redeveloping the 770,000 square foot former Merrill Lynch site in Plainsboro constructed in the 1980s into their new headquarters. By choosing to redevelop this existing site, Novo Nordisk was able to reduce their carbon footprint, renovate the outdated building to LEED Silver standards, and create 500 union construction jobs. While they did not utilize state economic development incentives, there are many examples of aging behemoth structures around the state that may not get a second chance absent such financial incentives.
The Economic Opportunity Act of 2013 is not perfect. It spreads incentives around the state, including some areas that may not be appropriate for additional growth. But it does far more good than harm, creating new opportunities to revitalize New Jersey’s existing landscape, ranging from our historic urban centers to our suburban office parks.